With the growing terrorist threat from the turbulent Middle East, America must maintain safeguards to ensure that the economy will recover from terrorist attacks. Economic resiliency is an essential part of homeland security.
I saw this firsthand from the tragic events of Sept. 11, 2001, and in the long-lived attacks on our economy that followed that fateful day. My own company, Host Hotels and Resorts, lost the Marriott World Trade Center Hotel, which was destroyed by the collapses of the two World Trade Center towers, and the Marriott New York Financial Center Hotel located two blocks away was also heavily damaged. Much more importantly, we suffered the loss of two hotel employees.
As with other companies that had commercial insurance policies, Host Hotels’ financial losses resulting from the Sept. 11 attacks were covered. However, all this changed after the attacks. Having paid out more than $30 billion in claims related to Sept. 11, insurance companies excluded terrorism coverage from their insurance policies, which must be renewed annually. In the aftermath of Sept. 11, policyholders were left exposed to losses from future terrorist attacks.
The terrorists scored a direct hit against American businesses, American workers and the American way of life, even after the attack itself. Without terrorism insurance, businesses struggled to find financing for expansions, new ventures and construction projects, all of which would have produced much-needed jobs. During the fourth quarter of 2001 and much of 2002, the lack of terrorism-risk coverage cost 300,000 jobs, canceled or delayed more than $15 billion in real estate transactions in 17 states, and caused a six-year low in commercial construction.
That’s why Congress enacted, with strong bipartisan support, the Terrorism Risk Insurance Act (TRIA) in November 2002, enabling the private insurance market to provide essential coverage against catastrophic terrorist acts that otherwise wouldn’t exist.
The threat for additional attacks has not subsided since Sept. 11, and Congress has twice renewed the act, always with bipartisan support, first in 2005 and again in 2007.
Today’s headlines trumpet on almost a daily basis that the threat of future attacks against America is very real, and the federal government warns Americans that these threats must be taken seriously. However, the Terrorism Risk Insurance Act will expire at midnight on Dec. 31, and Congress still has not done what it must do to extend it.
Reflecting a dramatic bipartisan mandate, the Senate voted overwhelmingly, 93 to 4, in July to extend the program for seven years through 2021. The House has still failed to act, though, and time is running out. When members return to Washington this month to complete the business of the 113th Congress, the House must do its part and pass a multiyear reauthorization of TRIA.
Terrorism is a tragic fact of life in today’s world. Terrorism-risk insurance is part of our country’s safety net for restoring the economy in the event of another major attack on our homeland and is a stabilizing factor in an unstable world.
If the House does not pass a bill to reauthorize the Terrorism Risk Insurance Act on a multiyear basis, economic resiliency will be replaced with instability, uncertainty and a heightened vulnerability to future attacks. As a CEO, I know that lenders, investors and the business community want to avoid uncertainty. Because businesses typically require long-term financing, a multiyear extension of the act is critical to provide markets the certainty needed to function properly.
When businesses can’t grow and the unemployed can’t find work, even working Americans become increasingly anxious about their job security. Every day Congress delays in renewing TRIA, it breeds more uncertainty that keeps insurers, investors and employers from betting on America’s future. Americans suffer and so does the economy.
Moreover, if there is another terrorist attack on America, taxpayers would pay more if the act expires than if it is renewed. That’s because it provides for the private sector to cover the initial losses from an attack, and then to share the costs with the federal government above certain thresholds.
Without the Terrorism Risk Insurance Act, Congress would likely make emergency appropriations to help businesses hurt by terrorist attacks, forcing taxpayers to pick up the entire tab. In fact, the RAND Center for Catastrophic Risk Management and Compensation concluded that failure to reauthorize the act could increase federal spending by as much as $7 billion for terrorist attacks similar in magnitude to those of Sept. 11.
Thirteen years after the attack, Congress needs to remember the lessons that American businesses and workers learned the hard way: We can’t have homeland security without economic security.
In this increasingly dangerous world, now is the time to renew the Terrorism Risk Insurance Act.
Ed Walter is president and CEO of Host Hotels and Resorts.