Terrorism risk insurance important for many companies on 9/11 anniversary

The National Association of Realtors argued the need for terrorism risk insurance in Congress.

The National Association of Realtors recently had representatives speak to Congress explaining that some property management companies should look at terrorism risk insurance, which is just one type of a wide range of general commercial insurance options available on the market.

Linda St. Peter, commercial committee vice chair for NAR explained the association's case in front of the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity, the association explained. A terrorism insurance program passed by Congress in 2002 – called the Terrorism Risk Insurance Act – and NAR pushed for the continuation of the program on the 10th anniversary of 9/11.

How TRIA works

The insurance type works by creating a partnership that spreads risk across the property management company, federal government and private insurance companies, the report explained. This was created to help private insurers continue offering this type of insurance. At present, the program will expire before 2015, unless an extension is granted.

"Terrorism continues to be an unpredictable threat to our nation, and as the leading advocate for property owners, Realtors know that American businesses must have adequate terrorism risk coverage," said St. Peter. "The federal government's terrorism risk insurance program helps protect the nation's business sector by ensuring that adequate insurance coverage is available. That coverage is critical to helping maintain a strong and vital commercial real estate market."

What TRIA does for businesses

The program helped not only make this type of insurance more affordable, but also ensured that it was more widely available, the report explained. A removal of this type of insurance could have a significantly negative effect on the commercial industry, as more than 80 percent of commercial mortgage loan balances have clauses that require such insurance. Additionally, continued worry that this insurance program may expire has the potential to increase drops of the policies, forcing many loans to default. This is because insurance rates could skyrocket at that point.

St. Peter added that the federal government needs to solve this issue soon, and with it, create a long-term solution so commercial property managers have terrorism coverage options for their properties. This could not only keep coverage current, but it may also help keep the commercial market on the path toward recovery, while helping improve the current economic situation.

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