There is bipartisan support on Capitol Hill for U.S. Secretary of the Treasury John Snow to extend the "make available" provision of the Terrorism Risk Insurance Act (TRIA). The Department of the Treasury is accepting comments on the provision through June 4.
The make available provision, set to expire Dec. 31, 2004, requires all commercial property and casualty insurers who write polices for commercial properties to offer terrorism insurance policies on a par with those for other catastrophic events. "Having the entire industry offering [terrorism insurance] has significantly lowered the price," said Gail Davis Cardwell, senior vice president, commercial and multifamily group with the Mortgage Bankers Association.
The provision in question is part of TRIA, a federal reinsurance program passed in November 2002 to limit potential terrorism-related losses to insurance carriers. The broader TRIA program is set to run through Dec. 31, 2005. Supporters of the make available provision are asking that it be extended to run the full term of TRIA. If the provision is allowed to expire, the federal reinsurance backup could be rendered irrelevant. Those insurance policies that have recently come up for renewal only extend terrorism insurance through the 2004 expiration date, leading many to believe that most carriers would not offer it if they were not forced to.
"Either [terrorism insurance] will not be available, or the capacity will be so limited that those that do offer it will be able to charge quite a bit, making it unaffordable," Davis Cardwell said.
Since a congressional hearing was held last month to discuss the issue, support has been forthcoming from both sides of the political spectrum. Both Rep. Barney Frank (D-Mass.) and Rep. Michael Oxley (R-Ohio) have sent letters advising Secretary Snow to extend the provision. Secretary Snow must make a decision by Sept. 1.
Additionally, in a hearing of the Senate Banking Committee last week, several senators favored extending the TRIA program in its entirety. The Treasury Department is slated to report to Congress by June 30 with regard to the effectiveness of the program and the availability and affordability of terrorism insurance following the expiration of the program.
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