[House Hearing, 119 Congress]
[From the U.S. Government Publishing Office]
THE REAUTHORIZATION OF THE TERRORISM
RISK INSURANCE ACT OF 2002
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HOUSING AND INSURANCE
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 17, 2025
__________
Serial No. 119-40
Printed for the use of the Committee on Financial Services
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
63-035 PDF WASHINGTON : 2026
=======================================================================
HOUSE COMMITTEE ON FINANCIAL SERVICES
FRENCH HILL, Arkansas, Chairman
BILL HUIZENGA, Michigan, Vice MAXINE WATERS, California, Ranking
Chairman Member
FRANK D. LUCAS, Oklahoma SYLVIA R. GARCIA, Texas, Vice
PETE SESSIONS, Texas Ranking Member
ANN WAGNER, Missouri NYDIA M. VELAZQUEZ, New York
ANDY BARR, Kentucky BRAD SHERMAN, California
ROGER WILLIAMS, Texas GREGORY W. MEEKS, New York
TOM EMMER, Minnesota DAVID SCOTT, Georgia
BARRY LOUDERMILK, Georgia STEPHEN F. LYNCH, Massachusetts
WARREN DAVIDSON, Ohio AL GREEN, Texas
JOHN W. ROSE, Tennessee EMANUEL CLEAVER, Missouri
BRYAN STEIL, Wisconsin JAMES A. HIMES, Connecticut
WILLIAM R. TIMMONS, IV, South BILL FOSTER, Illinois
Carolina JOYCE BEATTY, Ohio
MARLIN STUTZMAN, Indiana JUAN VARGAS, California
RALPH NORMAN, South Carolina JOSH GOTTHEIMER, New Jersey
DANIEL MEUSER, Pennsylvania VICENTE GONZALEZ, Texas
YOUNG KIM, California SEAN CASTEN, Illinois
BYRON DONALDS, Florida AYANNA PRESSLEY, Massachusetts
ANDREW R. GARBARINO, New York RASHIDA TLAIB, Michigan
SCOTT FITZGERALD, Wisconsin RITCHIE TORRES, New York
MIKE FLOOD, Nebraska NIKEMA WILLIAMS, Georgia
MICHAEL LAWLER, New York BRITTANY PETTERSEN, Colorado
MONICA DE LA CRUZ, Texas CLEO FIELDS, Louisiana
ANDREW OGLES, Tennessee JANELLE BYNUM, Oregon
ZACHARY NUNN, Iowa SAM LICCARDO, California
LISA McCLAIN, Michigan
MARIA SALAZAR, Florida
TROY DOWNING, Montana
MIKE HARIDOPOLOS, Florida
TIM MOORE, North Carolina
Ben Johnson, Staff Director
------
SUBCOMMITTEE ON HOUSING AND INSURANCE
MIKE FLOOD, Nebraska, Chairman
MONICA DE LA CRUZ, Texas, Vice EMANUEL CLEAVER, Missouri, Ranking
Chairwoman Member
JOHN W. ROSE, Tennessee NYDIA M. VELAZQUEZ, New York
WILLIAM R. TIMMONS, IV, South RASHIDA TLAIB, Michigan
Carolina AYANNA PRESSLEY, Massachusetts
RALPH NORMAN, South Carolina RITCHIE TORRES, New York
ANDREW R. GARBARINO, New York SYLVIA R. GARCIA, Texas
SCOTT FITZGERALD, Wisconsin NIKEMA WILLIAMS, Georgia
MICHAEL LAWLER, New York BRITTANY PETTERSEN, Colorado
MARIA SALAZAR, Florida JANELLE BYNUM, Oregon
TROY DOWNING, Montana
C O N T E N T S
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Wednesday, September 17, 2025
OPENING STATEMENTS
Page
Hon. Mike Flood, Chairman of the Subcommittee on Housing and
Insurance, a U.S. Representative from Nebraska................. 1
Hon. Emanuel Cleaver, Ranking Member of the Subcommittee on
Housing and Insurance, a U.S. Representative from Missouri..... 2
WITNESSES
Mr. Baird Webel, Specialist In Financial Economics, Congressional
Research Service (CRS)......................................... 4
Prepared statement........................................... 6
Mrs. Elizabeth Heck, Chairman, President, and Chief Executive
Officer, Greater New York Insurance Companies, on behalf of
National Association of Mutual Insurance Companies (NAMIC)..... 20
Prepared statement........................................... 22
Ms. Michelle Sartain, President, Marsh U.S. and Canada........... 27
Prepared statement........................................... 29
Mr. Jason Schupp, Founder and Managing Member, Centers for Better
Insurance, LLC................................................. 46
Prepared statement........................................... 48
Commissioner Andrew N. Mais, Connecticut Insurance Department, on
behalf of National Association of Insurance Commissioners
(NAIC)......................................................... 58
Prepared statement........................................... 60
APPENDIX
MATERIALS SUBMITTED FOR THE RECORD
Hon. Mike Flood:
Coalition to Insure Against Terrorism (CIAT)................. 94
American Property Casualty Insurance Association (APCIA)..... 97
Reinsurance Association of America (RAA)..................... 102
Hon. Maxine Waters:
GAO Highlights............................................... 103
RESPONSES TO QUESTIONS FOR THE RECORD
Written responses to questions for the record from Representative
John W. Rose:
Mr. Baird Webel.............................................. 119
Mrs. Elizabeth Heck.......................................... 121
Mr. Jason Schupp............................................. 124
Mr. Andrew N. Mais........................................... 126
Written responses to questions for the record from Representative
Scott Fitzgerald:
Mrs. Elizabeth Heck.......................................... 128
Mr. Andrew N. Mais........................................... 130
LEGISLATION
H.R. ------, the TRIA Program Reauthorization Act of 2025........ 132
THE REAUTHORIZATION OF THE TERRORISM
RISK INSURANCE ACT OF 2002
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Wednesday, September 17, 2025
U.S. House of Representatives,
Subcommittee on Housing and Insurance,
Committee on Financial Services
Washington, DC.
The subcommittee met, pursuant to notice, at 10:01 a.m., in
room 2128, Rayburn House Office Building, Hon. Mike Flood
[chairman of the subcommittee] presiding.
Present: Representatives Flood, Rose, Timmons, Garbarino,
Lawler, De La Cruz, Downing, Cleaver, Velazquez, Tlaib,
Pressley, Torres, Garcia, Williams of Georgia, and Bynum.
Also present: Representatives Hill, and Waters.
Chairman Flood. The subcommittee on Housing and Insurance
will come to order. Without objection, this chair is authorized
to declare a recess of the committee at any time.
This hearing is titled, ``The Reauthorization of the
Terrorism Risk Insurance Act of 2002.''
Without objection, all members will have 5 legislative days
within which to submit extraneous materials to the chair for
inclusion in the record.
At this time, I would like to recognize myself for 4
minutes for an opening statement.
OPENING STATEMENT OF HON. MIKE FLOOD, CHAIRMAN OF THE
SUBCOMMITTEE ON HOUSING AND INSURANCE, A U.S. REPRESENTATIVE
FROM NEBRASKA
I would like to, first of all, thank all of our witnesses
for being with us today, and I very much look forward to
hearing your testimony on the Terrorism Risk Insurance Program.
This program was created in the aftermath of tragedy.
After the events of September 11, 2001, the risk of
terrorism suddenly became an all-too-real situation for many
Americans. On that terrible day, the unthinkable happened and
the world forever changed.
After the terrorist attacks of September 11th, terrorism
risk, which was previously something that had been incorporated
directly into the underwriting of commercial property and
casualty insurance, seemed like a risk far too remote and
difficult to quantify and underwrite. As a result, the Federal
Government stepped in with what was initially proposed as a
temporary Federal reinsurance program.
The Terrorism Risk Insurance Program was created in
November 2002, and it has since been reauthorized four times in
2005, 2007, 2015, and, again, in 2019. The next expiration of
Terrorism Risk Program is at the end of 2027. That may seem
distant, but the reality is that terrorism risk contracts
typically extend for 1 year.
As we approach 2026, it makes sense to begin conversations
on what a Terrorism Risk Insurance Act (TRIA) reauthorization
should look like and for members of the subcommittee, this
hearing is the first step in the reauthorization process, and
an opportunity to learn more about the Terrorism Risk Insurance
Program.
We need to know how the program has changed over time, what
the program does well, where it can be improved as we begin
considering reauthorization.
I have two priorities on this issue. Number one is to work
quickly to provide the certainty required for insurers and
insureds to continue providing terrorism risk insurance, and at
a reasonable cost; and two, to ensure that we work to mitigate
taxpayers' exposure to this program.
Since the Terrorism Risk Program was created in 2002, we
have been fortunate, knock on wood, there has never been a
certified act of terrorism by the Department of Treasury, nor
have there been events that would have reached the Terrorism
Risk Insurance Program's financial trigger. We, of course, hope
that no future events ever, ever occur that would trigger that.
However, TRIA's value is not just in direct responses to
terrorism events. The program makes it easier to have an
operating market where entities can purchase insurance that
covers terrorism risk, and a well-functioning insurance market
makes it possible for all entities, and entities of all kinds
to purchase insurance against terrorism risks.
The Terrorism Risk Insurance Program helps our economy
bounce back in the event of an attack, and it provides market
stability and peace of mind in the interim.
So I look forward to hearing from our expert panel today
and we are going to talk about terrorism risk insurance all
morning. With that, I yield back.
I now recognize the ranking member of the subcommittee, Mr.
Cleaver, for 4 minutes for an opening statement.
OPENING STATEMENT OF HON. EMANUEL CLEAVER, RANKING MEMBER OF
THE SUBCOMMITTEE ON HOUSING AND INSURANCE, A U.S.
REPRESENTATIVE FROM MISSOURI
Mr. Cleaver. Thank you, Mr. Chairman, for holding this
important hearing on the reauthorization of the Terrorism Risk
Insurance Program, also known as TRIA.
I will, for the rest of my life, remember where I was at
the very moment that the report came through on what happened
in New York. I was watching Katie Couric, who is no longer a TV
reporter, saying: Something seems to have flown into a building
here in New York.
The terrorist attack on September 11, 2001, devastated U.S.
citizens, households and businesses. As a direct result of the
unforeseen and unexpected level of covered losses, insurers
began to explicitly exclude terrorism coverage in commercial
property casualty insurance policies.
Additionally, due to State laws prohibiting the exclusion
of individual risk elements from workers' compensation
insurance, the potential for enormous liability created a
crisis that impacted employers across the Nation.
In response, Congress passed, and the President signed,
TRIA into law to stabilize the market for terrorism risk
insurance. Since that time, Congress has been able to come
together and reauthorize the program four more times, most
recently in 2019. Many members were not on the committee during
those reauthorizations, and I hope this hearing is educational
on the value and elements of the program.
The threat of a terrorist attack on the homeland has not
subsided. According to the 2025 annual threat assessment from
the Office of the Director of National Intelligence, he writes,
and I quote, a diverse set of foreign actors are targeting the
U.S. health and safety, critical infrastructure, industry's
wealth and government. The Department of Homeland Security,
Office of Intelligence and Analysis, 2025 homeland threat
assessment states, ``Foreign terrorist organizations, FTOs, and
their supporters will maintain their enduring intent to conduct
or inspire attacks here in the homeland.''
The threat of terrorism impacts the entire Nation,
including my home district in the Midwest and I am glad that
Congress has been able to historically work in a bipartisan way
on this program.
Last Friday I sat down with the insurance industry, many of
which--some of whom are testifying here today, to discuss
priorities for TRIA reauthorization. I heard unanimous
agreement on the need for early and long-term reauthorization.
What I did not hear was any questions about the value of the
program.
