With terrorism continuing to be a constant threat, the National Association of Realtors (NAR) said that terrorism risk insurance was a vital component of commercial real estate transactions. The unavailability of these insurances could disrupt the commercial real estate industry's growth, the association said in a statement.
“Any uncertainty could cause insurance prices to fluctuate or prompt insurers to drop terrorism coverage, causing commercial loans to go into technical default,” Linda St. Peter, NAR’s 2012 Commercial Committee Vice-Chair, said in a statement.
She pointed out that the coverage was important to maintain a strong and thriving commercial real estate market.
“The federal government’s terrorism risk insurance program helps protect the nation’s business sector by ensuring that adequate insurance coverage is available,” she said.
The Terrorism Risk Insurance Act (TRIA), which is set to expire on December 31, 2014, is a federal terrorism insurance program that establishes a risk-sharing partnership between the government, private insurers and commercial policy holders.
In the aftermath of the Sept. 11 attacks, when many private insurers left the terrorism insurance marketplace, the Congress enacted TRIA to stabilize the sector by making terrorism coverage available and affordable.
But with the Dec. 2014 expiration date looming ahead, realtors feel that terrorism premiums would increase in some markets, thereby making it unaffordable.
“Realtors are concerned that TRIA’s potential sunset will create a spike in terrorism coverage premiums or make coverage unavailable in many markets; therefore, we believe the time has come for Congress to enact a long-term solution for insuring against terrorism – one that provides the needed market certainty to allow for continued economic growth and development,” said the NAR’s office-bearer.
“Since the reinsurance industry has not yet been able to develop a long-term solution that would eliminate the need for the federal government’s terrorism risk insurance program, extending TRIA beyond its current 2014 authorization will help maintain a strong commercial real estate market and the health of the nation’s economy.”
