Senate shoots down TRIA legislation
For the first time since 2002, the federal government no longer offers the real estate industry a federal backstop for terrorism insurance.
Unsurprisingly, the real estate industry isn’t thrilled about that.
The Terrorism Risk Insurance Act, or TRIA, which was originally signed into law in 2002 by President George W. Bush as a federal backstop for the real estate industry, officially died on Dec. 16, after the U.S. Senate adjourned for the year without renewing or extending legislation on the act. It’s a move that is receiving widespread criticism nationally and locally from an understandably worried real estate industry.
For over a decade, the act kept insurance rates from spiking following the wake of the 9/11 terrorist attacks, and it has been especially well supported by West Michigan’s real estate community, said Gene Szpeinski, associate broker at Grand Rapids-based Signature Associates.
The lame duck session was a terrific opportunity to extend the act, said Szpeinski, president of the Michigan Association of Realtors and a member of the Commercial Alliance of Realtors West Michigan’s political affairs committee. But as Szpeinski sarcastically said, one “can never get too excited about something happening in a timely manner within the political world.”
“This alarming failure to act before adjournment could stall commercial real estate development around the country. The Senate missed an opportunity to approve a six-year reauthorization of the Terrorism Risk Insurance Act that passed the U.S House of Representatives with overwhelming bipartisan support,” read a release from the National Association of Realtors.
The bill died when senators were unable to reach a unanimous consent agreement.
“Despite this temporary setback, realtors will work closely with Congress in 2015 to swiftly re-enact TRIA and provide much needed certainty to the commercial market,” the release stated.
TRIA was set to expire at the end of this year, and its extension had been trapped in debate in the House of Representatives for months. When the House finally announced it had passed a bill that would extend the act, Szpeinski said he felt the real estate industry was finally seeing hope.
“After Sept. 11, it was impossible for businesses to buy the terrorism insurance they needed to move forward with major construction projects. Development came to a halt, money for new projects dried up, and our economy suffered a devastating blow. … The Terrorism Risk Insurance Act was the solution, and it remains the solution,” said Congresswoman Carolyn Maloney, New York’s senior Democratic member of the House Financial Services Committee and the party’s lead author on the legislation.
“By providing a government backstop, it ensures that terrorism insurance is available and affordable, and the program works at no cost to taxpayers. After months of negotiations, I am so pleased we were able to pass this essential legislation,” Maloney said.
Although many were glad to hear TRIA had finally made it through the House, details soon surfaced about troublesome additions to the Act that had been made during its time in the House. Szpeinski said he was concerned about a particular amendment that was put in the House’s proposed deal.
The amendment, which was reportedly proposed by Republican leaders, would increase the “program trigger from $100 million to $200 million and discard the bifurcation provisions,” according to a release from Maloney’s office. “Democrats, including Maloney, opposed the inclusion of a small tweak to the Dodd-Frank Wall Street reform law, which she had argued should be passed as a standalone measure.”
Szpeinski felt raising the limits on TRIA could lead to the raising of insurance rates in West Michigan and across the country, which is the very thing TRIA is designed to prevent from happening, he said.
“Raising the limits from $100 (million) to $200 million puts us in a position where … with a higher bar on the backstop, that means more risk, which transfers into higher rates,” Szpeinski said.
Szpeinski’s chance to see what it would mean never came, as the Act died in the Senate last week and never made it to the president’s desk. Although Szpeinski feels the House’s new proposals essentially killed the act, he has hope a better version will be renewed sometime early next year.
“We will need to see if there is any action from insurers as to rate increases or cancellations. The Dodd Frank Act revision was probably one of the reasons Harry Reid didn’t invoke cloture and move it forward,” he said.
“TRIA will get re-enacted — I would suspect it will happen relatively quickly in 2015. What form it takes is still unclear. If they continue with the increase from $100 (million) to $200 million for the government backstop to kick in, we will surely see a cost ripple from insurers.”