TRIA, or the Terrorism Risk Insurance Act , was passed into law in 2002 to ‘put a temporary federal backstop program in place that would allow for a public and private sharing of insured losses resulting from future acts of terrorism against the United States’.
Due to a failure by the US Senate to pass an extension and to the dismay of the real estate industry, TRIA is now scheduled to expire on December 31, 2014.
From the firm AIR Worldwide, the implications of this expiration are laid out:
‘If TRIA expires, commercial insurers will no longer be required to offer terrorism coverage beginning January 1. Without a federal backstop, insurers may seek to limit underwriting for high concentrations of risks in major cities—causing terrorism insurance coverage to become unavailable or unaffordable. Insurers that do continue to offer commercial terrorism insurance would likely be required to maintain higher capital standards in order to avoid negative rating implications. Where coverage for terrorism-related events is still available, prices for this coverage will increase.
In the absence of TRIA, the workers’ compensation insurance market would be particularly vulnerable to terror attack losses. State workers compensation statutes offer insurers less flexibility to control terrorism risk through modifications such as policy limits or coverage exclusions. With or without TRIA, it is mandatory for U.S. employers to provide workers’ compensation coverage. If coverage is not available, employers may be forced to purchase insurance in the residual markets or self-insure. This could result in large amounts of risk being transferred to the residual market in a few states.
Allowing TRIA to expire would have widespread implications, not only for the insurance industry, but also for the broader economy. Construction and real estate business sectors may be unable to obtain financing without adequate terrorism coverage in place. If insurers limit underwriting following an expiration of TRIA, businesses with high concentrations of employees could have difficulty obtaining coverage for workers’ compensation, including higher education institutions, hotels, airports, hospitals, and financial services, among many others.‘
Michael Haltman, President of Hallmark Abstract Service, New York.
HAS is a provider of title insurance in New York State for residential and commercial real estate transactions specializing in the areas of New York City, Long Island and Westchester.
For anyone either buying a property or refinancing, remember that although your attorney will likely recommend a title insurance provider, you always have the right to choose your own title company (click here to learn more)!
If you have any questions you can reach Michael by email at email@example.com.