NMHC/NAA Viewpoint Given financial requirements for apartment owners to purchase terrorism insurance and the limited availability of such insurance in the private market, Congress should support an extension of the Terrorism Risk Insurance Act. Such an extension would fill a critical insurance need and provide stability in the marketplace.
Most lenders require apartment owners to carry terrorism risk insurance. Prior to the 9/11 terrorist attacks this was not a problem, as most general insurance programs included terrorism risk coverage. However, after the attacks, private carriers began dropping terrorism coverage from their policies. Within a short time, terrorism risk insurance coverage was simply unavailable or excessively priced, but nonetheless still mandatory for most property owners due to the terms of their loans.
In an effort to fill this critical void, Congress passed the Terrorism Risk Insurance Act (TRIA) in 2002, which provided a federal backstop for insured losses resulting from acts of terrorism. Administered by the Treasury Department, the program has been successful in ensuring widespread availability and affordability of terrorism risk insurance and bringing stability back into the private insurance market.
While the program was intended to be a short-term solution, the private insurance market has yet to recover enough to be able to meet the widespread demand for terrorism risk coverage. The program has been extended twice, most recently by the Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA). However, that measure and the federal terrorism backstop are set to expire in December 2014.
The April Boston Marathon bombings are a reminder that the continued threat of terrorism remains high. Absent an extension of TRIA, insurance carriers will begin to issue notices to policyholders informing them that terrorism coverage will not be provided after 2014. Apartment owners unable to find or afford replacement coverage will be in technical default on loans that require such coverage. Given the prevalence of this type of lender requirement, higher default rates could trigger considerable market disruption and potentially set back economic recovery.
Bipartisan legislation has been introduced in Congress to extend the current program for five years. Such an extension would fill a critical insurance need and provide stability in the marketplace.
Ninety-one percent of NMHC survey respondents report having terrorism insurance in 2012, up from 85% the prior year.
Print Friendly Fact Sheet
- Senate Takes an Early Look at Terrorism Risk Insurance Reauthorization
- Coalition Letter to Senate Banking Committee Regarding Terrorism Risk Insurance - June 2019
- Multifamily Industry Applauds Terrorism Insurance Passage
- NMHC/NAA Applaud Passage of Terrorism Insurance by Congress
- Congress Goes Home Without Renewing Terrorism Insurance