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WASHINGTON, DC-Fitch Ratings has released a report that offers a dim view of how the absence of the Terrorism Risk Insurance Act of 2002 would impact the CMBS market. TRIA is scheduled to expire on December 31 of this year and the absence of the federal backstop measure provided through TRIA would disrupt the CMBS market, Fitch Ratings concluded. The federal backstop measure insures federal coverage of payouts exceeding $100 billion of insurers’ liability resulting from terrorist attacks.

Fitch Ratings is calling for a two-year extension of TRIA in order to strengthen the US commercial real estate market and bide time to establish a long-term solution to the issues TRIA addresses. Essentially, the legislation resolved two significant problems that emerged following the attack on New York’s World Trade Center–reinsurers’ decision to abandon the terrorism coverage market, and the subsequent exclusion of such coverage by primary insurers.

“The lack of a federal backstop that provides insurance companies with a way to measure risk could lead to larger than expected increases in terrorism insurance premiums and fewer borrowers electing to obtain coverage,” says Richard Carlson, Fitch Ratings director. “This would most likely have a greater impact on large, high-profile properties in major metropolitan areas where premiums would increase substantially.”

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