Where are You TRIA

Posted by

Politicos and industry alike are echoing the sentiments of Cindy Lou Who when she sings “Where are you, Christmas?” in the popular movie “How the Grinch Stole Christmas” except in this case, the question is, “Where are you TRIA?”

As the current Terrorism Risk Insurance Act (TRIA) approaches its expiration date of  December 31, 2014, there are questions swirling about whether it will ultimately be renewed and whether the levels and conditions of coverage will be so diluted as to have an immediate negative impact on commercial real estate business and the securities markets in the United States. In fact, as preposterous as it may seem, some are even prognosticating that a failure to renew (or extend) TRIA could cause the Super Bowl in 2015 to be canceled.  A few years ago, the organizer of the World Cup, FIFA, could not find insurers to cover the Championship game of the 2006 tournament at a reasonable cost.  FIFA was eventually able to structure a special financial instrument so the game could take place, but this took several months to engineer.

Terrorism is not generally covered by Commercial General Liability policies and is included in only a handful of other types of policies. By law, only workers’ compensation insurance companies must include terrorism coverage in their policies, whether or not TRIA is renewed.  However, many insurers offer this coverage because of the Federal government’s backstop created by TRIA.  Without it, insurers may roll back terrorism coverage.  Following 9/11, the exclusion of terrorism coverage in CGL policies halted large construction projects around the country for some period because financial institutions were concerned about the viability of their loans. Their fears largely mirrored the concern that organizations such as FIFA had with respect to the 2006 World Cup championship and which the NFL has with respect to their own liability in the event of a large scale terrorist attack at the upcoming Super Bowl in Phoenix.

Which begs the question, “Where are you TRIA?” A number of versions of TRIA have been introduced over both sessions of this Congress and in 2013. However, differences between the House and Senate versions with respect the terms of the proposed new legislation  have largely stalled its renewal.  Despite earlier differences as to the form and substance of an extension, House and Senate leaders have agreed generally on a six-year extension that increases its triggering threshold from $100 million to roughly $200 million or possibly higher though there are some small differences to be resolved.  This agreement is generally supported by legislators and industry groups alike.

However, as the end of this Congress approaches, there is still a lot on the legislative plate including funding measures required to keep the government open, extension of tax breaks, along with a limited number of other pieces of legislation. TRIA is among several other pieces of legislation being considered as potential riders to the larger pieces of legislation under immediate consideration.  Despite general agreement as to its terms, the passage of TRIA is currently being discussed in conjunction with possible amendments to Dodd Frank and other possible financial measures.

In a letter to Senator Charles Schumer (D-NY) published in The Hill, Secretary of the Treasury Jack Lew alluded to disagreements over Dodd-Frank Act reform as a possible barrier to timely reauthorization of TRIA. Secretary Lew stated that TRIA should not be allowed to lapse at the end of the year and passage should not be delayed due to “unrelated financial regulatory issues.”

Despite the current uncertain outcome of the legislative arm wrestling, TRIA is largely expected to pass before the end of this Congress given the potential stakes associated with non-passage.