Property/casualty insurance industry groups, business associations and observers alike were quick to condemn the death of TRIA renewal for 2014. Without federal terrorism reinsurance in place for 2015, they predicted canceled coverage, market chaos and more unless the measure can be renewed in the new, Republican-led Congress.
“Terrorism insurance policies are going to lapse in 2015, and insurers will be under no obligation to renew them, adversely impacting the construction, energy and real estate industry, among others,” Robert Hartwig, president of the Insurance Information Institute, said in prepared remarks. “A major terrorist attack occurring without a [TRIA] law on the books will be far more disruptive to the U.S. economy than the one where TRIA is in place.”
What’s more, TRIA has cost little, if anything, to U.S. taxpayers, Hartwig said.
“The program has cost U.S. taxpayers virtually nothing yet has provided tangible benefits to the U.S. economy in the form of economic growth and job creation while ensuring terrorism insurance market stability, affordability and availability,” Hartwig added.
Jimi Grande, senior vice president of federal and political affairs for the National Association of Mutual Insurance Companies (NAMIC), told Carrier Management via email that lobbyists are still trying to get the House, Senate and president together in the next week to address the TRIA issue. Expectations, he said, are that “we need to hit the ground running when they return in January” in order to ensure a rapid renewal.
“We are incredibly disappointed in Congress for waiting until the lame duck [session] to reauthorize TRIA, for allowing politics to trump policy and for failing the American people by not providing protection for our economy from a terrorist event,” Grande added. “The country deserved better.”
On the other hand, A.M. Best is already chiming in on the issue, and said it “has determined that no rating actions on insurers previously identified as over-reliant upon [TRIA] are necessary at this time.”
The rating agency said it reviewed action plans from those carriers that addressed what they would do if TRIA was not renewed, and concluded that “sufficient mitigation initiatives were developed to avoid a material impact on a rating unit’s financial strength.”
Most observers had expected Congress to reauthorize the Terrorism Risk Insurance Act before it expires on Dec. 31. After all, the measure that created federal terrorism reinsurance had helped stabilize the market in the wake of the Sept. 11, 2001 terrorist attacks, and it had been renewed several times since. The Senate passed its own renewal bill back in June, and the House finally approved a six-year TRIA reauthorization just days ago, making approval of a bipartisan TRIA law tantalizingly close.
But then retiring U.S. Sen. Tom Coburn, an Oklahoma Republican, held up passage over an unrelated measure included in the bill that would have set up the National Association of Registered Agents and Brokers, an entity that would have potentially bypassed state regulators. Insurance industry pleas to set up a clean TRIA reauthorization bill fell on deaf ears.
In a formal statement, NAMIC lamented that the Senate adjourned for the year rather than taking a few days to address, and bypass, Coburn’s objections.
With the demise this year of TRIA renewal, predictions came quickly of an ominous market to come. Beyond Hartwig at the I.I.I., the American Insurance Association offered similar descriptions of impending trouble over time. NAMIC said TRIA’s expiration would cause “a tightening of insurance markets and terrorism coverage exclusions in commercial policies will go in full force.” NAMIC added that the new reality could force many commercial financial covenants and loans to go into technical default.
Even before the Senate’s Dec. 16 action, Fitch Ratings, in its 2015 outlook report, predicted the same fate that NAMIC, the AIA and others expect.
“Although private market stand-alone coverage has increased over time, it is unlikely that substantial private market capacity would arise as a substitute to [TRIA] coverage if the program is allowed to expire,” Fitch said in its report.
Looking ahead, business groups and insurance associations said they’d work to lobby Congress to pass a new TRIA law as soon as possible. They scrambled to keep the issue alive.
“We strongly urge the new Congress to take up the House-Senate negotiated TRIA reauthorization package as the first item of business when it returns in January in order to minimize disruptions,” AIA President and CEO Leigh Ann Pusey said in a statement.
RIMS President Carolyn Snow noted in prepared remarks that “the longer this lapse in coverage is allowed to continue, the more the U.S. economy will suffer.”
In other responses to TRIA renewal failure efforts, Coalition to Insure Against Terrorism (CIAT) spokesman Marty DePoy called the result “a bipartisan failure” that let down “American workers, American businesses and jeopardized U.S. economic and national security.” CIAT represents real estate, manufacturing, utility, construction, sports, entertainment and other industry sectors.
Thomas Bisacquino, president and CEO of NAIOP (the commercial real estate development association) said that the lack of TRIA renewal “will come at a significant cost to our economy, job growth and progress in the commercial real estate sector.”