Financial Services Subcommittee on Housing and Insurance Chairman Rep. Randy Neugebauer (R-Texas) outlined needed reforms to the Terrorism Risk Insurance Act due to market changes since it was passed 12 years ago during a hearing on Wednesday.
TRIA was adopted in the wake of the attacks on Sept. 11, 2001, to prevent limited terrorism insurance availability from inhibiting economic development. The bill was intended to provide a two-year transitional period for the market to respond to increased demand for private insurance coverage for acts of terror.
“Unfortunately, that transition hasn’t taken hold as quickly as Congress had originally intended,” Neugebauer said. “But since the last reauthorization of the program in 2007, we have seen encouraging developments that lead me to believe that this committee can finally begin to take off the training wheels and transition to a terrorism risk insurance market that is less dependent on a taxpayer-funded backstop.”
Since TRIA was passed in 2002, insurance markets have improved risk-management protocols, enhanced terrorism risk modeling and made the underwriting process more detailed. Those advancements have led to a 70-percent decrease in the cost of terrorism insurance, Neugebauer said.
“…TRIA has failed to keep pace with the advances and innovation of the private market,” Neugebauer said. “In fact, the program remains largely unchanged in nearly 12 years. Unfortunately, the slow evolution of the program has hindered the growth of the private market for terrorism risk insurance; thus resulting in a bad deal for U.S. taxpayers.”
Neugebauer said he “firmly believes” that private insurance markets are now able to handle the risks associated with conventional acts of terror.
TRIA is scheduled to expire in 13 months.