As the Treasury has affirmed, TRIA is effective in making
terrorism risk insurance available and affordable in the
insurance marketplace. I also heard that the uncertainty
surrounding the program has begun to restrict access to
coverage for 2008 and beyond. Early action well before the 2027
sunset of TRIA must be taken to avoid market uncertainty.
Thank you, Mr. Chairman, and I look forward to working with
you and Chairman Hill and Ranking Member Waters on this effort.
I yield back.
Chairman Flood. Thank you, Mr. Cleaver. We now recognize
the chairman of the full Financial Services Committee, Mr. Hill
from Arkansas, for 1 minute for an opening statement.
Chairman Hill. Thank you, Chairman Flood. Today we will
discuss the functions of the Terrorism Risk Insurance Act of
2002, or TRIA, and hear from industry professionals on the
current operations and the future ideas for the program. Thank
you for sharing your expertise with us today.
Congress is often criticized for not always being out in
front on a topic. Here we are, TRIA expires in 2027, and I
appreciate Chairman Flood and Ranking Member Cleaver stepping
out. Let us get out in front of this, let us think it through
very carefully and get the reauthorization completed before the
expiration.
The program has certainly helped foster stability in the
face of uncertainty allowing our economy to grow while
safeguarding citizens from that existential risk posed by
potential terrorist attack.
I thank Mr. Flood for his work on this. I look forward to
the discussion of the committee, and I yield back.
Chairman Flood. Thank you, Mr. Chairman. Today we welcome
the testimony of Mr. Baird Webel, a specialist in financial
economics at the congressional Research Service; Mrs. Elizabeth
Heck, Chairman, President, and CEO of the Greater New York
Insurance Companies here on behalf of the National Association
of Mutual Insurance Companies; Ms. Michelle Sartain, President
of Marsh US and Canada; Mr. Jason Schupp, founder and managing
member of Centers for Better Insurance, LLC; and Mr. Andrew
Mais, Commissioner of the Connecticut Insurance Department,
here on behalf of the National Association of Insurance
Commissioners.
We thank each of you for taking the time to be here. Each
of you will be recognized for 5 minutes to give an oral
presentation of your testimony. Without objection, your written
statements will be made part of the record.
Mr. Webel, you are now recognized for 5 minutes for your
oral remarks.
STATEMENT OF BAIRD WEBEL, SPECIALIST IN FINANCIAL ECONOMICS,
CONGRESSIONAL RESEARCH SERVICE (CRS)
Mr. Webel. Thank you, Mr. Chairman, and ranking member and
members of the subcommittee for having me here to testify
today.
As the chairman said, my name is Baird Webel. I am at the
Congressional Research Service. Before I go deep into my
testimony, especially for people who are listening, I would
just like to make clear who CRS is. We are a division of the
Library of Congress. We provide nonpartisan objective research
and analysis, and we do not take positions on legislation or
policy proposals before Congress.
I have been in this role at CRS covering non-health
insurance issues since 2003, so I have been a participant in
some way in all of the TRIA reauthorizations to this point.
I would just like to give the committee a little bit of a
background and overview on the reauthorizations in the past and
what the program does at this point.
So TRIA is a reinsurance program. The approximately $60
billion in damages in the 9/11 attack shocked both the primary
and reinsurance industries, which pulled back. The Congress at
the time decided to create a temporary 3-year program that
stood in the background of the insurance system.
So unlike, say, the National Flood Insurance Program, this
does not provide terrorism insurance directly to commercial
businesses that might be seeking it. It sits in the background
where the regular commercial insurers are required to offer the
terrorism insurance. Policyholders are not necessarily required
to purchase it. In the event of a terrorist attack, the Federal
Government would step in to share losses after the fact.
This system has a lot of advantages, particularly in the
sense that it has kept the administration of the TRIA program
pretty lean over the years. Other than the handful of people at
Treasury that act to administer it, there have been no
particular outlays in the program because you have not, thank
God, had a terrorist attack that met the thresholds.
What are these thresholds in the program? There is a
program trigger that is currently set at $200 million in
aggregate annual losses. So until we had $200 million in
terrorism losses in a year, money would not flow out of the
Treasury to cover the losses.
There is a 20 percent individual insurer deductible based
on each insurer's earned premiums from the year before. So each
of the insurers would have to cover this 20 percent amount of
losses, again, before they would receive any assistance from
the Treasury and there is essentially an 80/20 copay. So as
losses go up above those thresholds, the Treasury covers 80
percent, but the private insurers continue to cover 20 percent
of the losses.
Through the life of the program, those thresholds have all
been adjusted and been adjusted in ways to increase the private
sector's participation in terrorism risk. So even though at the
beginning, it was thought that the 3-year program would be
enough to eventually let the program go away and have the
private sector cover all of the risk, the conclusion over the
years has been that this is not going to--this is not going to
happen, but we have increased the private sector participation
in other ways than saying, okay, private sector, you are now
taking all of the risk.
A couple other thresholds that are in the law that have not
been adjusted over time. There is a $5 million single event
certification threshold. So before Treasury can certify that an
event is an act of terrorism, it must result in $5 million in
losses. I know there has been a little bit of industry question
and confusion over this, this figure and exactly how the
certification process might take place.
There is also a $100--on the other end of the program there
is a $100 billion threshold such that above a $100 billion
there is no Federal coverage, and the private sector is not
required to cover an event of that size. As I said, both of
those thresholds have stayed the same since 2002.
The final aspect of the program, which is a little unusual,
especially for an insurance situation where normally people pay
premiums upfront, is instead of upfront premiums, you have an
after-the-event recoupment provision, so that in the years
following a terrorist attack--again, there are various
thresholds in exactly how this would work--but you would have
recoupment of the Federal share of the losses and this is a
broad-based measure that would basically apply to pretty much
the entire commercial property and casualty industry after the
fact.
Over the years there has been sort of, I would say, so
three different levels of questions about the reauthorizations.
The first is, do we need this program at all? Do we reauthorize
this? Or do we let it go back to the private sector?
The second question has been, are we going to keep the
program approximately the same, but adjust various of these
thresholds in it?
The third, I think, is a broader one of should the program
be doing more and cover more aspects----
Chairman Flood. The gentleman's time has expired.
Mr. Webel. I will be happy to answer questions on any of
that.
[The prepared statement of Mr. Webel follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Flood. Thank you very much. Mrs. Heck, you are now
recognized for 5 minutes for your opening oral remarks. You
might want to hit your microphone.
STATEMENT OF ELIZABETH HECK, CHAIRMAN, PRESIDENT, AND CHIEF
EXECUTIVE OFFICER, GREATER NEW YORK INSURANCE COMPANIES, ON
BEHALF OF NATIONAL ASSOCIATION OF MUTUAL INSURANCE COMPANIES
(NAMIC)
Mrs. Heck. Chairman Flood, Ranking Member Cleaver, and
members of the committee, my name is Elizabeth Heck, and I am
Chairman, President and CEO with Greater New York Mutual
Insurance Company. I am pleased to have the opportunity to
testify in the Terrorism Risk Insurance Program, and the vital
role it plays in helping protect----
Chairman Flood. If the gentlelady will suspend for just a
second. We have to move your microphone a little bit closer to
you.
Mrs. Heck. I am sorry.
Chairman Flood. You are fine. There we go.
Mrs. Heck. Okay. I am pleased to have the opportunity to
testify in the Terrorism Risk Insurance Program, and the vital
role it plays in helping protect our country and economy.
I am testifying on behalf of NAMIC, which represents more
than 1,300 member companies. My views are informed by my first-
hand experience as a major writer of terror exposed commercial
property, both before and after the events of 9/11, as a member
representing small and mid-sized insurance companies on FIOA's
advisory committee on risk-sharing mechanisms, as chair of
NAMIC's TRIA task force, and, most importantly, as someone who
was in lower Manhattan that morning.
Amid the smoke and dust, fire and falling debris, I was
forced to flee my apartment building with my two small children
and my mother. Thankfully we were able to make it safely out of
the city, but like so many others, we never returned home.
For over 100 years, Greater New York Insurance has provided
policyholders with the vital support necessary to protect and
grow their businesses. The company was formed in the early part
of the 20th century by a group of immigrant property owners who
were denied insurance. These property owners found a way to do
it themselves by forming a mutual insurance company. Today we
write business in 17 States and are the largest writer of
commercial multiperil business in New York.
After 9/11, every financial institution began requiring
terrorism insurance for development, construction loan
agreements, and new commercial loans on existing properties. In
the new reality, the challenges of trying to underwrite
terrorism coverage became all too apparent, leading to canceled
projects, and insurers scaling back coverage needed by the
business community.
To understand why TRIA is needed, you must first understand
why terrorism is not insurable in the private market. Unlike
natural disasters, terrorism is driven by human intent that is
adaptive, which makes it unpredictable.
Wildfires, on the other hand, do not change their paths to
find a way around protective measures. Tornados do not
intentionally aim for population centers, and a hurricane will
not change its path to target only unprepared communities.
Terrorists intentionally seek vulnerabilities to maximize
damage and casualties.
Further complicating terrorism risk is that the information
that would normally be used to model potential exposure is
understandably classified as a matter of national security.
Because of this, credible modeling for the purpose of
underwriting is simply not feasible.
The situation in late 2001 and 2002 was dire, and the
gridlock created by this attack posed a real and significant
threat to our economy. My company was deeply involved in
finding the solution because of the unique nature of our
business, and my predecessor of greater New York testified
before this committee several times to explain why a public-
private partnership was essential, and why the program should
work for carriers of all sizes.
The Terrorism Risk Insurance Act was passed in 2002, which
unlocked the market for commercial development. The program
allows insurers a degree of certainty, enabling companies of
all sizes to offer coverage creating a competitive market and
affordable premiums. In the wake of an attack, insurance
companies are able to understand their obligation, and any
money provided by the Federal Government following an attack
will be repaid with interest in all but the most extreme
scenarios.
The creators of the program understood the importance of
having a diverse pool of small and mid-sized and large insurers
participate in the program. TRIA works because its mechanisms,
deductibles and recoupment are based on individuals' companies,
which means it scales according to company size.
If the threshold for Federal involvement, or those
deductibles are increased significantly, offering terrorism
coverage could become a bet-the-company risk for all but the
largest insurers, which would force us and many other companies
out of the market. In turn, this would reduce competition and
the availability of terrorism coverage.
As we look back nearly 25 years after the attacks, it is
important to recognize how much construction and economic
development TRIA has supported, all virtually at no cost to the
taxpayers.
I respectfully offer three principles to guide the
committee's work: First, longevity. We recommend extending TRIA
10 years because short-term reauthorizations cause uncertainty.
Second, simplicity. The program is effective in its current
form and taxpayers are protected. So avoid fixing what is not
broken.
And third, speed. Because of the timing of insurance
contracts, the sooner the program is reauthorized, the sooner
businesses can move forward.
Mr. Chairman, and members of the committee, thank you, once
again, for the opportunity to present testimony on this issue
of vital importance to me, NAMIC member companies, the
insurance industry as a whole, and the U.S. economy. I look
forward to answering questions today.
[The prepared statement of Mrs. Heck follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Flood. Thank you very much.
Ms. Sartain, you are now recognized for 5 minutes for your
oral remarks and if you could pull your microphone close, that
would be great.
STATEMENT OF MICHELLE SARTAIN, PRESIDENT, MARSH U.S. AND CANADA
Ms. Sartain. Good morning, Chairman Flood, Ranking Member
Cleaver, and members of the committee. My name is Michelle
Sartain, and I am President for Marsh's U.S. and Canada
division. I appreciate the opportunity to discuss the
reauthorization of the Terrorism Risk Insurance Program with
you.
