Two competing renewal bills for the Act will soon be redefining the level of federal support for private insurers.
As a result of a rash of damages and vandalism following the attacks on 9/11, terrorism insurance faced a total estimated loss of $32.5 billion, which caused insurers to start to create exclusions for the coverage for commercial properties across the country.
Businesses struggled to be able to find coverage to protect themselves against financial losses from acts of terror.
The concern from cities and states was that this lack of terrorism insurance coverage would make it harder for businesses to receive loan approvals from lenders, which could lead to considerable harm in economic development and would be particularly hard on the real estate markets. The Terrorism Risk Insurance Act (TRIA) was then created in 2002, which formed a partnership between the federal government and private insurers, creating a form of backstop against losses that could be experienced as a result of a terror attack.
That terrorism insurance law will expire at the end of 2014, and two competing bills will define its future.
Each of these bills represents a very different vision of the way in which federal assistance will be provided to private insurers that are selling this coverage. There are also some groups that feel that there is no need to renew the protection.
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The chief executive officer of Host Hotels & Resorts, which owns two hotels in New York City that sustained considerable damage due to vandalism – among its 118 total properties at the time, which have now grown to 140 hotels – feels differently. CEO Edward Walter said that “Anybody that’s operating in business, big or small, is at risk. The smaller ones are probably more at risk.”
Walter went on to explain that “If I lose one hotel, I’d still have 139 left. But a florist operating in that hotel might not have another location. It might matter more to them than to me.”
Aside from the business sector, the National Association of Insurance Commissioners (NAIC) as well as the National Governor’s Association, are also urging the renewal of the terrorism insurance program.