TRIA renewal could displace emerging private solutions to terrorism insurance
WASHINGTON (Jan. 6, 2015) – The R Street Institute warned today that a pending renewal of the Terrorism Risk Insurance Act, which the U.S. House could take up as early as today, does not go nearly far enough in shifting risk to the private sector and off the backs of taxpayers.
House Financial Services Committee Chairman Jeb Hensarling, R-Texas, has pledged the chamber will take up legislation this week substantially similar to the six-year reauthorization of the $100 billion federal terrorism reinsurance facility that passed the House in December by a 417-7 margin.
According to R Street Senior Fellow R.J. Lehmann, though the bill takes some modest steps in the direction of reform – most notably, raising the program’s trigger from $100 million to $200 million – it fails to acknowledge the degree to which capital markets already are responding to the program’s expiration by offering enhanced private solutions.
“The flood of new product offerings we have seen in the past few weeks, both in anticipation of the program’s Dec. 31 expiration and in the days since, is ample evidence that private insurers, reinsurers, brokers and underwriting syndicates are ready and able to do more,” Lehmann said.
“The fear of uncertainty surrounding the program’s expiration was fully understandable, and it was a concern we shared,” Lehmann added. “But now that the program has expired and the sky clearly hasn’t fallen, we would urge lawmakers to sit down for a more deliberate and thoughtful debate about deeper reforms to the program, rather than rushing through a hasty reauthorization that could displace the private market.”
Among the reforms R Street has proposed are a much larger increase in the program’s trigger, to at least $1 billion; ending the backstop’s coverage of commercial liability risks; a shorter extension that would allow Congress to assess the degree to which private coverage emerges over the next two-to-three years; and charging insurers an upfront premium for the reinsurance the program provides.