For our company, the impact of terrorism is deeply
personal. Marsh McLennan lost 358 friends and colleagues on
September 11, 2001. Marsh and Guy Carpenter are market leaders
providing risk advisory, analytics and brokerage services to
insurance buyers, insurers and reinsurance companies. As such,
we have a unique perspective on the terrorism insurance market.
We consider TRIA to be a model public-private partnership.
It restored insurance capacity at a critical time following 9/
11, and it continues to insure a well-functioning terrorism
market today.
Terrorism Risk Insurance Program Reauthorization Act
(TRIPRA) is the reason that policyholders have access to
affordable and widely available terrorism insurance coverage,
which allows investments to be made, and the economy to
function.
Today I will address four aspects of TRIA that underscore
its importance. First, the key features of the program that
have helped its overall effectiveness.
Second, the risk if the program is not reauthorized, or is
reauthorized too close to its expiration.
Third, the role of the program in Workers' Compensation.
Finally, the trends in the commercial marketplace that
emphasize the importance of TRIA.
First, the program's design has proven remarkably effective
over the past two decades. TRIA provides transparent Federal
backstop that shares catastrophic terrorism losses between the
private sector and the government. By requiring insurers to
make coverage available, and by setting clear deductibles and
loss-sharing thresholds, the program stabilizes the market
without crowding out private capital. It has fostered healthy
competition and enabled the development of private market
products that expand protection and complement TRIA.
Its existence ensures the broad availability of coverage
across all sectors, from businesses in high-risk urban centers,
to critical public infrastructure, to vital healthcare and
educational systems.
According to Marsh data, the healthcare sector has a 61
percent TRIPRA uptake rate, one of the highest, and the
education sector has a 47 percent uptake rate, reflecting a
strong reliance on the backstop to prevent financially
devastated losses from terrorism. Hospitals and education
systems represent symbolic high-impact targets because they
hold concentrated large numbers of vulnerable individuals and
America's youth.
Without TRIA, healthcare and education sectors, indeed many
parts of our economy, would be unable to secure insurance
required by lenders, bondholders and governing boards at a
reasonable and predictable cost.
Second, failing to reauthorize, or reauthorizing too close
to the program's sunset date has serious consequences.
Uncertainty alone causes markets to withdraw coverage, insurers
to pull back, and capital markets to tighten. Without
certainty, policyholders face higher premiums, narrower terms,
and outright nonrenewal.
For sectors like commercial real estate, construction and
energy where terrorism coverage is contractually or
regulatorily required, it could stall transactions, slow
development, and ripple across the broader economy.
Third, the program is especially vital to the Workers'
Compensation market. Workers' Compensation policies do not
include any stated policy limits or specific perils. Thus,
terrorism and nuclear, biological, chemical, or radiological
(NBCR) attacks cannot be excluded. That means that insurers are
exposed to unlimited losses in the event of an attack. Insurers
can only reduce their exposure by limiting the number of
employers for which they underwrite coverage, especially in
areas of high-employee concentration.
State funded Workers' Compensation pools could be exposed
to significant losses and insolvency without TRIA. The program
is essential for maintaining solvency and stability.
Finally, in my written statement, I provide an overview of
the commercial market trends concerning things like
cyberattacks, the role of captives, and trends in violent
attacks. Broadly rising geopolitical instability and the
evolving nature of terrorism underscore the continued
importance of TRIA.
While the U.S. P&C market was profitable in 2024, that was
proceeded by 4 years of loss suggested unprofitability. For
catastrophic scenarios, the private market alone cannot provide
sufficient coverage. Reauthorization signals stability to the
U.S. and global markets, reassuring investors and policyholders
alike.
In short, TRIA has worked exactly as intended. It protects
taxpayers by requiring meaningful private participation,
supports economic resilience, and ensures that American
businesses and workers have access to critical coverage.
Thank you for holding the hearing early, and I look forward
to your questions.
[The prepared statement of Ms. Sartain follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Flood. Thank you very much. Mr. Schupp, you are
now recognized for 5 minutes for your oral remarks.
STATEMENT OF JASON SCHUPP, FOUNDER AND MANAGING MEMBER, CENTERS
FOR BETTER INSURANCE, LLC
Mr. Schupp. Chairman Flood, Ranking Member Cleaver, and
members of the subcommittee, good morning.
My name is Jason Schupp, and I have been closely involved
with TRIA since the legislation was first introduced nearly 25
years ago.
After retiring from the insurance industry, I formed
Centers for Better Insurance as a self-funded platform to
provide policymakers, regulators, and other insurance industry
stakeholders with independent analysis of important insurance
laws and regulations, including TRIA.
In 2015, Congress directed Treasury to collect extensive
information from participating insurers and publish an analysis
of that data every other year. We now have the benefit of 10
years of data, and five reports from Treasury.
Each of Treasury's reports reveals that large corporations
have established their own special purpose insurance companies,
known as captives, to access the Terrorism Risk Insurance
Program. In fact, this data proves that after a large terrorist
attack, up to $0.96 out of every $1 that would be paid out
under the program would go to large corporations through their
captive insurance subsidiaries.
The officers and directors of a captive are almost always
the executives of the parent organization, such as its CFO,
general counsel, head of tax, and risk manager.
By controlling both sides of the negotiations, and with the
comfort that the Federal program will bear 80 percent of
terrorism losses, captive owners have been very generous with
themselves.
As an illustration, for a mere $10 million premium, the New
York Times company negotiated a $1.3 billion terrorism
insurance policy with its captive that even includes coverage
for nuclear, biological, chemical, and radiological terrorist
attacks. Under this one policy, the Terrorism Risk Insurance
Program is on the hook for up to $1 billion of losses after the
captive satisfies a token $20,000 deductible.
The New York Times is hardly unique. Amazon, for example,
negotiated a $2 billion terrorism insurance policy with its
captive. Indeed, in half the scenarios the Treasury has tested,
captive insurers and their large corporate parents take at
least 90 percent of program benefits.
Unfortunately this problem is much, much worse than simply
sophisticated companies figuring out how to exploit benefits
under a Federal program. Treasury is required by statute to
recoup 140 percent of program payments through surcharges on
all property and casualty policyholders. In other words,
whatever the program pays to captive insurers, Treasury then
marks up by an additional 40 percent and bills all American
commercial property and casualty policyholders.
In one scenario the Treasury developed in Washington D.C.,
a truck bomb over at Metro Center, captive insurers would
receive $2.1 billion from the backstop, but captive
policyholders would wind up paying less than 10 percent of that
amount in surcharges. Somewhere around $200 million.
In stunning contrast, all other insurers participating in
the program would receive a total of only $243 million, but
their policyholders would pay 12 times that amount in
surcharges, an astounding $3.1 billion.
Treasury's data shows after a major terrorism attack,
captive and large corporations get billions of dollars, but
only paid millions of dollars in surcharges. On the flip side,
the insurers of small businesses, local governments and non-
profits receive millions of dollars, and their policyholders
pay billions of dollars back into the program.
The real picture is probably even more lopsided than
Treasury's reports reveal because of State secrecy laws that
protect captives and their owners, Treasury collects data from
only about 15 percent of U.S. licensed captives, and even then,
Treasury has no idea who owns them.
Through my own research I have uncovered a captive insurer
licensed right here in the District of Columbia that is
ultimately owned by a sanctioned Chinese military company.
This is not the first time captive insurers have been
structured to undermine a Federal program. Ten years ago the
Federal Housing and Financing Agency kicked captive insurers
out of the Federal home loan bank system after it learned that
these captives had been used to funnel $35 billion in low-cost
loans to their ineligible corporate parents.
There are solutions, and I look forward to discussing those
in questions and answers. Thank you.
[The prepared statement of Mr. Schupp follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Flood. Thank you. Commissioner Mais, you are now
recognized for 5 minutes for your oral remarks.
STATEMENT OF COMMISSIONER ANDREW N. MAIS, CONNECTICUT INSURANCE
DEPARTMENT, ON BEHALF OF NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS (NAIC)
Mr. Mais. Chairman Hill, Chairman Flood, Ranking Member
Cleaver, members of the committee, my name is Andrew Mais. I am
the insurance commissioner for the great State of Connecticut,
and past president of the National Association of Insurance
Commissioners, or NAIC, which represents the primary insurance
regulators of the 50 States, the District of Columbia, and the
five territories, and I do appreciate the opportunity to be
here today. Thank you for inviting me to testify today before
this committee and thank you for addressing this important
issue more than 2 years before TRIA, the Terrorism Risk
Insurance Act, is set to expire, as noted, on December 31,
2027.
Your forethought is both appreciated and necessary as
insurance and reinsurance contracts and decisions to deploy
capital are made months, if not years, in advance.
Furthermore, business decisions that depend on access to
commercial insurance from deciding to break ground on a
commercial space, to starting a new business, or building more
housing are often years in the making, so understanding that
insurance will be available is critical to supporting the
continued growth for communities and the economy.
State insurance regulators have supported TRIA since its
inception. Our job is clear, we want to make sure insurers can
pay claims, keep the market stable, and ensure that coverage is
available and TRIA is the best type of partnership between the
private market and the government.
The government's involvement in this instance creates the
appetite for a private market to exist and let me be clear
here, absent TRIA, or a similar solution, we do not believe
private insurance carriers would make meaningful capacity for
affordable commercial terrorism coverage available, and this is
especially true for smaller and mutual companies.
Insurance is well-suited to protect against losses from
events where one can make reasonable assumptions about the
frequency and severity of loss: car accidents, house fires,
slip-and-fall injuries, for example but the basic concept of
insurability does not apply to terrorism where neither the
regulators, nor the industry possesses the necessary insight or
data to anticipate the frequency or severity of a terrorist
attack, or its impact on the insurance industry solvency.
And furthermore, policyholders lack sufficient knowledge to
truly mitigate their risk. Elsewhere, you can choose to drive
carefully or not, you can install smoke alarms or not, but
terrorism is ultimately an attack on the values that we all
share as Americans regardless of whether it is a foreign or
domestic actor, and regardless of where it occurs. If our
government is the embodiment of the values that terrorists are
attacking, it stands to reason that the government does bear
some responsibility to absorb the financial impact of such an
attack.
The tragic 9/11 attacks resulted in more than $40 billion
in total insured losses, of which nearly $25 billion was just
property losses. Now, at the time of the attack, that was
greater than the historic average natural disaster losses of
the entire U.S. property casualty industry in a typical year.
Insurers have a tremendous capacity to absorb losses, but
they are vulnerable to a ``tail'' event with massive impact.
TRIA removes that ``tail'' event risk. By doing so, the private
market can manage at least one variable, severity, and offer
coverage at reasonable prices.
To keep commercial coverage available, we support a long-
term TRIA reauthorization of 7 to 10 years. TRIA stabilizes not
only the insurance sector, but the broader economy. Businesses
and consumers that live, work and shop in communities in every
State benefit from a stable insurance sector which provides
commercial terrorism insurance only because TRIA exists as a
backstop.
This stability has come at little cost to the Federal
Government, fortunately with no claims paid since its creation,
knock on wood again, while insuring a market that takes on
billions of dollars in risk that would otherwise go largely
uninsured.
It is also worth noting how TRIA handles more exotic
terrorism risk, including, as mentioned, nuclear, biological,
chemical and radiological events, or NBCR. TRIA does not force
insurers to cover these extreme risks, nor does it override
policy exclusions. It only provides a backstop for losses the
insurer has already contracted to cover, and this keeps
insurers responsible for their coverage choices while insuring
a Federal safety net for extreme terrorism events.
Without TRIA the question is simple, should taxpayers cover
the first dollar of losses, or the first dollar after the
insurance industry has paid out more than $53 billion. Thank
you, sir.
