Magazine article Mortgage Banking

House Subcommittee Mulls Longer-Term TRIEA Extension

Magazine article Mortgage Banking

House Subcommittee Mulls Longer-Term TRIEA Extension

Article excerpt

There appears to be general support for a continuation of a federal terrorism-insurance backstop among members the House Financial Services Subcommittee on Financial Markets. However, a consensus between members and industry representatives as to the shape, scope and duration of an insurance extension isn't quite as clear.

In testimony before the subcommittee in April, Joseph Ditchman Jr.--representing the Coalition to Insure Against Terrorism (CIAT), of which the Mortgage Bankers Association (MBA) is a member--urged members of Congress to craft a long-term terrorism solution that would remove uncertainty from the markets and make terrorism insurance available and affordable.

"Frankly, we believe there is no need for delay in action by Congress. The facts are in--terrorism is clearly a risk that the private insurance industry alone cannot and will not underwrite," said Ditchman. "As we saw before in 2005, when the Terrorism Risk Insurance Act [TRIA] was set to expire, problems associated with the availability of terrorism-risk insurance will increasingly get worse as the year wears on."

As Mortgage Banking has reported, the Terrorism Risk Insurance Extension Act of 2005 (TRIEA), signed by President Bush at the end of 2005, provides insurers with a federal backstop for acts of foreign terrorism. Just as with the original Terrorism Risk Insurance Act (TRIA), which passed in 2002 and expired at the end of 2005, TRIEA is designed to keep a temporary federal terrorism-insurance mechanism in place through the end of 2007 until a permanent solution is crafted (see Mortgage Banking, January 2006, p. 97; and February 2006, p. 134).

During its National Policy Conference in Washington, D.C., in April, MBA announced its support for a long-term extension of the TRIA/TRIEA program for a minimum of 10 years to allow borrowers, lenders and loan servicers to be able to adequately plan for putting terrorism coverage in place.

The subcommittee chairman, Rep. Paul Kanjorski (D-Pennsylvania), noted the need for a timely and deliberate solution in renewing the temporary federal backstop--the operative word being "temporary."

"We must choose a length of time that is long enough to provide greater certainty to the marketplace and short enough to encourage the private sector to develop its own solutions to the problems posed by conventional terrorism," said Kanjorski. "Such an extension should be neither permanent nor even semi-permanent. At this time, I believe that a six- or eight-year time frame provides the balance we need. …

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