US extends Terrorism Insurance Scheme for Commercial Property

Posted on 16 August, 2014 by Cliff Goodwin

The US Senate has agreed to extend a government-backed insurance scheme to compensate commercial property owners in the event of a terrorist attack.


First introduced in 2002, the scheme was devised to calm the insurance markets after the 11 September World Trade Centre attacks which ultimately cost the industry £40bn (£23.5bn). Under the extended programme, due to run for the next seven years, the federal government will contribute toward terrorism damages that exceed $100m (£59m).

The programme has never been triggered because there haven’t been any homeland attacks that caused more than $100m in insurance losses, says the nonpartisan Congressional Budget Office. But many insurance companies, backed by billions of dollars of international money, are still reluctant to provide terrorism cover.

“In a post 9-11 world, developers and business owners embarking on multi-year, multi-million or billion-dollar construction projects need to be certain they can insure their investments,” explained Senator Chuck Schumer, who sponsored the bill which also has presidential support.

“At a time when our economy is not growing as robustly as we’d like, failing to renew this  programme would be particularly foolish,” he added. “Without a programme like this it’s a virtual certainty that a large number of construction jobs and economic development would be lost.”

Supporters of the insurance safety net programme claim it has made it possible for commercial property owners to get coverage, especially large venues that might be more vulnerable to a terrorist attack.

In a parallel development the House of Representatives is considering a similar bill that treats conventional and nuclear attacks differently, providing less federal help for attacks using conventional weapons.

Under the new bill — passed by the House Financial Services Committee in June — the programme would still kick in at $100m in the event of a nuclear, biological, chemical or radiological attack. But for attacks using conventional weapons, the threshold for triggering government support would gradually increase to $500m (£294m).

“The bill we have put together allows the private insurance industry to absorb and cover the losses of all but the largest acts of terror, ones in which the federal government would likely be forced to step in if the programme were not there,” said Senator Mike Crapo a member of the Senate Banking Committee.

Sceptics, however, question why the updated legislation should distinguish between conventional and nuclear incidents. They point out that the 9-11 attacks weren’t nuclear, biological, chemical or radiological and the insurance industry would, therefore, have received less government aid.

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