[The prepared statement of Mr. Mais follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Flood. Thank you, sir. We will now turn to member
questions. I now recognize myself for 5 minutes for some
questions.
Mrs. Heck, kind of a two-part question to start with you.
Can you describe the State of the market before the terrorist
attack September 11, 2001, and then how did the market react in
the aftermath of September 11th?
Mrs. Heck. Thank you.
Chairman Flood. Your microphone.
Mrs. Heck. I have to get this right but thank you for the
question.
Prior to the attacks on September 11th, the concept of
terrorism did not even exist in insurance contracts. So
overnight we all of a sudden had this exposure that could
potentially sink every insurance company.
Immediately after the attacks, companies had to recognize
that exposure and pare down concentration. So exclusions were
added to policies, companies were withdrawing from markets, it
caused banks to stop lending, construction projects halted, so
essentially the economy just froze in place until TRIA was put
together.
Now, the TRIA program was put together in 2002, and almost
overnight the markets began to behave in a way that was
competitive, and it made coverage available and affordable, and
it continues to work that way today.
Chairman Flood. Thank you for that. Ms. Sartain, you did a
nice job in your opening remarks talking about the implications
of what failure to reauthorize TRIA would mean. Two-part
question for you, if we fail to reauthorize TRIA by, let us
say, January 1, 2027, what will happen to this market?
Number two, what kinds of effects would we see if the
program fully lapsed and was not reauthorized in 2028?
Ms. Sartain. Thank you for the question. The insurance
market requires stability, and they need to understand what
they are on the hook for. If we wait too long to reauthorize
TRIA, many insurance companies will start withdrawing coverage,
limiting coverage, replacing sunset provisions in their policy,
which means they can write the coverage, but if TRIA is not
reauthorized, the coverage will go away.
If TRIA is not reauthorized, as we saw in 2015 where it
lapsed for about 12 days, the markets do the same thing, they
start limiting coverage, they start increasing prices, and they
look to sunset the coverage. I do not believe that terrorism
coverage would exist if TRIPRA is not reauthorized.
Chairman Flood. Thank you for that. Mr. Webel, because TRIA
has never been tested, the mandatory recoupment provision in
the program has never been tested either. Can you help explain
how mandatory recoupment works under TRIA, and has there ever
been an attempt to conduct an analysis of how recoupment would
work in practice?
Mr. Webel. Yes. The recoupment basically, I mean, is
subject to a significant amount of Treasury discretion as to
exactly the percentages that would be placed and how they would
be placed. There is ability to change what the premiums look
like.
The total amount under the law that is supposed to be
recouped is 140 percent of the outlays. There is a time
schedule in the law, depending on when exactly the terrorism
attack occurs and when these recoupments have to come back.
This timeframe is, frankly, a little unrealistic, I think,
particularly for a large-scale attack, so I would expect a
future Congress to definitely revisit those provisions in the
aftermath of an attack at the end of the program.
Chairman Flood. Thank you for that. Okay. Fast fact here,
you might not know this, but when the Cornhuskers are playing
football in Lincoln, the stadium becomes the third largest city
in Nebraska. Ninety thousand people descend to watch the
Huskers play football.
Ms. Sartain, talk to me about the impact TRIA's non-
authorization would have on colleges and universities given
their role in America and what all happens there?
Ms. Sartain. Absolutely. Colleges and universities and
educational systems are some of the biggest buyers of terrorism
risk insurance. As I mentioned in my comments, they represent a
symbolic part of the American culture, and it is also where our
young people go to learn and educate and become part of our
economy. So when you have concentrations of individuals in one
location, unfortunately they become a prime target for
potential terrorist attacks.
The universities need to make sure that they can insure the
property, as well as the individuals, and TRIA provides the
backstop that gives them confidence to secure both the private
insurance that is available in the market, as well as what is
available through the backstop.
Chairman Flood. Thank you very much. With that, I yield
back. I now recognize the ranking member of the full Financial
Services Committee, Ms. Waters, for 5 minutes.
Ms. Waters. Thank you very much. Commissioner Mais, when
TRIA was first established in 2002, it was designed as a
temporary program with expectation that the private insurance
market would eventually assume the risk of terrorism coverage
and affordability. However, time has shown that absent TRIA,
private insurance carriers would not fill that gap. Since then,
TRIA has been reauthorized four times.
In your view, if TRIA were to expire, would the private
market be able and willing to absorb these risks without
jeopardizing market stability or coverage availability?
What are the benefits of having a longer reauthorization,
say, 10 years, or even longer, to our communities in order to
provide stability and consistency for their economic
development?
Mr. Mais. Thank you, Ranking Member Waters. One of the
important things that we all face, everybody who has run a
business, everybody who is a regulator understands that
certainty is important.
When it comes to insurance, that certainty is even more
important because, as I mentioned in my opening statement, the
capital commitments that are necessary are made in advance, and
the coverage has to be available in advance.
For instance, if TRIA were to expire and not be renewed,
what we would expect is that all the coverages that would begin
after January 2026, that would be filled with uncertainty. I
would expect that, as Ms. Sartain said, what happened if TRIA
were not renewed, would be the same thing as we saw after 9/11;
the coverage was not available, coverage was--and even if it
were, it would have been too expensive, and we had significant
problems, significant knock-on problems, including what
mortgages and what buildings we simply were not able to have a
sit--we were not able to have the insurance coverage that
provided businesses with the certainty that they could
continue, which means that communities were affected.
A big part of that is that this is not a normal risk.
Again, to go back to normal risk, if you have pretty much
everything else, even your natural catastrophic risk, those are
huge, but we can do things to help mitigate the damage, and we
know we could have a good idea, we can model that damage well.
Terrorism we have no control over. Terrorism is hard to
price properly. So what would happen is that even if terrorism
insurance were, by some magic, affordable, it would be
unavailable--or if it were available, it would be unaffordable,
and that is what we are afraid of.
We as regulators want to make sure that, A, the insurers
are around to pay the claims, that consumers get the coverage
they need, and all of this is made possible when it comes to
terrorism because we have TRIA as a backstop providing that
certainty. Thank you.
Ms. Waters. Let me just speculate here for a moment. You
probably have been involved in a lot of conversations about
what happened in California and our wildfires. One of our
communities, in particular, has suffered greatly, and there are
a lot of problems that we are finding out about as it relates
to what happens when you have this kind of catastrophe.
One of them, and I do not want to have to ask this question
of you because it may be way out of your range here, but a
person receiving disability, for example, had devastation and
the insurance company, of course, was responsible because he
had paid his premiums, he has paid up all of that, but he is
being told now that if he takes the insurance money, that he
loses his disability and if he does not take his disability,
even though the insurance company is going to pay up, he still
needs money to live on every day. So, I was just made aware of
this problem, and I am taking a look at it, but all of these
kinds of problems are surfacing as it relates to insurance. I
am sure you have heard about a lot of these.
If you have any suggestions at all based on anything that
you know, or you are hearing that needs to be corrected, what
needs to be strengthened, needs to protect our premium payers,
I would certainly like to have you share that with us.
Mr. Mais. Thank you, Congresswoman. The north star for U.S.
State insurance regulators is consumer protection. No system is
perfect, we do recognize that, and that is exactly why we have
systems in place to address this.
You speak of the wildfires in California, I will tell you
it was probably a month or two ago that we--a whole bunch of us
insurance regulators from all----
Chairman Flood. The gentlelady's time has expired. Thank
you. All right. The chairman of the full committee----
Ms. Waters. Thank you.
Chairman Flood. Gentleman from Arkansas, Mr. Hill, is
recognized for 5 minutes.
Chairman Hill. Thank you, Chairman Flood. Thanks again to
the panel for your constructive help on thinking through this
reauthorization.
Mr. Webel, let us start with you. Thanks for all of your
advice to Congress over many, many years on this topic. I think
you have now studied all four reauthorizations.
What is your observation about this program's
effectiveness? In other words, you have now seen it be
reauthorized, what is your view on some of the things you have
heard today as to the essential nature of it?
Mr. Webel. I mean, I think it has obviously been very
effective in keeping the market going. It is, also, I
observed--you know, an insurance program that never actually
has to operate or payout always looks very effective. So, I
think that there are some questions and probably appropriate
congressional oversight of Treasury in terms of are they
prepared, if we did have an attack, what do their systems look
like, what would be going forward.
Particularly since it was set as a temporary program to
begin with, whether or not if--as listening to people, it seems
like it may be a permanent, essentially a permanent program,
were all the structures that were put in place when it was a
temporary program, does that make sense if it is going to be
around for the duration.
Chairman Hill. Would you--does Treasury, to your knowledge,
do like tabletop exercises on this, and had they--do you feel
that you are not the Inspector General of Treasury of this
program, but from your observation, is the government
functioning in a way like they are prepared to operate?
Mr. Webel. I believe so. I mean, I have had interaction
with the Treasury and the Freedom of Information Act (FOIA)
office on various things of this over the years, and I have
always gotten what I needed out of them when I had questions. I
believe in general that they are doing a good job of being
prepared, but I have also, as a creature of Congress over the
years, observed that sometimes it is not a bad thing for
Congress to ask questions, too.
Chairman Hill. Yes. So you think as a part of this we
should do that and have the committee assess the operational
aspects that the authorization directs of the Treasury?
Mr. Webel. I think that is, as I said, always a reasonable
thing for Congress to do.
Chairman Hill. When you look at these reauthorizations, do
you have comments on whether both policyholders and insurers
have a clear set of expectations about how the program would
work if it ever were deployed, how do you feel about that?
Mr. Webel. I mean, I think that they are--I think that the
expectations really are not as clear as they could be,
especially in the realm of nuclear, biological, chemical, and
radiological.
I remember past hearings where I would hear people in your
seats talk about scenarios where this would be particularly
needed, and the sort of typical disaster scenario for a high-
level terrorist attack goes to a suitcase nuclear weapon in
Manhattan, or bombing a chemical train that is going through an
area, and I remember thinking to myself in various points of
like, that would not be covered under TRIA because most private
policies would exclude that sort of thing and the program works
through those private policies.
So I think there is a hole in the expectations,
particularly when it comes to that.
Chairman Hill. Well, I think your perspective is really
helpful, and I appreciate the panel's views as well. I mean, I
think that clarity of what we are insuring and what we are not
insuring and how it works in practice is very important and it
should be assessed carefully. I want to thank you, Mr.
Chairman, for the hearing, Mr. Cleaver, and I yield back.
Chairman Flood. The gentleman yields back. The ranking
member of the subcommittee, gentleman from Missouri, Mr.
Cleaver, is now recognized for 5 minutes.
Mr. Cleaver. Thank you, Mr. Chairman. Mr. Webel, the
chairman and I are from the same center of the country,
Nebraska, Missouri, and so, there is sometimes this misguided
perception that only the west coast or the east coast, New York
or Los Angeles are places that should think about TRIA. Will
you please explain why TRIA is important in different regions
of the country?
Mr. Webel. Sure. I am from the southern part of Illinois,
so I--a long way from Chicago, so I do understand.
I think that the chairman mentioned, particularly at
Nebraska stadium, it is full of people. Educational
institutions need terrorism coverage, too. We have large-scale
universities across the country. There is any number of
potential places that a terrorist could attack that would cause
damage that people do not think about, and it is precisely--the
terrorists are seeking those sorts of places to attack.
So I do think that the coverage is needed in places outside
of Los Angeles and New York, and that TRIA has helped get
coverage to those places.
Mr. Cleaver. Thank you very much. Mr. Mais, in your
testimony this morning you note, and I quote, the question is
simple, should taxpayers cover the first dollar losses or the
first dollar after the insurance industry, unquote. I actually
agree with you that with or without TRIA, the Federal
Government would step in, and TRIA is the best outcome for
taxpayers.
