Federal backstop will no longer be available for insurers and businesses
The Terrorism Risk Insurance Act is set to expire at the end of the year following the blocking of a legislation that would have extended its lifetime. The U.S. Senate has failed to reach an agreement concerning the legislation, with lawmakers unable to reach a vote before the end of the Congressional legislative session. Because no solution was found for the issue, the federal backstop that the government had provided to the insurance industry will no longer be available after December 31, 2014.
Backstop had offered significant protection to commercial buildings and sporting events
The federal backstop was established in 2002 and has provided the insurance industry with financial aid in the event of an act of terrorism. This backstop has also provided similar aid to owners of skyscrapers, sports stadiums, and other large commercial buildings and projects throughout the country. Large projects are often considered to be attractive targets for acts of terrorism. As such, they require insurance protection to stay operation and, in some cases, take form.
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Senator Tom Coburn blocks legislation due to concerns
The termination of the legislation that would have saved the Terrorism Risk Insurance Act may be the responsibility of one person: Senator Tom Coburn. The Senator is nearing retirement, but wanted to see significant changes made to the legislation. Despite attempts by other lawmakers to find a compromise, Coburn would not be swayed, which effectively lead to the legislation’s demise. One of the provisions of the legislation that Coburn had opposed involved the creation of a licensing program that would allow insurance agents to sell coverage across state lines.
Insurance industry may face greater costs due to expiration of Terrorism Risk Insurance Act
The expiration of the Terrorism Risk Insurance Act could have serious implications for the insurance industry and taxpayers in general. Because insurers and businesses will no longer have the ability to rely on the federal backstop, they may face more costs associated with protecting themselves from acts of terrorism.