Council Responds to President's Working Group on Terrorism Insurance
NEW YORK—August 3, 2010—The CRE Finance Council filed a letter of response to the President's Working Group (PWG) on Financial Markets on the long-term affordability and availability of terrorism risk insurance under the Terrorism Risk Insurance Act (TRIA). TRIA was created as a federal backstop for insurance claims related to acts of terrorism, and the provisions are set to expire on Dec. 31, 2014 unless reauthorized by Congress. The PWG is required to submit reports to Congress on the TRIA program in 2010 and 2013.
The CRE Finance Council believes TRIA, which has given commercial borrowers access to terrorism risk insurance, should remain in place, not only for the protection of commercial properties, but for the stability and continued recovery of the capital markets as a whole.
The U.S. terrorist attacks of September 11th resulted in a horrible loss of life and, separately, the market witnessed insured damages of approximately $35 billion. The terrorist attacks also created tremendous uncertainty in the insurance market, which was further exacerbated by the threat of future attacks and the inability to price for terrorism risks. To this end, CRE Finance Council believes that a smooth functioning commercial finance marketplace is dependent upon the availability of "all risk" insurance coverage, including terrorism insurance. Investors and rating agencies demand terrorism insurance coverage, while lenders require that such coverage be in place in the loan documents.
"The availability of terrorism risk insurance, in turn, makes financing commercial mortgages viable, which ultimately fosters market liquidity and the availability of much-needed capital for investment in commercial real estate," the CRE Finance Council said in the Aug. 2 letter, signed by Lisa Pendergast, President, and Dottie Cunningham, Chief Executive Officer.
"Should terrorism risk insurance become significantly more expensive or unavailable, there is a significant risk of destabilizing the CRE finance market. As the CRE market recovers from a worldwide recession, the stability and certainty TRIA provides is imperative," the letter said.
For Council work on this issue and information related to TRIA, please visit the Terrorism Insurance section of the CRE Finance Council website.
Media Relations: Kenneth Reed, CRE Finance Council, 212-589-0961
# # #
|