TRIA Reauthorization: An Overdue Victory for CRE

TRIA Reauthorization: An Overdue Victory for CRE

During Congress’s first week back in session, the commercial real estate industry scored a tremendous legislative victory. The 114th Congress convened on January 5, and two days later, the House passed H.R. 26, which extends the federal terrorism risk insurance backstop program known as TRIA for six years; the next day, the bill was passed in the Senate. On January 12, President Obama signed it into law. This was Congress working at warp speed, but the legislation it passed was long overdue.

The federal government’s terrorism risk insurance program first was put into place during the immediate aftermath of 9/11, when many building owners were advised that their policies would not be renewed or that their new policies would exclude terror and war risks. Thirteen years into the government program, which was initially intended to be a short-term backstop, it still appears that the insurance and reinsurance industry cannot accurately underwrite and assume the risk. BOMA believes that this program is critical to ensure business continuity, protect taxpayers and policy holders and provide a mechanism for the orderly payout of claims in the event of a terrorist attack.

We’ve known for years—as has Congress—that TRIA was set to expire on December 31, 2014, unless Congress passed legislation to extend the program. As BOMA has been explaining to Congress for the past two years, without the federal backstop in place, many policyholders would be unable to insure their properties at reasonable rates and terms, and much of our nation’s infrastructure, including buildings, arenas and transportation systems, would be at risk, creating an economic risk to the entire nation.

However, despite commercial real estate’s best efforts to urge a renewal of TRIA in advance of its expiration, Congress played its political games throughout the 113th Congress. Here’s the long, complex backstory: Early in the session, which began in January 2013, three bills to extend the program were introduced in the House. The legislation that many key stakeholders rallied behind was introduced by one of the industry’s champions on the issue, Rep. Michael Grimm (R-N.Y.). Grimm later was indicted for tax fraud, won his reelection bid to continue to serve as Congressman for Staten Island and eventually resigned his seat on January 5 of this year after accepting a plea deal on felony tax evasion. Regardless of the controversy surrounding former Rep. Grimm, the chairs of the House Financial Services Committee and the Subcommittee on Housing and Insurance—Jeb Hensarling (R-Texas) and Randy Neugebauer (R-Texas), respectively—did not support a simple reauthorization of the program and, in fact, were not convinced that the program should be extended at all.

A year and a half into the session, the Senate, which had been waiting for the House to act first, decided to make a move. In July, the Senate passed an extension of TRIA with overwhelming bipartisan support and the backing of the policyholder and insurance communities. Many hoped that this united show of support would prompt the House to take up the issue.

Meanwhile, back in the House, Chairman Neugebauer had introduced his own bill, which passed out of the Financial Services Committee and tentatively was scheduled for a vote on the House floor. However, that vote never happened, as too many lawmakers who supported extending TRIA did not agree with the proposed changes to the program in the Neugebauer bill, and Speaker of the House John Boehner (R-Ohio) opted to postpone a vote instead of seeing it defeated.

Soon after, Congress adjourned to hit the campaign trail for midterm elections, and focus on TRIA only resumed during the post-election, lame-duck session. Despite the “mandates for cooperation” that members of both parties claimed to have heard from the voters, the “politics as usual” went right back into play. The House finally did pass the Senate bill extending TRIA, but it was amended to include some riders on unrelated issues that House leaders knew were objectionable to some in the Senate. Shortly after the House passed the bill, they adjourned for the year, leaving the Senate no choice but to vote on the bill with the objectionable riders or allow the program to lapse. In the end, a retiring Republican Senator put a hold on the bill and Senate Majority Leader Harry Reid (D-Nev.) was unwilling to keep the Senate in session for another few days to wait out a filibuster. The program expired at the end of 2014, with Republicans blaming the Democrats, the House blaming the Senate and vice versa.

With some help from the press, which blasted Congress for its ineptness—and helped spread rumors that the Super Bowl could be in jeopardy if the host stadium’s insurance policy lapsed—the House and Senate finally showed some leadership and passed a good bill in less than a week. In addition to extending TRIA through December 31, 2020, the legislation also gradually increases the loss threshold that triggers federal assistance under the program from $100 million to $200 million.

A hard-won victory, indeed.

Karen Penafiel is vice president of advocacy, codes and standards for BOMA International in Washington, D.C.

 

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