Terrorism Risk Insurance Act House Testimony From NAR Commercial Committee Vice-Chair
In 2002, Congress passed and President Bush signed into law the Terrorism Risk Insurance Act, a bit of federal insurance market subsidy aimed at maintaining access to sufficient insurance coverage for owners and borrowers/buyers of commercial property. Private insurers, faced with a radically expanded scale and scope of terrorism after 9/11, had been leaving the market in droves, finding it beyond their ability to quantify the risk of terrorism coverage. The destabilized market for private coverage settled down after TRIA was passed, but the jitters — and rising coverage costs — resurfaced in 2005 and 2007 when Congress debated extending TRIA, past its original expiration date.
At the time, the impact on commercial property mortgages became clear; property owners could be in risk of default on mortgages if private insurance carriers ceased offering the now-required terrorism risk coverage on their properties. The program was extended to 2014, but the debate on continued extension has picked up again now.
The coverage is not in any way limited to showcase properties in primary markets; some reports indicate 85% of commercial mortgages carry the coverage required by lenders.
Appearing earlier this week before the House Subommittee on Financial Services for the TRIA debate was Linda St. Peter, the operations manager of Prudential Connecticut Realty in Wallingford, Conn., and vice-chair of NAR’s commercial committee. Ms. St. Peter’s testimony recommending lawmakers extend the program before the market again becomes nervous about the program’s continued authorization.