When those of us in the commercial real estate industry think back to the aftermath of Sept. 11, we are reminded of the economic impact that resulted from the absence of terrorism insurance. A million jobs lost, the delay or cancellation of $15 billion in property transactions and a six-year low in commercial construction. This followed reinsurers' departure from the marketplace, insurers' reluctance to offer terror coverage and lenders' demand that borrowers secure such coverage.

With the terrorism risk insurance marketplace in disarray, Congress in 2002 passed the Terrorism Risk Insurance Act. TRIA was established to provide a temporary backstop to help insure against catastrophic losses caused by an act of foreign terrorists.

To date, the program has achieved two major national goals. First, it has helped keep the economy going in the face of continued terrorist threats by allowing businesses across America to secure this commercially necessary product. And, second, it serves as an important tool to minimize the severe economic disruption that almost certainly will occur from a future terrorist attack.

With TRIA set to expire at year's end, however, there remain serious doubts about the private market's ongoing ability to function well. Concerns about a dysfunctional terror insurance marketplace must be considered alongside the risk of new, potentially catastrophic, attacks. In mid-April, three men were indicted in connection with a plot to bomb East Coast financial institutions. And CIA director Porter Goss has warned that, "It may only be a matter of time" before extremist groups attempt to use chemical, biological, radiological or nuclear weapons on the US.

The Coalition to Insure Against Terrorism, a multi-industry group of business-insurance consumers, believes there are five compelling reasons why Congress must act sooner rather than later to both make certain that terrorism insurance is available into next year:

First is the unique nature of the risk. Unlike natural disasters, terrorism risk is much more akin to war risk, both in its man-made characteristics and its potential for massive, unpredictable destruction. These factors make it extremely difficult, if not impossible, for the private market alone to provide adequate insurance.

Second is the highly regulated state of the insurance industry. State legislatures and insurance commissioners dictate virtually all insurance- industry actions including the type and price of coverage. The result is a patchwork quilt of regulations that hinders the private markets' ability to respond to the threat of terrorism.

Next is the proper role of government. Terrorists target places and properties on American soil in an effort to change government policy and our behavior as a society. Therefore, it is appropriate for our representative government to share in some limited way in the effort to insure against this risk.

Fourth is a matter of fairness. The Overseas Private Investment Corp. provides insurance against political risks--including terrorism--for US businesses' overseas operations. If it is the policy of the federal government to provide terrorism risk insurance to US companies working abroad, it should do no less for businesses here at home.

Finally we must consider economic security. It is essential to protect our economy against a future attack. A federal insurance backstop in place in advance, like TRIA, provides for the timely and orderly payout of claims to the victims of terrorism, thereby minimizing the economic fallout from the next terrorist attack.

In February, CIAT welcomed word that the US Senate had taken the first step in the debate to ensure that this necessary coverage will be available next year. Legislation introduced by Senators Robert Bennett (R-UT) and Christopher Dodd (D-CT), S. 467, would extend the backstop through 2007 and require the treasury department to develop recommendations on long-term solutions to the challenge.

Testifying on CIAT's behalf before the Senate Banking Committee in April, Real Estate Roundtable chairman Robert J. Lowe urged senators "to act promptly to provide continuity to the terrorism insurance market for next year." According to Lowe, the American economy is already being adversely affected by the anticipated year-end expiration of TRIA. "If we want to avoid a repeat of the near-paralysis of major construction and interruption of other business activity that we experienced in 2001-2002 before TRIA was in place, then Congress needs to act well in advance of year-end," he stated.

Banking committee chairman Sen. Richard Shelby suggested that he would be open to extending the program if a treasury department study due by June 30 shows there is "a real need" for the program. Policyholders have no doubt of the backstop's need. Consumer demand for terror coverage has been well documented, with take-up rates that are significantly higher than other comparable lines of coverage, such as flood and earthquake insurance.

CIAT members have expressed concerns that expiration of the national terrorism insurance program could result in construction projects being put on hold and America suffering job losses in numbers equal to or greater than those of 2002.

We also remind policymakers that TRIA is the most fiscally responsible approach to this problem. With a backstop in place, insurers and policyholders would bear the first dollar loss of up to $20 billion in annual claims resulting from terrorist attacks. Without a backstop, however, the government would likely be called upon to foot the entire bill.

TRIA's expiration will leave us exposed and unprotected--just as we were after Sept. 11. Who among us wants to go down that road again? TRIA has succeeded. It's still needed. It must be extended.

Martin L. DePoy is vice president, government relations at the Washington, DC-based National Association of Real Estate Investment Trusts. He also serves as steering committee coordinator for the Coalition to Insure Against Terrorism.

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