Terrorism Insurance
AH&LA supports continuation of a Federal program that allows insurance companies to offer affordably-priced terrorism insurance coverage.
The terrorist attacks on September 11, 2001, in New York City and Washington, D.C., had a tremendous ripple effect across the lodging industry. These effects ranged from a drop in tourism spending to the ability in obtaining reasonably priced terrorism insurance coverage.
Insurance companies, stung by enormous payouts following September 11, sought to recoup losses and limit future losses by dramatically raising the cost of terrorism insurance or severely limiting availability. As a result of these huge cost increases, lodging properties faced the difficult decision of paying these exorbitant fees, foregoing opening new properties, or dropping terrorism coverage and risking a bank default and potentially devastating losses if another incident occured.
In 2002, Congress passed the Terrorism Risk Insurance Act (TRIA) promising aid to insurers in the wake of a future catastrophic terrorist attack. This federal aid allowed insurers to continue to offer reasonably priced terrorism coverage, while limiting their risks.
However, several studies since then have concluded that the private insurance market is not positioned to offer terrorism coverage without the backup support of a federal program. If TRIA were to expire, the terrorism insurance market would immediately see significant increases in costs and/or severe restrictions on availability.
This program was scheduled to expire in December 2007. AH&LA began working with the 110th Congress to extend this important federal program. In June 2007, Rep. Michael Capuano (D-MA) introduced H.R. 2761, the "Terrorism Risk Insurance Revision and Extension Act." This bill extended the program 15 years, five years longer then the 10 years proposed in the original 2002 bill. It also eliminated distinctions between foreign and domestic acts of terrorism, and it eliminated the required availability of nuclear, biological, chemical and radiological (NBCR) acts of terrorism for the insurance to become valid. On September 19, 2007, the House passed H.R. 2761 by a vote of 312-110.
On October 12, 2007, Senators Christopher Dodd (D-CT) and Richard Shelby (R-AL) agreed on a seven-year TRIA extension bill which eliminated the distinctions between foreign and domestic acts of terrorism, offered a study of NBCR and a study of reset mechanisms (coverage of which was included in the House version). The bill extended terrorism insurance coverage until December 2014.
The full Senate passed the legislation by unanimous consent on November 16, 2007, and it was voted out of the House 360-53 on December 18, 2007. President Bush signed this important bill into law days later on December 26, 2007 (Public Law 110-160).
For more information, contact Kevin Maher, AH&LA senior vice president for Governmental Affairs, at (202) 289-3147,
kmaher@ahla.com.(Updated August 2008)