Waters Calls for Renewal of Terrorism Risk Insurance Program
Financial Services Subcommittee Holds Hearing on TRIA Program
Today, at a Committee on Financial Services’ Housing and Insurance Subcommittee hearing, Ranking Member Maxine Waters (D-CA) called for the quick, clean and long-term renewal of the Terrorism Risk Insurance Act, known as TRIA.
At the hearing, entitled “The Future of Terrorism Insurance: Fostering Private Market Innovation to Limit Taxpayer Exposure,” Waters noted that an overwhelming number of stakeholders from a wide range of industries support TRIA’s renewal. Among many others, these include National Association of Realtors, U.S. Chamber of Commerce, International Association of Amusement Parks & Attractions, Jewish Federations of North America, National Conference of Insurance Legislators, U.S. Conference of Mayors, American Hotel and Lodging Association, National Association of Mutual Insurance Companies, the International Council of Shopping Centers and every major national sports league and organization, including the MLB, NFL, NBA, NHL, NCAA, NASCAR and the U.S. Olympic Committee.
She delivered the following opening statement.
As prepared for delivery:
Thank you, Mr. Chairman.
I’m pleased to participate in this hearing on the importance of the successful Terrorism Risk Insurance Act, known as TRIA. For more than a decade, TRIA has supported critical economic growth by ensuring access to terrorism coverage for our largest venues, businesses and employers. And Democrats are strongly committed to renewing this program quickly and without controversy.
The terrorist attacks of September 11, 2001 caused a tragic loss of life and significant disruption to our economy. In addition, insurance losses totaled an estimated $40 billion in today’s dollars.
Such losses made it financially impossible for many insurers and reinsurers to offer terrorism coverage. Most fled the market. Those that did offer coverage did so at a cost that was prohibitively high.
In 2002, Congress enacted TRIA to address the problem. The program makes terrorism insurance both available and affordable – by requiring insurance companies to offer coverage to commercial entities in exchange for a federal backstop – which is used to protect against only those terrorism-related losses at the highest levels.
Support for TRIA is so strong and so widespread that it has been reauthorized twice by the House – both times without controversy and with overwhelming bipartisan support.
But as we approach TRIA’s 2014 expiration, leading Republicans oppose this measure, arguing that TRIA is hindering private sector participation and that private capital is available to cover terrorism risks.
By continuing to drag out this noncontroversial reauthorization, they are putting up roadblocks that threaten the renewal and effectiveness of this important program. This hurts our economic growth.
Contributing to this problem is an inability to appropriately model and price for terrorism risk due to an absence of actuarial data. This is because of the extreme difficulty in predicting the frequency, location, and severity of loss associated with a potential terrorist attack. Attacks are random, infrequent, and the details are largely classified.
Additionally, Republican opponents of TRIA argue that the current structure leaves taxpayers exposed and that increasing private participation will limit this exposure. However, TRIA actually reduces taxpayer risk because it keeps most of the terrorism risk with the private sector. Without TRIA, many buildings, schools and large venues would remain uninsured against terrorist attacks, meaning that the government likely would pick up 100 percent of the tab for catastrophic losses.
But don’t take my word for it. A wide array of TRIA’s policyholders and beneficiaries have expressed support for the program – including shopping malls, hotels, and office buildings – to insurers and reinsurers – as well as market analysts, lenders, and developers. All these interests and more depend on the quick, clean, and long-term reauthorization of TRIA.
For all these reasons, I believe we need to reauthorize TRIA as soon as possible. TRIA must remain in place to ensure a speedy recovery after an attack, to avoid market disruptions, and to protect schools, jobs and businesses. We need to realize that now is not the time to be having a debate over alternatives to TRIA. The private market can not and does not want to step into the void.
I thank you again for holding this hearing. I continue to believe it is of the utmost importance that TRIA is reauthorized quickly, cleanly and for the long-term. Democrats support it. Insurers support it. Businesses and the U.S. Chamber of Commerce support it. There’s no reason this shouldn’t have broad bipartisan support in Congress as well. I look forward to the witnesses’ testimony and I yield back the remainder of my time.