Kevin McKechnie, Senior Vice President & Director of the American Bankers Association's Office of Insurance Advocacy, testified earlier today before the National Association of Insurance Commissioners (NAIC) on the need for Congress to renew as soon as possible the Terrorism Risk Insurance Act (TRIA), which expires at the end of 2014.
Testifying on behalf of the ABIA, ABA and the ABA Securities Association, Mr. McKechnie told an NAIC working group considering the implementation of TRIA that without congressional reauthorization of TRIA well before its current expiration date, the capital markets -- and the economy at large -- could suffer due to disruptions in the commercial insurance marketplace.
From the testimony:
"The prospect of TRIA not being reauthorized has created significant uncertainty for ABA’s member banks, as well as the insurers that underwrite terrorism risk and the securities underwriters that rely on it. The threat of TRIA’s lapse alone has already caused significant market disruption. Insurance policies with terrorism coverage for any term extending beyond 2014 cannot be issued to commercial customers without conditional coverage. As a result, multi-year commercial loan products, which require property insurance policies backing them, are at risk. The consequence is that new loans and refinancings are only being issued on a short-term basis, or in some cases, not at all. Existing loans are also in jeopardy because insureds cannot comply with loan conditions requiring evidence of terrorism insurance coverage."
Read Mr. McKechnie's testimony before the NAIC.