How long would you like to see TRIA reauthorized, you know,
understanding the tradeoffs and so forth?
Mr. Mais. Short answer to that is as long as possible but
it is certainly up to this committee, but certainty for all of
us is best.
Mr. Cleaver. Actually, it is not up to this committee, but
I do think that the entire Congress would very likely agree
with what you just said. I just want to make sure that it gets
on the record.
Mrs. Heck, over the years some have argued that TRIA is
effectively crowding out the private reinsurance market by
providing Federal reinsurance. If the private reinsurance
industry were willing and able to provide this coverage, then I
would expect them to lobby against TRIA in order to push out
the competition, and yet that is not the case. In fact, in 2024
the Treasury report stated, and I quote, Treasury has no--has
not observed any aspects of the program that have discouraged
or impeded insurers from providing property and casualty
claims, and that TRIA is actually not crowding out the private
sector. What say you?
Mrs. Heck. Thank you for the question. The program actually
encourages the private marketplace. If the program were not in
place there would be very few market participants. We saw that
in the aftermath of 9/11, and, of course, in 2014, even though
it was only for 12 days, we saw the market reaction. So it is
precisely because of the program that we see private
participation.
Now, one thing that I want to press upon you is the fact
that in order for the coverage to be available and affordable,
it is important to have a range of carriers involved in the
program, which means making it possible for small, mid-sized,
and large carriers to participate, which means that the
triggers and the deductibles matter.
Mr. Cleaver. Thank you. Mr. Chairman, I yield back.
Chairman Flood. The gentleman yields back. The gentleman
from Tennessee, Mr. Rose, is now recognized for 5 minutes.
Mr. Rose. Thank you, Chairman Flood and Ranking Member
Cleaver for holding this important hearing and thank you to our
witnesses for being with us today.
Mrs. Heck, I want to follow up on where Congressman Cleaver
just was, and Mr. Webel, I will come to you as well because I
am kind of curious why, why do you believe a private market
would not naturally form here and be robust, what is your--I
mean, I have my own intuition or suspicion there, but tell me
why you think that is true if TRIA was gone.
Mrs. Heck. Because we--well, first of all, we do not have
to guess because we saw it happen. The reason for that is
because the exposure is too large and too unpredictable that a
carrier, the private market is not willing to put their capital
at risk at something that they cannot quantify.
Mr. Rose. Impossible to underwrite.
Mrs. Heck. It is. It is impossible. So because of the
unpredictability, and the fact that terrorists can change where
they attack just because they choose to, you cannot use the
past to be able to predict the future. Any of the metrics that
could help in trying to model that exposure is protected as a
matter of national security, so it is just not possible.
Mr. Rose. So is not a part of that kind of the implied or
implicit belief that the government will backstop this, would
be required to in some way, do you think that is true, is that
what is also driving those who might desire the coverage to not
go seek it out because they think, well, the government is
going to be there for us?
Mrs. Heck. Yes. I actually think it is the opposite,
because the backstop is there the private market is willing to
put out limits, because they are able to understand what that
exposure is.
Every insurance company has to manage their capital and the
issue with a terrorism attack is that it is so potentially
catastrophic that it could sink the company. So companies are
not willing to put their balance sheets at risk because it
would cause multiple insolvencies. So because the backstop is
there and the government can step in, it makes it possible to
put out limits because there is some certainty. The really good
news about the program is that taxpayers are fully protected
because every dollar is paid back 40 percent higher than what
the government outlays. So it is just a way to smooth the
losses so that carriers can put some--you know, put out limits.
Mr. Rose. But I have some skepticism about whether we would
actually recover that money after the fact, and so I wonder,
should there not be a more proactive plan for putting something
away for a rainy day, if you will?
Mrs. Heck. Well----
Mr. Rose. Even though this has never been triggered, right,
not once.
Mrs. Heck. In my opinion, it is not necessary because what
we have seen over the past 24 years is having the backstop in
place, it has allowed for a viable market.
I do not know that would necessarily add anything because
at the end of the day the Treasury Department has the authority
embedded in the law to collect the money, and they also have
the authority to be able to collect more than what is provided
for in the statute.
Mr. Rose. Do you think that we should, in some way, index
the triggering numbers so that over time they do not become
small enough that they are maybe ineffective?
So the $5 million and $200 million trigger, I mean, if we
index those from when TRIA was originally put in place, they
would be quite different today. Should we do that so that the
program does not become kind of obsolete in that regard?
Mrs. Heck. Well, I will talk about the two triggers
separately. So with regard to the $200 million trigger, I do
not think that trigger should be changed in any way because the
trigger actually prevents market participation for small
carriers.
Because of the way that the make-available provision works,
which requires every company to offer the coverage if--for
every eligible line of business, a smaller company could be in
a position where a scenario happens. They have made the
coverage available. They sustained losses. They have exhausted
their deductible, but they cannot recover under the program
because the trigger is too high.
The large companies are not impacted by the trigger, so I
would argue, the trigger does not do much to protect taxpayers
in any way.
Mr. Rose. Thank you. My time is expired. I appreciate your
answers.
Chairman Flood. The gentleman yields back. The gentlewoman
from New York, Ms. Velazquez, is now recognized for 5 minutes.
Ms. Velazquez. Thank you, Mr. Chairman and Ranking Member,
for this important hearing. For me, this is deeply, deeply
personal. I know exactly where I was, primary day in New York
City for mayor, and I was standing in front of a school.
My staff called me and said, Something happened at the
World Trade Center. Then another call, another tower, and I
realized that something was really, really wrong.
So I would like to ask you, by a show of hands, does anyone
on the panel think the TRIA program should not be reauthorized?
Good.
Ms. Sartain, the program is not currently set to expire
until 2027, but can you explain why it is important to
reauthorize the program early and why a long-term
reauthorization is needed?
Ms. Sartain. Thank you for the question. Again, insurance
companies and policyholders require stability so that they can
make future plans.
As we saw in 2015 when TRIA lapsed, insurance companies
needed to respond to limit the capital that they had exposed,
and so we saw policyholders losing coverage, seeing increased
premiums, or seeing some set provisions in the policies that
were placed.
So by reauthorizing early, we allow the insurance market to
continue to function well and smoothly, as well as managing the
expense associated with this risk.
Ms. Velazquez. Thank you.
Mr. Schupp, you say in your testimony, and I quote,
Treasury repeatedly raised concerns that captive insurers could
be structured to gain the program. Can you please explain this
statement?
Mr. Schupp. Certainly. Thank you. In the early years of the
program, Treasury had acute concerns that a captive insurance
company which, remember, is just a subsidiary of a noninsurance
company--most Fortune 500 companies have one--that because the
deductible which we have talked about is 20 percent of prior-
year, direct-earned premium, that deductible, by utilizing a
captive, would be tiny.
So in my example of the New York Times, and I picked them
because I can get to that data--this data is very hard to
find--they have, last year, they had total premium in their
captive of about $800,000, maybe $850,000.
That gives them a $19,000 deductible under the program.
After that, Treasury is on the hook for 80 percent of losses.
In contrast, a company like an AIG or a Travelers may have
a backstop deductible of $2 billion.
Ms. Velazquez. How should we address this concern?
Mr. Schupp. I think there are two ways to address it:
Number one is information, some transparency, both to Treasury
and to the public.
So Treasury is not able to collect data from these
captives. It is shooting in the dark, where everyone else gets
data through the NAIC, all the other participants. So who is
actually participating in it and who is behind them, what
corporations are actually running it.
Second, there is a way to--very simple way to cutoff the
subsidies that are running, and I cover that in my testimony.
Ms. Velazquez. Thank you.
Ms. Sartain and Mrs. Heck, if you please also address this
question.
Every time we discuss the reauthorization of TRIA, we
debate the program's triggers. Currently, the Federal
Government provides co-insurance of 80 percent of losses up to
$100 billion cap if the loss exceeds initial deductible of 20
percent of an insurer's annual premiums for commercial
property.
Do you think adjustment to any of these levels are
necessary, even for inflation?
Ms. Sartain. Maybe just two ways to think about that.
Because of the way that insurance is underwritten, based on the
values of the buildings or the risk within it, there is an
automatic indexing that comes through the premiums that are
charged.
Second, when it comes to what the triggers are, I think the
most important thing is that there is certainty as to what
those triggers are, and there is not a shock to the insurance
markets or the policyholders as to the change in those
triggers.
In terms of changing the triggers, I would suggest that
there be a thorough study of the impact of those triggers on
policyholders and the broader economy.
Ms. Velazquez. Do you have anything to add?
Mrs. Heck. Oh, yes. So to add to with what Ms. Sartain
said, just to give you an example, my company, for example, our
deductible post-9/11, in 2002, was $10 million, and today it is
$250 million.
So to Ms. Sartain's point, there is an automatic indexing
that happens because the basis for calculating the deductible--
--
Chairman Flood. The gentlelady's time is expired.
Ms. Heck [continuing]. has already considered inflation.
Chairman Flood. Thank you very much. The gentlelady yields
back.
Ms. Velazquez. Thank you. I yield back.
Chairman Flood. The gentleman from Montana--in fact, he is
the former insurance czar of Montana, Mr. Downing, is now
recognized for 5 minutes.
Mr. Downing. Well, Thank you, Chairman Flood, thank you,
Ranking Member, and thank you to the witnesses for being here
today.
And, Commissioner Mais, great to see you. Please send my
regards back to my former colleagues.
The Terrorism Risk Insurance Program was essential to
stabilizing insurance markets after the September 11th attacks,
and I am glad we are having this hearing to evaluate the
effectiveness of the program and its future.
As many of you know, I have long called for the elimination
of the Federal Insurance Office, or FIO, under Dodd-Frank. FIO
is directed to assist the Treasury Secretary in administering
the Terrorism Risk Insurance Program.
However, this program existed nearly a decade prior to the
creation of FIO and, as far as I know, without any issues.
I am going to start with Mr. Heck--Mrs. Heck. I'm sorry.
Can you tell me what role FIO plays in the Terrorism Risk
Insurance Program and how it operated prior to the creation of
FIO under Dodd-Frank?
Mrs. Heck. So, yes, so prior to the creation of FIO, the
program functioned just fine. There is a small office, the
Terrorism Risk Insurance Program (TRIP) office is part of FIO.
There is a small number of people that participate, and there
is no reason why those people could not continue to operate in
the event of attack.
Mr. Downing. Right. So to be clear, the program operated
just fine before FIO?
Mrs. Heck. Correct.
Mr. Downing. If FIO was eliminated today, how would that
impact the program?
Mrs. Heck. I do not think that it would impact the program
at all. I think that, again, there are a few people within the
TRIP office which is a sub segment of FIO that could continue
to administer the program and assist the Treasury Department
after an event.
Mr. Downing. Right. Thank you.
Mr. Webel, what are your thoughts on FIO and TRIA?
Mr. Webel. I think that, I mean, since the last--say, the
last 10-plus years, it has felt like there has been more
activity because of FIO but that is also coinciding with the
additional responsibilities put by Congress when they
reauthorized it in 2015.
So you see a lot more activity. There are a lot more
reports coming out under FIO, but it is not necessarily clear.
Is that because of FIO or is that because of the fact that
Congress has basically asked the Treasury to do this.
Mr. Downing. All right. Thank you.
So as mentioned earlier in this hearing, TRIA was intended
to be temporary until the private markets stabilized and were
able to accurately model and price in the risk of terrorism.
Mr. Webel, to you again. Has the program met these goals?
