On June 3, the United States Banking Committee unanimously forwarded a bill (S. 2244 the Terrorism Risk Insurance Program Reauthorization Act of 2014) that would extend the Terrorism Risk Insurance Act (or TRIA) for seven years. The bill forwarded by the Senate Banking Committee was introduced in April by Senators Schumer (D-NY), Kirk (R-IL), Reed (D-RI), Heller (R-NV) and has 23 cosponsors.
Chairman Randy Neugebauer (R-TX) of the U.S. House of Representatives’ Financial Services Subcommittee of the Housing and Insurance Committee is pursuing a three year reauthorization. A hearing is expected in the House later this month.
TRIA was originally signed into law by President George W. Bush in the early aftermath of the September 11th attacks in New York, Washington D.C. and rural Pennsylvania.
TRIA effectively placed the U.S. federal government as a backstop insurer for insurance claims arising out of acts of terrorism. Following the September 11th attacks, insurers began to exclude coverage resulting from acts of terrorism from policies offered in the insurance marketplace. With the federal government essentially serving as a reinsurer of such risks, TRIA was conceived to allow projects to proceed in the face of insurance risks, allowing public and private parties continue to negotiate transactions that otherwise might not have proceeded for lack of insurance, thus removing one more impediment to the recovery of the U.S. economy in the wake of the attacks.
TRIA has been set to expire several times (2005, 2007), but had been extended. The latest extension, however, is set to expire at the end of 2014.
For P3 transportation projects, P3 project owners are often very concerned about terrorism risk, and at the same time seek the competitive tension of procurements to leaven costs for concessions. The uncertainty of terrorism risk insurance coverage serves both to increase concession costs and even to cause potential concessionaires to elect not to bid on the transactions. As insurance premiums are valued based upon the insurance market (and not, for example, subject primarily to inflationary pressures), having the federal government consider continuing in its backstop role allows public owners to expect more competitive bids from more potential concessionaires.
Information about the U.S. Government’s terrorism risk insurance program can be found at this link: http://www.treasury.gov/resource-center/fin-mkts/Pages/program.aspx
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