Terrorism insurance rates for commercial developers, business owners and contractors could skyrocket, according to the Associated General Contractors, if Congress does not approve legislation to extend a program that calls for the federal government to share in the cost of future terrorist attacks.
Pete Sessions, R-Texas, Richard Baker, R-La., Sue Kelly, R-N.Y., and Eric Cantor, R-Va. By extending the act, terrorism insurance will continue to be available to property owners and construction contractors.
The Associated General Contractors of America recently expressed its support for the legislation that would extend the Terrorism Risk Insurance Act.
“Extending the terrorism insurance backstop will provide an essential safeguard for U.S. jobs and the construction industry,” said Stephen E. Sandherr, chief executive of AGC. “Allowing the act to expire could put thousands of construction jobs and projects back at risk.”
The original TRIA act, passed by Congress in November 2002, created a program in which the federal government would share the cost of a terrorist attack that caused at least $5 million in insured losses. Because of the governmental assistance, insurance companies were required to offer terrorism coverage for commercial properties until the end of 2004. Before September 11, 2001, damage from terrorist attacks was included in standard commercial property and casualty policies. However, since the insured losses from 9/11 totaled $32.5 billion, many companies were not willing to offer terrorism coverage without government support.
The TRIA act mandated that the Treasury Department decide by Sept. 1, 2004, whether to extend the terrorism coverage requirement through the end of 2005. On June 18, the Treasury decided to extend a provision of the act that requires all commercial property and casualty insurance companies to make terrorism coverage available.
But Congress will have to decide whether to continue the government’s assistance in the case of a terrorist attack.
According to AGC, extending the backstop would help protect the U.S. economy. Without a terrorism risk insurance program, the organization fears the broad exclusion of all future acts of terrorism from property and liability insurance policies could trigger another economic recession. Qualify for new projects, construction loans or permanent financing could become more difficult for property owners.
It is not known when Congress will formally discuss the TRIA extension legislation. The Treasury will conduct a study this year and make a recommendation to Congress on the program’s extension by June 2005.