TRIA Supporters Claim Victory
Congress passed an extension of the federal terrorism re-insurance program so that commercial property owners can continue to obtain terrorism insurance for the next two years.
Financial services and real estate groups consider final passage and the president's signature of the bill to be a major legislative victory.
President George Bush signed the Terrorism Risk Insurance Act extension one week before the federal re-insurance program was due to expire on Jan. 1.
"It would have been difficult, if not impossible, for policyholders to obtain affordable terror coverage in the absence of such a program," according to the Coalition to Insure Against Terrorism.
The final bill (S. 467) increases property and casualty insurers exposure if there is another serious terrorist attack.
But to the dismay of House Financial Services Committee chairman Michael Oxley, R-Ohio, the TRIA extension largely reflects the Senate bill. House-passed provisions designed to help the insurance industry move toward a private solution to terrorism insurance were dropped during a House-Senate conference.
"In this short-sighted legislation, we have missed a golden opportunity to frame the TRIA program more effectively and to move toward a market-based solution," Rep. Oxley said.
However, Senate Banking Committee chairman Richard Shelby, R-Ala., insisted on a simple extension and the Bush administration backed the Senate's approach.
The bill directs the President's Working Group on Financial Markets to conduct an analysis of long-term availability and affordability of the terrorism insurance. But it does not really contain a mechanism for another extension two years down the road.
The Commercial Mortgage Securities Association urged the various interests to work together to find a long-term solution to terrorism insurance. "Otherwise, we will find ourselves in the same situation two years from now," CMSA president Dottie Cunningham said.
The Mortgage Bankers Association said its members look forward to working with the president's group.
"MBA believes the two-year extension of this legislation will provide the commercial real estate finance industry with stability and certainty," MBA senior vice president Kurt Pfotenhauer said.
The TRIA extension bill requires property and casualty insurers to continue to offer terrorism insurance policies. And the federal government will back up private insurers if insurance losses due to a terrorist attack exceed $50 million during 2006 and $100 million during 2007. The previous trigger for the government to step in and pay claims was $5 million.
The bill also increases deductibles and co-shares, which shift more costs to the private insurance companies.
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