Policy: Economy

Terrorism insurance pits NFL and NHL against Tea Party

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The NFL, NASCAR and other sports leagues are joining with insurers in battling the Tea Party over federal subsidies for terrorism insurance that are due to expire at the end of the year. The leagues say they're worried about insuring their stadiums against attacks if the law is allowed to die.

Under TRIA, as the law is known, providers of property and casualty insurance are required to provide coverage for terrorism-related losses. The federal government backstops that coverage, paying for losses above $100 million and recouping its payments later with surcharges on all terrorism policies offered by insurers.

This could be an expensive proposition. AT&T Stadium in Arlington, Texas, previously known as Cowboys Stadium, cost an estimated $1.15 billion to build.

TRIA was passed following the 9/11 terrorist attacks, when insured losses ran over $40 billion in today’s dollars — the largest losses from a non-natural disaster on record, according to the Congressional Research Service. In the aftermath of the attacks and the insurance payouts, private insurers stopped offering terrorism coverage, and Congress stepped in with TRIA in 2002. The program was reauthorized in 2005 and 2007.

Industry groups say the program works well and want it extended as soon as possible before next year’s policies have to be drawn up. Businesses from the NBA to United Airlines have formed the Coalition to Insure Against Terrorism to lobby for an extension.

But free-market groups such as Heritage Action say the program was intended to be a temporary response to the attacks and should be allowed to expire to allow the private sector to retake the business of insuring against terrorism risks.

Reauthorization is expected to have a smooth path in the Democratic Senate. The Senate Banking Committee approved a bill Tuesday that would renew TRIA for seven years while increasing the share of damages paid by the private sector.

But Tea Party-aligned Republicans will make the path to passage in the House a little trickier. Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee, has said that his priority is reforming the "Washington insider economy" by ending "bailouts, earmarks, tax preferences, and barriers to entry for trade." He is supporting a draft bill from one of the GOP members of his panel, Randy Neugebauer of Texas, that would extend the law for only three years.

In addition to shortening the lifespan of the reauthorization, which supporters say is the most critical component of any bill, Neugebauer’s draft would reduce the federal government’s fiscal commitment and slim down the program by separating the terms of coverage for conventional terrorist attacks and those involving nuclear, biological, chemical or radiation weapons.

Insurers warned that the original draft of Neugebauer’s bill could effectively end TRIA.

House leaders in both parties are more sympathetic to the insurance industry, especially on the Republican side, which has intervened in Hensarling’s committee’s business in similar circumstances before. In March, Majority Leader Eric Cantor cut off the committee’s work on a bill to reform the federal flood insurance program to pass legislation staving off rate increases.

Nevertheless, it’s widely thought that TRIA reauthorization could clear the committee and the House and become one of the few bills to pass Congress before the November elections.

R.J. Lehmann, an insurance analyst and co-founder of the free-market R Street Institute, favors a slimmed-down TRIA program, rather than complete termination, acknowledging that “terrorism insurance is a little more complicated” than flood insurance. Private terrorism insurance may not be available if the program ends, he said.

He added that “with flood insurance, you’re subsidizing people to take risks they wouldn’t otherwise take. It’s not clear with terrorism insurance that that’s generally a problem.”

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