Governors, Lenders Push TRIA Extension

Washington

Over half of the nation's governors and a major lenders' grouphave added their voices to the chorus of calls for an extension ofthe Terrorism Risk Insurance Act.

In a letter addressed to congressional leaders, the governors of28 states–including New York's George Pataki, Arnold Schwarzeneggerof California, Florida's Jeb Bush and Bob Taft of Ohio–expressed a"strong belief" that the economy depends on the availability andaffordability of terrorism insurance.

"Now, less than two months before its scheduled expiration, weurge you to act quickly and ensure that our businesses can continueto be protected against the threat of terrorist attacks," thegovernors said.

Without the federal backstop for terrorism coverage providedunder TRIA, the governors said business would likely face marketconditions such as those in the months after the terrorist attacksof Sept. 11, 2001. "Policyholders will likely pay exorbitantly highpremiums for terrorism insurance, or simply be unable to secureit," they said in the letter.

Additionally, the governors noted the findings of the TreasuryDepartment's report on the TRIA program, which predicted that ifTRIA were allowed to expire as scheduled, in the short term therewould be less coverage available, very high premiums and a lowpurchase rate, meaning many businesses would be uninsured for therisk.

Recovery Imperiled

"In the absence of any financial protection, a future terroristattack will have a significant impact on our nation's ability torecover as businesses find themselves without the necessaryresources to rebuild their operations," the governors said.

A lack of federal backing for terrorism insurance could provedamaging to the economy on the international stage as well, thegovernors said, noting that without TRIA the United States wouldfind itself "at a competitive disadvantage against countries with aterrorism insurance program, such as the United Kingdom or Germany,when attempting to attract international private investment."

Meanwhile, the Mortgage Bankers Association also called onlawmakers to ensure that some form of federal backstop forterrorism insurance remains available in 2006, or risk a seriousdisruption of the commercial real estate finance industry.

In a letter to House Financial Services Committee Chairman MikeOxley, R-Ohio, and Ranking Member Barney Frank, D-Mass., theassociation said Congress must act to ensure the continuedavailability of terrorism coverage and not allow the process to beslowed by attempts to improve the TRIA program.

The MBA pointed to the results of a study it conducted in 2004,which found that 94 percent of commercial real estate financingincluded a requirement for terrorism coverage.

"The lack of availability of terrorism insurance in a post-TRIAenvironment would catch a wide range of borrowers, servicers,rating agencies and others between obligations to have terrorisminsurance in place and a lack of available and affordablecoverage," the MBA warned.

"Given these continuing uncertainties, the expiration of TRIA inthe short term will result in the commercial real estate investmentmarkets becoming more dysfunctional," the group added.