In an era where bitter partisanship seems to be the biggest obstacle to sound public policy, it is gratifying when leaders in both parties can come together to get something done. When their action benefits the American economy, then that is even better and more remarkable.

Congress is on the verge of accomplishing just such an outcome by reauthorizing the Terrorism Risk Insurance Act.

We can all remember the horror of Sept. 11, 2001 and the massive destruction that came with it. The losses were staggering. Almost 3,000 innocent civilians lost their lives–more than were killed in the attack on Pearl Harbor. Insurers paid out over $35 billion in claims–financial resources that enabled businesses and the economy to recover.

Before the terrorist attacks, insurance companies did not exclude losses from terrorist attacks. That approach became impossible after 9/11. No one in the industry had any idea “how high was up” when it came to estimating possible losses from future attacks, and models to assess losses were–and still remain–extremely inaccurate.

Insurance premiums are based on the ability to accurately evaluate the frequency and magnitude of a given risk. There was no basis to make such evaluations with terrorism.

A bank making a loan to a business–such as a commercial builder–rightfully wanted the assurance that those receiving the loan had insurance in the event of another terrorist attack, just the same as protection against fire or wind. With coverage for terrorist attacks unavailable, lending for new commercial developments dried up and the impact on the economy was staggering.

The White House estimated that in the 14 months between 9/11 and the passage of the original TRIA, nearly 300,000 jobs were put on hold. The Real Estate Roundtable calculated that nearly $14 billion in real estate transactions had either been stalled or canceled because of a lack of terrorism insurance.

Congress wisely took action and developed TRIA–one of the most successful and efficient public/private partnerships ever created. In exchange for insurers making terrorism insurance coverage available to all commercial insurance buyers, and paying the first $27.5 billion in losses from a future attack, the federal government promised to serve as a backstop once damages exceed a well-defined threshold.

Far from any sort of “corporate welfare,” the program only kicks into action if losses are massive and go beyond the ability of the private market to handle the situation.

No less a friend of markets than Alan Greenspan has stated on multiple occasions that no primary or secondary private market for terrorism insurance would exist without the federal government serving as the backstop.

Best of all, the TRIA program works. Every year the percentage of businesses buying terrorism insurance increases. Today, nearly two-thirds have such coverage.

What does that mean for taxpayers? It means that should another attack occur, the government actually would have a lower level of exposure than prior to TRIA being put into place.

There are some who have argued that TRIA hinders the development of a robust private market for terrorism insurance. However, the facts show that just the opposite is true. There are no indications that absent TRIA a private market for such coverage would develop on its own.

Last month, the House of Representatives passed legislation to extend TRIA for 15 years. In the Senate, a bill calling for a more modest seven-year extension is due to go to the floor soon.

The House version mandated that insurers “make available” coverage from attacks involving weapons of mass destruction (nuclear, biological, chemical, and radiation–NBCR). The Senate Banking Committee deleted that provision, deciding that careful study is required to assure we do not put the whole program in jeopardy.

The next step is for the full Senate to approve the bill. A House-Senate conference committee must then work out the differences between the two proposals and send a final version to the President.

The White House has sent a strong signal to Capitol Hill that it will accept the Senate's narrower TRIA extension. We're hopeful that congressional leaders will act decisively on this critical legislation and agree on a bill that guarantees a stable, long-term market for terrorism coverage.

PCI and other industry groups have worked hard to educate members of Congress on the need to extend TRIA, and it appears we are on the verge of success.

It may not happen often enough to satisfy most Americans, but when Congress does something right, they deserve to be applauded. So, when lawmakers send a new TRIA to the President for his signature, go ahead and recognize them for the effort. It will be good news for our economy and every American.

David A. Sampson began his new post as president and chief executive officer of the Des Plaines, Ill.-based Property Casualty Insurers Association of America on Sept. 4.

Special Reports /

Congress Poised To Do The Right Thing On TRIA

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