Mr. Webel. Strictly speaking, no. I mean, it is a 3-year
temporary program. It is 22 years later. It is still here. So
if you take the Congress at the time that said it is going to
be 3 years, then it did not meet the goal of going out of
existence.
I think it has met the goals of backstopping a terrorism
market and mitigating some of the broader economic damage that
a lack of terrorism insurance would have.
Mr. Downing. So staying with you, Mr. Webel, what might the
private market look like when a Federal backstop is no longer
needed?
Mr. Webel. I mean, I think that--I think it would look
different--certainly very different in a sense that there are
all the problems about modeling terrorism that other people
have gone into. It would definitely be smaller.
I think a lot of the risk would remain on bank balance
sheets, much as you see in some other areas where if a bank has
a choice between writing a loan and you cannot get terrorism
coverage, are they going to still back the project? In some
cases, they probably would.
So the risk would still be there, but it would probably be
more diffused throughout the financial sector.
Mr. Downing. So what would, if any, what would the
alternatives be to a Federal program?
Mr. Webel. I mean, you would have some more private
reinsurance perhaps. You would have some primary insurers that
might continue to take on some of the risk, or as I said, you
would have banks and lenders that would essentially be taking
on the risk.
Mr. Downing. How are other countries, how do they account
for this risk?
Mr. Webel. Most other countries or many other countries do
have some forms of backstops. Some of them there terrorism-
specific. Some of them roll it into a broader, catastrophic
program that does not just cover terrorism but also might cover
wind or flood or other catastrophic events.
Mr. Downing. All right. Thank you.
Mrs. Heck, I saw you kind of wiggle there when I was asking
that, so it seems you might have something to say about the
private market without a Federal backstop.
Mrs. Heck. Yes. I would argue that without the program
there really would not be much of a private market and to your
question as to what would happen after event, I think the
Federal Government would probably feel the need to step in to
be able to stabilize the economy.
The way the TRIA program works, it actually allows for that
to happen with recoupment so that taxpayers are protected. So
in a sense, what TRIA is doing is, it is preventing the
government----
Chairman Flood. The gentlelady's time is expired.
Mr. Downing. Thank you, Mr. Chairman. I yield.
Chairman Flood. The gentleman yields back. The gentlewoman
from Massachusetts, Ms. Pressley, is now recognized for 5
minutes.
Ms. Pressley. Thank you.
Every year, thousands of people from every walk of life
come together from around the world for the Boston Marathon.
Starting in Hopkinton, runners traverse 26.2 long miles past
schools, homes, and businesses, toward the finish line in
Boston's Copley Square.
In April 2013, what was supposed to be a festive Monday
celebration for the Boston community with smiles and hugs
turned into a nightmare we will never forget. The terrorist
attack at the finish line robbed us of precious souls, injured
hundreds who are still recovering from physical injuries and
invisible wounds, and traumatized thousands.
My neighbors and our community are still healing from
tragedy, which is why I drafted, in close partnership with
marathon survivors, the Post-Disaster Mental Health Response
Act. This was signed into law in 2022.
It is legislation to extend Federal Emergency Management
Agency's (FEMA's) crisis counseling supports to survivors of
terrorist attacks, and it is why I especially appreciate
today's hearing focused on reauthorizing the Terrorism Risk
Insurance Act, also known as TRIA.
For the general public, TRIA is a form of insurance to
cover the economic losses to businesses and is critical to
rebuilding community after a terrorist attack. It supports
brick-and-mortar shops that are physically damaged, and it
helps business owners pay their employers, so no worker has to
worry about bills while focusing on recovery.
But TRIA could be strengthened to better meet the needs of
cities and States. In the aftermath of the Boston Marathon
bombing, businesses waited for weeks, months, and ultimately
more than a year to learn if the Treasury Secretary would
classify the assault on our city as a terrorist attack.
That classification is the essential first step in
determining if insurance payouts will be backed by the
government.
Now, Mr. Webel, can you explain why Treasury may take
lengthened time periods to classify a terrorist attack?
Mr. Webel. I mean, I think there is obvious difficulties in
terms of attribution of terrorist attack, who exactly performed
it, that is critical in determining the certification.
I think in the case, particular of the bombing in Boston,
the biggest issue was the insured losses not meeting the $5
million certification and the fact that it is property casualty
losses, not losses to life and limb and health insurance that
count.
So I think that in some ways, a lot of the difficulties
here revolve around the integration of what is a reinsurance
program, TRIA, in primary insurance coverage, which is the
coverage that the insurers are giving to the businesses that
were around the bombing.
In most cases, primary insurance would go ahead and pay,
whereas if there was reinsurance coverage in the private
sector, there would then be----
Ms. Pressley. Thank you.
Mr. Webel [continuing]. a negotiation between them but this
intermixing of the two causes, I think, confusion.
Ms. Pressley. Thank you so much, Mr. Webel.
Commissioner Mais, insurers and businesses alike want
certainty on the timing of whether an event will be declared an
act of terrorism. What are the consequences of delays in
getting a response from Treasury?
Mr. Mais. The consequences of delays in getting a response
from Treasury post-event, is that what you are----
Ms. Pressley. Yes.
Mr. Mais. I am uncertain as to how to respond to that
because, frankly, TRIA is run by Treasury. There are very
definite requirements that must be met. As we saw in the Boston
Marathon, as was just explained----
Ms. Pressley. Okay, fair enough. Let me ask a question
because the clock is ticking here.
Mr. Webel and Commissioner Mais, there is a proposal to
require Treasury to respond to requests for classification from
a Governor within 6 months, and even if denied, a Governor can
make the request again. This would offer certainty around
response timing, but not finality for an answer.
How could such a system help or hinder the current process
for TRIA?
Mr. Webel. I mean, I think it would certainly help the
primary insurers to have certainty to pay out or not to pay out
based on their policies that revolve around certification.
Mr. Mais. Again, I would defer to Treasury and the
Congress, but certainty always helps.
Ms. Pressley. Okay. Thank you.
I truly pray that no community experiences a terrorist
attack. No one should have to live with that pain, that fear,
and that trauma.
To my neighbors still struggling in the aftermath and
grieving the loss of a loved one, or what could have been, know
that your Congresswoman sees you and your family.
I yield back.
Chairman Flood. The gentlewoman yields back.
A quick announcement. Do not be alarmed if you hear jets
overhead in any 15 minutes. The Blue Angels are doing a
scheduled flyover. So I figured with this group of people here
today, I want to put you as ease.
The gentleman from New York, Mr. Lawler, is now recognized
for 5 minutes.
Mr. Lawler. Thank you for that notification, Mr. Chairman.
We are here just a few days removed from the 24th
anniversary of September 11th, a day that forever changed our
country.
Unfortunately, the reality 24 years later is that we still
have to deal with the threat of terrorism. There are people who
do not like us and do not like the ideals and the values of
this Nation.
We are grappling with the ramifications of the unholy
alliance between Russia, Iran, China, and North Korea, and
those who seek to undermine and destabilize the free world.
We are also dealing with a rise in extremism. In my
district, the immediate suburbs of New York City, and where a
large portion of my constituents commute into New York City for
work, we have deeply felt the impact of past attacks and remain
concerned for the future.
Today, my district continues to deal with the ramifications
of 9/11, with first responders continuing to die from 9/11-
related health illnesses.
New York remains arguably the largest target of terrorism
in the world. It is critical for our businesses and developers
to know both that they have this coverage and that the coverage
is stable and sustainable for the long term.
Mr. Webel, or Ms. Sartain, what, if any, alternatives are
there to a free, Federal reinsurance terrorism backstop? How do
other countries handle terrorism risk insurance?
Mr. Webel. Other countries, as I mentioned, have various
mixed programs. Some focus specifically on terrorism; some
rolled into a more general catastrophic backstop.
In terms of what a program might look like outside of TRIA,
obviously most insurance that you get have premiums of some
kind up front, and it would not be impossible to envision a
situation where some of the premium dollars that currently flow
to primary insurers--and Treasury has estimated that over the
life of TRIA, it is probably in the $60-to $70 billion of
terrorism premium that has been collected by primary insurers.
You could envision a situation where some of that was shared
with Treasury for the backstop.
The downside to that is that would it increase the cost of
terrorism insurance and so to the degree that you want to
increase people purchasing the terrorism insurance so that it
is in place after an event. If you were to charge premiums for
TRIA up front, you would obviously lower that participation
rate.
Mr. Lawler. Mrs. Heck or Mr. Schupp, how important is it
for TRIA to have clear rules and expectations for both
policyholders and insurers, and are there steps that Congress
can take to increase certainty in this process should an event
ever be certified under TRIA?
Mrs. Heck. First of all, having clear rules and certainty
is critical. It is critical both to insurance companies who are
providing the coverage, and the business community who need the
coverage. So that is absolutely important.
With regard to certainty, should there be any changes to
the program, the program has proven over the past 24 years that
it is really working the way it is designed. So we do not feel
that any legislative changes are necessary.
What we do think is important is that there is swift
reauthorization for as long a term as possible, and that is
going to provide the most certainty to the market.
The second thing that we think is critically important is
to not increase the trigger to the extent that it would keep
out the smaller companies, because in order to have a market
that is thriving and robust and affordable, it is important to
have as many companies to participat in the program as
possible.
Mr. Lawler. Thank you.
Mr. Schupp. If I may very briefly, you have to keep in mind
that the provisions of TRIA have made their way into the
insurance contracts, into the reinsurance contracts. So when
something changes here, it has that downstream effect and
creates contractual uncertainty.
It is not just a program that hangs behind, but it is
actually infiltrated the contracts themselves. So any changes
need to be done very early and thoughtfully.
Mr. Lawler. All right. With the TRIA set to expire at the
end of 2027, obviously anything that would change, or the
reauthorization, needs to be in 2026 to give certainty to the
marketplace.
Ms. Sartain, TRIA includes a mandatory make-available
provision that requires all insurers to offer terrorism
coverage to their insureds.
How has that requirement impacted the operations of small
and larger insurers?
Ms. Sartain. It has required that everybody participates,
which means that there is more capacity available in the market
than would otherwise be the case.
Mr. Lawler. Thank you. I yield back.
Chairman Flood. The gentleman yields back. The gentlewoman
from Michigan, Ms. Tlaib, is now recognized for 5 minutes.
Ms. Tlaib. Thank you, Mr. Chairman.
We all know for insurance to really work, it must be able
to, I guess, model and predict the likelihood of an event
occurring, right, in addition to its impact.
However, terrorism risk, and we are talking about this, is
incredibly unique here. Much of the information about terrorism
risk is not publicly available, right?
The number of terror events also does not give one a large
sample size to draw from in making certain future predictions.
So Commissioner Mais, you touched on this in your
testimony, but can you give a little bit more detail about why
private insurance industry is not well-suited to addressing
terrorism risk in particular?
It is not just what I said, those factors, but also--and no
offense to anybody, it is very pro--just let the private
insurance companies do whatever they want--they just do not
do--we almost always have to force them to do what is right
here, even with high risks, because they are all very driven by
profit and so forth.
I get it, you want to keep the company going and moving but
I think right here, in this unique situation, I think it is
important for, I think, my residents who are listening in, to
understand why we have to have this in place.
Mr. Mais. Thank you, Congresswoman, and, yes, you are
absolutely correct. The quality of that risk is simply, it is
so difficult to predict, so you cannot properly price for it.
As regulators, we need to ensure that there is solvency. If
you cannot tell what the result is going to be, the frequency,
or the severity, then you are pretty much out there flying
blind. For us as regulators, it would make it difficult to
ensure that consumers get the coverage they deserve.
Ms. Tlaib. Despite this, someone might still think the
private market should be responsible for this reinsure--you
know, insurance, not the government.
