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Terrorism Risk Insurance Legislation Advances, But Obstacles Remain

Commercial Real Estate Sector Engaged

As Congress wraps up its work in 2014, a top business community priority is reauthorization of the Terrorism Risk Insurance Act (TRIA).

TRIA became law in 2002 following the September 11, 2001 attacks and the ensuing crisis in the property insurance marketplace. TRIA provides a federal backstop given that catastrophic terrorism is an uninsurable risk, as described in a 2014 RAND Corporation analysis. Congress approved two TRIA extensions with reforms in 2005 and 2007.

TRIA is especially important to the commercial real estate sector. One trade association noted that, without reauthorization, commercial property owners “will either go into technical default on existing loans (if they lack terrorism coverage), or be unable to obtain financing for new projects, as lenders require terrorism insurance on the loan collateral,” which “will surely lead to significant delays in all types of real estate transactions — such as purchases, sales, refinancing and construction — as well as significant job losses across the country.”

In the last several months, Congress has made significant progress on the TRIA reauthorization, but obstacles remain before the bill can reach President Barack Obama’s desk for signature. Final passage could come as late as a post-election “lame duck” session.


On July 17, the Senate overwhelmingly approved S. 2244, the “Terrorism Risk Insurance Program Reauthorization Act of 2014.” The vote was 93–4. Numerous conservative senators, notably Sens. Ted Cruz (R–TX), Rand Paul (R–KY), and Mike Lee (R–UT), voted for S. 2244.

A bipartisan group of senators, led by Sens. Chuck Schumer (D–NY), Mark Kirk (R–IL), Jack Reed (D–RI), Mike Johanns (R–NE), Chris Murphy (D–CT), and Dean Heller (R–NV), crafted the legislation. The Senate Banking Committee unanimously approved it on June 3.

S. 2244 extends TRIA with reforms. Key elements include:

  • A seven-year extension of the law until December 2021;
  • Continuation of the existing $100 million minimum or “trigger level” of aggregate insured losses, the existing $5 million insured loss minimum, and the $100 billion maximum federal loss provision;
  • A phased-in increase from 15 to 20 percent in the insurer copayment; and
  • An increase in the insurance marketplace aggregate retention amount from $27.5 to $37.5 billion (the federal government recoups losses under the retention amount) coupled with a 2.5 percent increase in the recoupment amount.

S. 2244 enjoys support from a wide swath of American businesses, including real estate, construction, retail, hospitality, sports and entertainment, financial services, energy and transportation, and from broad-based business groups, including the US Chamber of Commerce and the National Association of Manufacturers under the umbrella group “Coalition to Insure Against Terrorism” (CIAT).

Significantly, the Chamber of Commerce “key voted” S. 2244 for its legislator rating scorecard, noting that “catastrophic terrorism remains an uninsurable risk because its frequency and location cannot be accurately predicted, and its potential scale could be economically devastating” and that TRIA “has served as a vital public-private risk sharing mechanism, ensuring that private risk insurance coverage remains commercially available and that the U.S. economy could more swiftly recover in the event of a terrorist attack.”

Some conservative organizations, notably the Heritage Foundation and the Club for Growth, oppose TRIA reauthorization. Heritage recently said, “the insurance industry is well-capitalized and fully equipped with risk-management resources necessary to provide terrorism coverage without government subsidies” and that, under the Senate bill, “taxpayers would continue to be on the hook for private losses that the insurance industry is well-positioned to manage.” Club for Growth said, “[a] country that believes in free markets should not have a federal government subsidizing insurance policies at the bidding of various special interests” and noted it would “key vote” the legislation.

House of Representatives

Even though the Senate easily approved the TRIA reauthorization, the legislation faces an uncertain path in the House of Representatives.

On June 19, the Financial Services Committee approved H.R. 4871, the “TRIA Reform Act of 2014” by a 32–27 vote along partisan lines.

The legislation’s lead sponsor is Rep. Randy Neugebauer (R–TX), who chairs the Housing and Insurance Subcommittee, and the bill has the support of Rep. Jeb Hensarling (R–TX), who chairs the full committee.

Key elements of H.R. 4871 include:

  • A five-year extension of the law until December 2019;
  • Bifurcated treatment of nuclear, biological, chemical, and radiological (NBCR) terrorist attacks and conventional terrorist attacks;
  • Increased insurer co-pay (from 15 to 20 percent) for conventional attacks;
  • Increased program trigger (from $100 million to $500 million for non-NBCR attacks), recoupment (an increase from $27.5 billion to about $44 billion under a new formula), and certification requirements; and
  • A small-insurer opt-out provision.

The business community supporting TRIA reauthorization was pleased that Financial Services moved forward on H.R. 4871, though several trade associations raised concerns about its trigger and bifurcation provisions.

Chairman Hensarling has stated that he’s committed to getting H.R. 4871 through the House and will work with the Senate in a conference committee to resolve the differences between the House and Senate bills.

The short-term outlook for H.R. 4871 is unclear. For now, the House is deadlocked with H.R. 4871 lacking the votes to move forward. As Chairman Hensarling noted following Senate passage of S. 2244, “We have some members who believe the reforms go too far and we also have a host of conservatives who feel the reforms don’t go far enough.”

A group of Republicans, led by Rep. Pete King (R–NY), is playing a key role. They are urging Chairman Hensarling to move forward with either the Senate bill or a House bill modified to closely resemble the Senate bill that can easily clear the House with bipartisan support and quickly be “conferenced” with the Senate and sent to President Obama for approval.

Others, however, are urging Chairman Hensarling to push forward with H.R. 4871 as approved by the Financial Services Committee and wait until House-Senate conference before considering any substantial changes.

In response, Chairman Hensarling said, “As this process goes forward over the next several months, I will be using that time to discuss with all members how to continue the program and also make reforms that improve our stewardship of Americans’ hard-earned tax dollars.” He added, “[u]nfortunately, the Senate bill is essentially a status quo bill that uses a phony Washington budget gimmick as a pay-for, meaning it can’t even come to the House floor as written.”

For more detail on TRIA and the Senate and House bills, see “Terrorism Risk Insurance Legislation: Issue Summary and Side-by-Side Analysis” by the Congressional Research Service (CRS). The CRS likely soon will update the analysis to reflect Senate passage of S. 2244.

The White House

White House support for the TRIA reauthorization is not in doubt. Prior to Senate consideration of S. 2244, the White House issued a “Statement of Administration Policy” urging its “swift passage.”


The Senate and the House of Representatives begin their summer recesses this week and will return to Washington in September for two to four weeks of legislative work before recessing for the November 4 election. A post-election “lame duck” session of uncertain duration is likely.

The TRIA reauthorization has broad support from the business community, and in Congress and from the President, but obstacles remain before it can reach President Obama’s desk. Ultimately, we expect Congress to reauthorize TRIA, but passage could come as late as just before the program’s expiration at the end of 2014 — maximizing uncertainty in the property insurance marketplace. It’s also possible that Congress could approve a short-term extension postponing real action until mid-2015.

Arent Fox’s Government Relations practice will continue to monitor future developments. For additional information, please contact Norman F. Lent III, or the Arent Fox professional who handles your matters.

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