Following strong support voiced by the California Chamber of Commerce, the US. House of Representatives yesterday reauthorized the “Terrorism Risk Insurance Act” (TRIA). The resolution, H.R. 26, now heads to the U.S. Senate for a vote.
“The Senate must act swiftly to pass H.R. 26 as it is critical to employers and our economy,” said Marti Fisher, CalChamber policy advocate. “Recent increased terrorism threats have underscored the need for immediate action on this legislation and we strongly support a long-term extension of TRIA to minimize the cost to employers from the risk of terrorism.”
The Terrorism Risk Insurance Act was a response to the inability of insurance policyholders to secure terrorism risk insurance following the attacks of 9/11. TRIA requires insurers to offer terrorism coverage to policyholders in certain commercial insurance lines. Policyholders are free to accept or reject the offer, but terrorism coverage may not be excluded in these lines unless the policyholder has had the opportunity to purchase such coverage on the same terms, amounts and limitations applicable to other perils. With the act in place, the federal government provides confidence to the private market that terrorism losses will not paralyze economic activity.
Since its enactment in 2002, the program has served as a vital public-private risk sharing mechanism, ensuring that private terrorism risk insurance coverage remains commercially available and that the U. S. economy can recover more swiftly in the event of a terrorist attack. H.R. 26 is a balance that would ensure commercial availability of coverage while increasing taxpayer protections.
In a letter to the California congressional delegation urging approval of H.R. 26, CalChamber points out that delays in extending the program will likely result in increased risk and costs for employers particularly with respect to workers’ compensation. Current requirements prohibit workers’ compensation policies from excluding terrorism, imposing policy limits, or excluding losses from attacks. This risk falls directly on employers, who are statutorily required to have workers’ compensation coverage for their employees. In a review of the impact of failing to extend the program, the RAND Corporation concluded that without the act in place, workers’ compensation policy premiums would increase, more policies would be pushed into residual markets and employers would be required to absorb additional risk, meaning higher costs.
Staff Contact: Marti Fisher