So, Mr. Webel, when the program briefly lapsed at the end
of 2014, did we see private insurers move to exclude terrorism
losses?
Mr. Webel. Generally, yes. There are provisions put in the
contracts calling for that.
Ms. Tlaib. I would like to turn to recoupment because I
think--starting with mandatory recoupment.
Mr. Webel, in your testimony, you write that the mandatory
recoupment would be equal to 140 percent of the difference
between the aggregate retention amount and the total amount of
insured losses that were not reimbursed by the government,
direct quote from your testimony.
First, can you help us understand, okay--my mom's
watching--like, help people understand, because the public need
to understand why this is important here. That is my first
question, to understand that sentence and explain aggregate
retention.
Second is, the recoupment percentage has changed over time
from 100 percent to 140 percent. Are you--you know, what is the
rationale around that change?
Mr. Webel. Sure. The rationale for that, I think, largely
revolves around Congressional Budget Office scoring rules, and
that post-event recoupment actually would get deducted by
insurance companies from other taxes.
So therefore, even though it is being paid to the
government, it would result in less taxes being given to the
government in other places. Therefore, the amount in past
reauthorization was increased essentially to allow for this
budget-neutral scoring with regard to Congressional Budget
Office (CBO).
Ms. Tlaib. Okay. Commissioner Mais, how do you feel about
the congressionally determined parameters within the Treasury
Secretary--which the Treasury Secretary makes that decision?
Mr. Mais. We follow the law and the----
Ms. Tlaib. Are they too restrictive, too loose?
Mr. Mais. Again, we are here to follow the law. Congress
decided there was----
Ms. Tlaib. Are there any changes that you would propose?
Mr. Mais. There are no--that is really not up to us to
discuss as State insurance regulators. We just----
Ms. Tlaib. Yes.
Mr. Mais [continuing]. need to make sure that the coverage
is there and that the companies are solvent.
Ms. Tlaib. Every time I bring up private insurance
companies, the auto insurance industry comes to mind in my
district. Everybody is smiling. They probably know. I got on
this committee to work on that issue.
Does anybody here on this panel know anything about what is
going on with the auto insurance industry? Anyone?
Oh, Mr. Schupp.
Well, because why are they now asking for non-driving
factors like the GPA--literally your GPA of your student in
college? What does that have to do with whether or not you are
a good driver? Does anybody know?
How about ZIP code? How about whether or not you have a
Ph.D. or are you married? What the heck does that have to do
with whether somebody is a good driver or not? How is that a
predictor?
Studies show that somebody with a DUI, because he has a
high credit score, is paying three times less than the person
with no DUI but has a lower credit score. Do you not think that
is discriminatory?
Mr. Schupp. So insurance is discriminatory, right, by its
nature. It is supposed to be discriminatory----
Ms. Tlaib. But they are asking for the GPA of our kids.
Mr. Schupp. But it is not supposed to be----
Ms. Tlaib. What the hell does that have to do with whether
or not we are a good driver?
Mr. Schupp. But it should not be unfairly discriminatory,
and I think those are the questions----
Ms. Tlaib. I think non-driving factors should be
prohibited.
Thank you.
Chairman Flood. The gentlewoman yields back. The
gentlewoman from Texas, Ms. De La Cruz, is now recognized for 5
minutes.
Ms. De La Cruz. Thank you, Mr. Chairman, for holding this
hearing today.
I enjoyed serving as the vice chair of Housing and
Insurance Committee. It is an area that I worked in and--I am
sorry--I worked in housing and insurance for over 20 years, so
this is a meaningful area. I was taken back by the
Congresswoman's comments because unless you have actually
worked in the insurance industry, then you have a better
understanding of why these factors are important.
And so, I would encourage my colleague to actually meet
with people who work in the industry and who understand the
statistics and what drives actual cost.
That put aside, coming from the insurance world, the
private insurance world, including auto and housing insurance,
it is interesting to learn about this large-scale, federally
backed insurance program.
Very recently 9/11 just passed, a sad day in our Nation's
history and a day of complete terror, especially for our fellow
citizens in New York City. While we hope that a terrorist
attack like that never happens again, we do need to be prepared
should something happen, and that is why we are in Congress.
So creating the Terrorism Risk Insurance Act, or TRIA, was
very important, and is very important.
This is a bill that has been reauthorized four times in a
bipartisan manner, and helps our country, our communities, and
our businesses be prepared for the future.
One benefit of TRIA is that it helps Americans get reliable
and affordable energy by facilitating insurance of critical
energy projects built right here in the United States.
For Texas and my district, this means TRIA supports jobs,
as my State is home to many energy-producing companies,
workers, and projects. TRIA makes terrorism insurance remain
both available and affordable to energy producers in Texas and
across America.
Ms. Sartain--excuse if I did not quite get that right--
without TRIA, is it fair to say that insurance would be unable
to offer this coverage which would leave critical
infrastructure like refineries, pipelines, and power plants
exposed to catastrophic financial loss?
Ms. Sartain. The short answer is yes. Marsh McLennan
Companies also employs people in Texas as we do across the
United States, and the energy sector is an important sector
that we serve, understanding that energy security is key to the
security of this country.
Without TRIA, terrorism insurance would prevent projects
from moving forward, prevent things from moving around the
country, and limit the recovery in the event--unfortunate event
of a terrorist act.
Ms. De La Cruz. Now, as a Nation, we are moving toward
energy dominance, and TRIA is vital to both our national energy
security and economic resilience. TRIA's role in stabilizing
the insurance market gives energy companies the confidence to
invest in long-term infrastructure and workforce development.
Thankfully, the Treasury has never designated an event that
would activate TRIA provisions, and I hope, quite frankly, that
it never does.
How can we continue to ensure the program is properly
prepared for the future, and are there any potential changes to
the program the witnesses would like to briefly discuss?
Mrs. Heck.The first thing, by the way, Congresswoman, I
applaud your comments earlier in your testimony.
I mean, one thing that I would like to point out is that
insurance companies are not motivated by profit. What we are
motivated by is providing coverage for our policyholders and
being there after a loss, which means that it is very important
that the industry remain solvent and be able to cover those
losses.
With regard to the current program, what we found is that
it works, and I think what is most important is that we renew
it swiftly for a long term--for a long term so that the program
is there to keep the market stabilized.
Ms. De La Cruz. Thank you. In regard to my earlier
comments, one of the things that I like about the insurance
industry is that it is based on facts and not feelings.
With that, I yield back.
Chairman Flood. The gentlewoman yields back. The
gentlewoman from Georgia, Ms. Williams, is now recognized for 5
minutes.
Ms. Williams of Georgia. Thank you, Chairman Flood and
Ranking Member Cleaver, for this hearing today, and thank you
to all of our witnesses, because this is a conversation that I
really want to understand better and make sure that my district
understands.
I represent Georgia's Fifth Congressional District, a
region with a very vibrant business community, and it is
centered in Atlanta where we have a lot of large-scale national
security events.
While we cannot predict when and where a terrorist attack
could happen on our American soil, we know that sometimes big
events are a draw, and so that brings a lot of things to mind
for me.
The city of Atlanta is preparing to host the World Cup next
year, and it is a stark reminder of what happened almost 30
years ago when the Centennial Olympic Park bombing happened
during the 1996 Olympics.
Now, this was pre-TRIA being implemented, so that was not
something that businesses and the community of Atlanta had
access to, which is why this is so important to me.
Terrorism risk insurance, or TRIA, is such an important
program and, quite frankly, a program that no matter what side
of the aisle you are on, as you have heard today, we all agree
that this is a program that should exist, and this coverage is
very important.
Mr. Webel, I would imagine that most people perceive TRIA
as being a regional issue for big cities--New York, we heard
about the Boston Marathon. Atlanta, in my mind, is, like, up
there on that list.
Also, I heard our chairman when he talked about college
football--and, Mr. Timmons, this weekend when Georgia Tech beat
Clemson in Atlanta, there were a lot of people in the city of
Atlanta.
[Laughter].
So, I am thinking about Atlanta hosting these large-scale
national security events.
According to Treasury's 2024 data call, takeup rates for
terrorism risk insurance are relatively high across the country
by policy count. Can you explain why TRIA is important in
different regions of the country?
Mr. Webel. I mean, I think the large-scale events that you
mentioned are a big deal. I think also the critical
infrastructure that your colleague mentioned is a big deal as
well.
The truth of the matter is, things can happen in wide
swaths of the country that can cause a lot of economic damage
and a lot of spillover effects, in the transportation system,
in gatherings, et cetera.
And so iI
Ms. Williams of Georgia. So I am also thinking about
representing a city that has already been impacted by an act of
terrorism. It is a constant reminder of why this is important.
I also represent the world's busiest and most efficient
airport, at Hartsfield-Jackson International, and I remember a
cybersecurity attack that grounded flights, and that has an
impact worldwide.
Then I am thinking about just the ransom that the city of
Atlanta had to pay, and that is not covered by TRIA, and we
were trying to figure it all out.
It left so many constituents unable to pay their water and
utility bills on time, our airport was grounded, and while TRIA
does not speak directly to cyber insurance, Treasury has
provided guidance to clarify that cyber insurance is included
when it is a written line of insurance that is subject to the
program.
Commissioner Mais, do you believe anything further needs to
be done to clarify or expand TRIA's coverage of cyber
insurance, and as an insurance regulator, do you believe the
industry has the tools to provide sufficient and affordable
coverage for current-day cyberrisk?
Mr. Mais. I do understand the desire to have cyber
insurance as a separate line, but I think what we have seen is
that market has expanded. If we look at the number of policies,
it has increased 11.7 percent from 2022 to 2023. We have $16.66
billion in written premium and the private market.
TRIA exists to ensure that the private--to fill in where
the private market cannot. If the private market is evolving
and providing coverage, I am worried about unintended
consequences if we intervene.
Ms. Williams of Georgia. Thank you.
I am going to be running out of time soon, but, Mrs. Heck,
given that TRIA has been extended four times since its
inception, what are the benefits of having a longer
reauthorization, say 10 years or more, so that our communities
can have the stability and consistency for their economic
development?
I am thinking down the road of big events that we are
already planning for in Atlanta, and just everything that we
are hearing in this day and age, giving a peace of mind to our
communities.
Mrs. Heck. First of all, again, we have proven--the program
has proven that it works. It has been 24 years, and the market
has really stabilized by the program. The longer that we can
extend it, the more stability that we will introduce into the
market.
I think to--just some other things to remember----
Chairman Flood. The gentlewoman's time is expired.
Ms. Williams of Georgia. Thank you, Mr. Chairman.
Chairman Flood. The gentleman from South Carolina, Mr.
Timmons, is now recognized for 5 minutes.
Mr. Timmons. Thank you, Mr. Chairman.
Mr. Webel, I am going to be directing my questions to you.
Let us go back to 9/11, terrorist attack from Afghanistan,
and we spent hundreds of millions--billions of dollars making
victims whole, and we spent $2.3 trillion in Afghanistan. That
was our response to a kinetic attack using airplanes to crash
into multiple targets.
I want to talk about cybersecurity. So we have nation-State
cybersecurity attacks that attack our businesses here in the
U.S. on a regular basis, and the Federal Government does not
really make whole the victims or the business.
We obviously expect these businesses to have cyber
insurance, and I do not understand the difference between a
kinetic attack that costs hundreds of millions, billions of
dollars in damage from a foreign nation State, versus a
cybersecurity attack that costs hundreds of millions of
dollars, billions of dollars to a business and to victims.
Should we view these things similarly, and should we create
legislation to make victims and businesses whole from nation-
State attacks?
Mr. Webel. I mean, ``should,'' I will leave up to Congress,
but I do think it is a very valid question in terms of how much
does the source of an attack or the source of the damage
matter.
