Property management companies promptly address TRIA expiration

The Empire State Building currently has $1.5 billion in terrorism insurance under TRIA legislation even though the building is worth $2.5 billion.

As the Terrorism Risk Insurance Act inches closer to expiring in December of 2014, commercial real estate managers are not wasting any time in winning a robust extension of the legislation.

According to data from the Marsh 2013 Terrorism Risk Insurance Report, demand for terrorism-related coverage has increased since 9/11. Currently, 60 percent of organizations have enlisted in some sort of terrorism insurance. If TRIA were allowed to expire, insurance companies would no longer be obligated to provide such coverage and premiums would likely rise, according to The Risk and Insurance Management Society.

In a recent article in The Wall Street Journal, Fitch Ratings said it expects policyholders in densely populated metropolitan areas to take the economic blow well before TRIA expires as insurance companies negotiate premiums.

"Banking, construction, real estate – if TRIA went away they would be more affected than insurance," Jim Auden, an analyst in Fitch's insurance group said. "Insurers would adapt to the lack of reinsurance cover and pare back their writings in those metro areas."

In New York City, for example, the Empire State Building is worth $2.5 billion, but only has $1.5 billion in terrorism coverage, according to the New York Post. 

"Waiting to take legislative action until the scheduled 2014 year-end sunset would be a mistake," Jeffrey DeBoer, CEO of Real Estate Roundtable, told the source. "Starting in the next few months, as policies roll and terror coverage becomes less certain, increasing numbers of large and small transactions across the country will be delayed or canceled."

A push for a new law
According to the law firm Edwards Wildman Palmer, legislation that would extend TRIA for another five years was considered in February, introduced by Congressman Michael Grimm. However, after the marathon bombings in Boston, another piece of legislation was recently introduced by Congressman Bennie Thompson, known as the Fostering Resilience to Terrorism Act, extending TRIA another 10 years. Such an extension would, as Representative Thompson stated, provide a stable environment that businesses need to make sound investments.

FRTA also amends the potential mechanisms that must be triggered to kickstart the support of Homeland Security and the Department of the Treasury, as well as encourages the distribution of terrorism best practices information to potential insureds that fall under TRIAs umbrella.

Leigh Ann Pusey, CEO of the American Insurance Association, recently released a statement fully endorsing the Fostering Resilience to Terrorism Act and its ability to provide certainty that, in the case of an attack, a recovery will be supported adequately.

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