Terrorism Insurance Still Necessary to Foster Resilience
Last week, we commemorated the twelve year anniversary of the terrorist attacks of September 11, 2001. One of the tough lessons of that day was that our Nation was not as resilient as it could be. In the weeks and months that followed, as Americans began coming to terms with the resulting loss of life and destruction, our economy sputtered. The Dow experienced its worst one-day drop ever (600 points), our civil aviation system teetered on economic collapse, and over 125,000 American workers were laid off. Property insurance claims resulting from the attacks were nearly $40 billion—rendering September 11th the largest single insurance event that the Nation had ever experienced. By early 2002, fearing that the terrorist threat could not be adequately predicted and underwritten, prominent reinsurers exited the U.S. market and businesses across the country could not get terrorism coverage. In an effort to prevent further damage to the U.S. economy, particularly to the construction, hospitality, housing, and manufacturing sectors, Congress enacted the Terrorism Risk Insurance Act (TRIA) which mandated that terrorism coverage be made available to at-risk businesses and, in turn, the Federal government would provide a backstop in the event of a certified terrorist incident that results in at least $100 million in insured damages. As designed, a complex system of triggers must be activated before Federal funds are disbursed. To date, not a single dollar has left the U.S. Treasury under this program; it appears as though the Boston Marathon bombings will not meet the statutory threshold either, since insurance payouts are only about $1 million.
Over the past ten years, TRIA has fostered a more resilient country and, notwithstanding these turbulent times, the number of firms securing terrorism risk insurance, as well as premium rates, has remained fairly constant. The Boston Marathon bombings are a stark reminder that mass violence, whether a result of terrorism or other acts, remains a homeland security and economic threat to the Nation and our infrastructure. Today, firms that need insurance to bounce back from terrorism face the very real threat that it will not be available to them. According to a prominent insurance industry survey, if TRIA is allowed to expire, as is slated to occur at the end of 2014, there is a great likelihood that 68% of insurers would exclude terrorism coverage, thereby causing an enormous spike in the cost of this insurance and placing a heavy burden on the private sector as it emerges from the recent economic crisis.
Recognizing the importance of TRIA to fostering a more resilient America, it has been reauthorized by Congress twice, on wide bipartisan bases. Inexplicably, even as policymakers openly debate whether new insurance products should be made available to firms that proactively address the risk of cyber attacks, there is increasing likelihood that this Congress will let TRIA lapse. To ensure economic stability and ensure that at-risk businesses can continue to operate, plan, and grow, I introduced legislation to extend TRIA for ten more years. The Fostering Resilience to Terrorism Act would ensure that responsible companies, big and small, can be certain in the knowledge that should they be hit by terrorism, they will be able to dust themselves off, roll up their sleeves, and get back to business. It is time for Congress to do its part to foster resilience. It is time for Congress to provide a long-term authorization for the TRIA program.