from National Association of Home Builders
American businesses rely upon the availability and affordability of terrorism risk insurance and it’s a vital component of most commercial real estate transactions, the National Association of Realtors said in testimony last month.
NAR’s 2012 Commercial Committee Vice Chair Linda St. Peter spoke before the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity on the 11th anniversary of the Sept. 11 terrorist attacks about the future of the Terrorism Risk Insurance Act.
TRIA is a federal terrorism insurance program enacted in 2002 that establishes a risk-sharing partnership between the government, private insurers and commercial policyholders.
“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, operations manager for Prudential Connecticut Realty in Wallingford, Conn. “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.”
In her testimony, St. Peter said that after the Sept. 11 attacks private insurers backed out of the terrorism insurance marketplace, prompting Congress to enact TRIA, a federal insurance backstop that allows the federal government and private insurance companies to share losses in the event of a major terrorist attack. TRIA helped stabilize commercial real estate markets by making terrorism coverage available and more affordable over time. Congress has reauthorized the program twice; it currently expires on December 31, 2014.
While the commercial real estate finance market is starting to show signs of life, any disruption in the availability of terrorism insurance would have serious consequences on commercial real estate’s fragile road to recovery. According to industry sources, 84 percent of outstanding commercial mortgage balances require terrorism insurance.