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Terrorism Risk Insurance Act (TRIA) Extension Faces Tough Fight

On December 31, 2014 the Terrorism Risk Insurance Act, or TRIA, is set to expire. The program, originally enacted in 2002, provides a financial backstop by the federal government in the case of a large-scale terrorist attack. TRIA has been extended twice, in 2005 and 2007, but there is uncertainty as to whether the program will be extended again.

Legislation that would simply extend the program to 2019 has been introduced by Rep. Michael Grimm (R-NY) and Rep. Carolyn Maloney (D-NY). However, Rep. Jeb Hensarling (R-TX), chairman of the House Financial Services Committee, has voiced opposition to extending the program in its present form. The House Financial Services Committee has stated its plans to examine the private sector’s capacity to assess and price for terrorism risk and to consider proposals that would phase out TRIA over time.

Others have expressed arguments against the program’s extension as well. David C. John, senior research fellow in retirement security and financial institutions at The Heritage Foundation, testified before the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity in September 2012 that “we have now reached a point where the private sector is increasingly capable of providing [terrorism] coverage at appropriate prices without government support.”

Maurice R. Greenberg, chairman and CEO of C.V. Starr & Co. and former CEO of American International Group Inc., stated at a press conference at the National Press Club in Washington that the “private market is capable of doing a heck of a lot more” in regards to terrorism coverage than it could at the time of the program’s original authorization. While he did stop short of calling for ending the program, Mr. Greenberg’s statement added to the argument that the private sector is capable of insuring terrorism risks without a federal backstop.

Proponents of the program, including RIMS, argue that a completely private solution is not feasible as terrorism acts are exceedingly difficult, if not impossible, to predict. Without a federal backstop in place, coverage capacity will be significantly reduced, driving prices much higher. This holds especially true in high-risk metropolitan areas such as New York City, Chicago, Los Angeles, etc. Without adequate capacity, many organizations will be forced to self-insure, leaving themselves exposed to an event that could possibly end in bankruptcy.

Supporters of the bill would like to see an extension passed by the end of 2013 so as not to negatively impact policies issued in 2014, but with Congress focused on other priorities, this debate could continue well into 2014 and potentially right up to the deadline of December 31, 2014. Supporters of the program, including RIMS members, are strongly encouraged to reach out to their member of Congress to express their support and need for the program.

Risk Management Magazine and Risk Management Monitor. Copyright 2017 Risk and Insurance Management Society, Inc. All rights reserved.


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Risk Management Magazine is the premier source of analysis, insight and news for corporate risk managers. RM strives to explore existing and emerging techniques and concepts that address the needs of those who are tasked with protecting the physical, financial, human and intellectual assets of their companies. As the business world and the world at large change with increasing speed, RM keeps its readers informed about new challenges and solutions.

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