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U.S. CONGRESS LIKELY TO EXTEND TRIA MEASURE

By Dees Stribling

The Terrorism Risk Insurance Act (TRIA), originally enacted in 2002 and then extended (with some changes) in 2005, stands a good chance of being extended yet again beyond its year-end expiration by this 110th Congress, sources say. The measure obligates insurers to offer coverage for terrorist attacks while also making the federal government an agency of reinsurance — a “backstop” to pay most claims in the event of massive losses from terrorism. “The outlook for TRIA extension this year is very good,” said Jennifer Platt, ICSC’s director of federal government relations. “Democrats have been more sympathetic toward the measure, and in particular Barney Frank in the House and Chris Dodd in the Senate are in favor of an extension, very likely for five years.”

Rep. Frank (D-Mass.) is now chairman of the House Financial Services Committee, and at the end of January he said publicly that he wants House passage of TRIA by April, before Congress goes on spring break. Sen. Dodd (D-Conn.), the new chairman of the Senate Banking Committee and a lead sponsor of the previous extension, is also known to favor action to extend TRIA. Norman M. Kranzdorf, senior vice president of retail at Plymouth Meeting, Pa.-based Urdang Capital Management, is beating the drum from the industry side. “It’s essential to both the real estate and insurance industries, and Congress knows that,” he said. “The question is how long it’s going to take to agree on its content. But TRIA hasn’t cost the government anything, and it’s stabilized the insurance industry, so its prospects are very good this year.”

But not even the savviest denizen of Capitol Hill can predict exactly what form any particular bill will take. Actuarial expert James Macdonald, director in the Philadelphia office of Navigant Consulting, says there is always a possibility that Congress could tinker with the law in a way that proves unfavorable, perhaps inadvertently, to parts of the real estate industry, such as the owners of major retail properties. “One idea that’s been suggested is to make TRIA more narrow in focus by applying it only to chemical, biological, radiological or nuclear attacks,” Macdonald said. (In Department of Homeland Security parlance, this is called CBRN.) “That would be a major mistake and bad for shopping center owners, because shopping centers are much more at risk from conventional attacks than [from] CBRN.”

To underscore the uncertainty, he cites the report of the Presidential Working Group, published last year. “The report offered no definitive position on extension, either pro or con,” he said. The document recognizes the limits of estimating losses from terrorism before any attack; those against extending TRIA will see that the report describes an increased willingness among insurers to underwrite terrorism risk.