The nation-State actor is an interesting question because
then you start getting into acts of war and war exclusions
and--I mean, I do recall seeing some serious analyses post-9/11
that maybe you could have tried to exclude those under a war
exclusion on some policies, but that the--I think, for partly
public relations reasons, insurers decided they did not want to
go down that road because it would have been a public relations
disaster if they had, but these are questions that I think
definitely need to be fleshed out in the world that we are in,
because the attribution of cyberattacks may be very murky, and
it may be very hard to certify a terrorist attack under TRIA
because you are not really sure where this is coming from.
Mr. Timmons. How can an insurance or reinsurance company
appropriately underwrite an attack from China, Iran, Russia,
North Korea?
I mean, the resource disparity between a company that is
spending hundreds of millions, billions of dollars to protect
their data and protect their customers' data, versus the
Chinese Government is just a nonstarter. How can you actually
effectively underwrite that?
Mr. Webel. Well, I think that is a lot of the reasons why
from the insurer perspective, they tend to exclude nation-State
attacks as acts of war and want to say: No, we are not going to
cover that if it is a nation-State actor.
For the individual companies, I think that there obviously
needs to be U.S. Government involvement in helping people in
cybersecurity in understanding things.
But in some ways, that the--you know, a lot of it comes
down to hardening your cyberdefenses whether it is a nation-
State attack, or whether it is a ransomware from a criminal
gang that just wants to extort money.
Mr. Timmons. So our Commander in Chief, his favorite word
is tariffs, and my question is this: Should the U.S. use
tariffs to penalize nation-State attacks to then make the
victims and the businesses whole, and just create the status
quo of, if you are going to engage in cyberattacks--or I will
go one further.
If you allow a criminal organization to operate undeterred
within your sovereign borders--I mean, we could do the same
thing to a foreign country that is allowing a criminal
organization to operate within their borders--again, whatever
the damages are to the business and to the victims, you make
them whole. You then levy tariffs against the nation-State that
is either responsible directly or is harboring the criminals
indirectly.
Then you say: All right, this is the new status quo.
Continue to attack U.S. businesses and you will be penalized
financially. Is that a reasonable approach to this problem?
Mr. Webel. Honestly it is not an approach that I have ever
really analyzed or thought about. I mean, I think that it--I
mean, how you approach this is probably a policy question above
my pay grade.
Mr. Timmons. Would anybody else on the panel like to
address that question about the proposal to levy tariffs to
deter nation-state and--nation-states that are allowing
criminal organizations to operate within their borders as a
deterrent method? Anybody? Mrs. Heck?
Mrs. Heck. I could not opine on tariffs per se, but one
thing I would like to say about cyber is that within the TRIA
program, again, if an event is certified by the Treasury
Secretary, then it would be covered under the TRIA program.
So when you distinguish between non-terror events I would
urge Congress to think about is it--you know, can you model it,
is there a private market. Commissioner Mais mentioned that
there is a growing market. So----
Mr. Timmons. I am out of time. I am going to have to yield
back. Thank you so much.
Mrs. Heck. Okay.
Chairman Flood. The gentleman yields back. The gentleman
from New York, Mr. Torres, is now recognized for 5 minutes.
Mr. Torres. Thank you, Mr. Chair.
As a New Yorker who came of age amid 9/11, terrorism is no
abstraction to me. Twenty-four years after 9/11, the specter of
terrorism continues to haunt America's largest city, which in
2025 alone has seen an average of one terror plot per month.
Terror threats have grown dramatically in the decade since
9/11, and those threats show no signs of subsiding. In the age
of emerging technologies like cyber and AI, the complexity of
terrorism is rising rapidly in real time.
I want to follow up on a number of the questions asked. I
have a question about the applicability of TRIA to
cyberterrorism.
What exactly is the difference between a cyberattack and
cyberterrorism, or cyberwar and cyberterrorism, or cybercrime
and cyberterrorism, because these lines can easily get blurred?
Mr. Schupp. If I may, so if we look at the statute, what it
really focuses on is the intention of the actor. That is the
starting point, the intent of the actor, the individuals behind
the attack, is to influence the people or the policy of the
United States.
In the context of cyberattacks, it is extremely difficult
to figure out who is behind them and the motivation. That is
one of the challenges with certifying a cyber act as an act of
terrorism under the existing structure.
Mr. Torres. What if it were a cyber attack on the part of a
foreign government that is hostile to the United States, would
that qualify as a cyberterrorist event?
Mr. Schupp. So the statute does include damage to
infrastructure which was always understood to mean electronic
infrastructure, but remember the decision to certify is a
political decision, not a legal decision. The Secretary of
Treasury has the sole discretion to certify, and it is
unreviewable by the courts.
So really an act of terrorism is whatever the Secretary of
Treasury says.
Mr. Torres. I have question about the scope of the Treasury
Secretary's authority, right? Is it just right or is it
excessive, and should judicial review be permitted or
prohibited?
Mr. Schupp. It is a desire to have finality and quickness.
So the idea was that a single person would make that decision,
but we have seen that it can take a lot of time.
Mr. Torres. Yes.
Mr. Schupp. My own belief is, you could make changes and
get to a really bad decision quickly----
Mr. Torres. It sounds like apart from the $5 million loss
threshold, terrorism is whatever the Treasury Secretary says it
is. As you know, Justice Potter Stewart once said, ``I cannot
define it, but I know it when I see it,'' and that seems to be
the standard we apply to the meaning of terrorism for the
purpose of TRIA.
Mr. Schupp. My belief as a practical matter, is true.
Mr. Torres. Okay, and is that excessive discretion, or
should there be some judicial review?
Mr. Schupp. Judicial review would create enormous
uncertainty that is not tolerable.
Mr. Torres. Regarding the necessity of TRIA, is it fair to
say--and I will direct the question to Mrs. Heck--that without
TRIA, there would be no financing or far less financing of
projects, without TRIA there would be no operational terrorism
risk insurance market, and without TRIA, few businesses in
America could survive a catastrophic terrorist event?
Mrs. Heck. That is absolutely correct, and we have had 24
years of experience to see what happens when there is a
backstop. We have seen it happen twice--once after 9/11, and
then again in 2014 when the program was allowed to lapse.
Mr. Torres. Right. I just find it strange that we are
debating the viability of a private market without TRIA as if
we have no life experience. Like, what was 9/11's immediate
impact on financing and terrorism insurance?
Mrs. Heck. What happened was, overnight a new catastrophic
exposure just emerged, and insurance companies had to really
pare back. Otherwise, they risked insolvency. So the TRIA
program really stepped in and made it possible to be able--for
the economy to continue.
Mr. Torres. One of the most common complaints I have heard
about insurance has been inflation. It feels to me that
inflation has been particularly pronounced in the insurance
market.
Have those same inflationary pressures affected terrorism
risk coverage? What has been the impact of inflation on
terrorism risk coverage?
Mrs. Heck. Actually, the way the program was designed, it
is actually somewhat embedded in the coverage. So in what the--
the insurance market, the private market accepts, the
underlying deductibles are based on premiums that are
essentially indexed for inflation because they grow over time.
In general, those----
Mr. Torres. Because it is a percentage?
Mrs. Heck. Now the percentage has grown, which means that
the private market has picked up additional--additional
exposure, but it has also grown just because the underlying
premiums have grown.
For example, my company, our deductible after--immediately
after 9/11 under the program was $10 million, and today, it is
$250 million. So it has grown significantly.
Mr. Torres. Thank you.
Chairman Flood. The gentleman's time is----
Mr. Torres. Thank you.
Chairman Flood. The gentleman yields back. The gentleman
from New York, Mr. Garbarino, is now recognized for 5 minutes.
Mr. Garbarino. Thank you very much, Mr. Chairman, and thank
you for all the witnesses for being here today.
TRIA is a program created following the horrific attacks on
9/11, an event that deeply and personally affected all of us.
As a result of this attack, insurers and reinsurers began to
realize the real, yet-difficult-to-model risk that resulted
from terrorism insurance.
Terrorism insurance was becoming less accessible and
increasingly unaffordable, especially in the dense urban areas
like New York.
Mrs. Heck, as a large writer of commercial real estate in
New York City, your company was intimately involved in the
creation of the TRIA program.
Can you help this committee recall the circumstances post-
9/11--I know you touched on it a little bit--but post-9/11 that
led to TRIA and how the program was designed to help?
Mrs. Heck. Yes. The program--so immediately after 9/11,
development stopped, and what the program did is made it
possible for there to be a viable market, and the program does
that really in three ways: It provides certainty to insurance
companies so that insurance companies can manage that exposure;
it allows for a robust market by making it possible for small,
midsize, and large companies to participate and taxpayers are
really fully protected under the program.
So when you think about it, all of the stakeholders, it
manages all of the concerns of every stakeholder.
Mr. Garbarino. While TRIA is not supposed to expire until
the end of 2027, I am glad we are doing this today and know
that we are looking at reauth--Mrs. Heck, you highlight in your
written testimony that TRIA needs to be extended next year in
2026.
Can you please explain what happens if Congress does not
extend the program by the end of next year, what would happen
to insurance contracts in 2027?
Mrs. Heck. Yes, because of the way that insurance contracts
are written, because of the timing, it is important to get this
reauthorized before we get into 2027, or what will happen is,
if policies lapse, the expiration of the program, then there
will be exclusions attached to it, and we risk running--having
that same disruption that we saw in 2014.
Mr. Garbarino. Say that again. If it does lapse, what will
happen?
Mrs. Heck. If it lapses without reauthorization, exclusions
will be attached to the policies so that we run the risk of
having the same problem that we had in 2014, when the program
was allowed to lapse.
Mr. Garbarino. I hope it does not lapse, and I am sure the
chairman and other members of the House hope it does not lapse.
Unfortunately, a lot of other things have lapsed because of our
colleagues over in the Senate, specifically one of them--I will
not mention his name--but hopefully that does not happen here.
As chairman of the House Homeland Security Committee--and I
am going to ask you about cyber just like Mr. Torres did--I
held a hearing last July about the importance of securing
operational technology systems from cyber adversaries.
This includes water treatment facilities, energy grids, and
transportation systems, just to name a few.
If a cyberterrorism event caused physical damage to these
critical infrastructure systems, under the TRIA framework,
would those attacks be covered?
Mrs. Heck. A terror--a cyberattack that is deemed a
terrorist event would be covered under the program.
Mr. Garbarino. Great, that is, as we heard the previous
member ask, that is if it is deemed a terrorism event by the
Treasury Secretary?
Mrs. Heck. By the Treasury Secretary.
Mr. Garbarino. There have been people that have come to me
and talk about the creation of a cyber backstop--Federal
backstop for cyberattacks. Some have suggested tying it to
TRIA. I do not think that is the right way to go.
If we are going to do something, I think it should be done
separately, and something this committee should look at, if it
should be done separately.
So I think it was very important to put on the record that
as TRIA's currently written, it does currently cover
cyberterrorism events.
I have about 45 seconds left. A lot of times when we
reauthorize something, we just reauthorize the law from 10
years prior without any updates. You might have said something
already, but are there any updates that you would like to see
put into this, that would help the law run better? Mr. Schupp?
Mr. Schupp. Yes, I do believe that Congress could increase
the data collection abilities of Treasury to reach, in
particular, to some of the more opaque structures, such as
captives and alien insurers where data from the NAIC is very
limited.
Mr. Garbarino. I appreciate that. I am down to 10 seconds,
so if any of you else have any ideas, if you could submit them
in writing, that would be great.
Thank you, Mr. Chairman. I yield back.
Chairman Flood. The gentleman yields back. I now ask
unanimous consent to enter the following statements into the
record--a September 15, 2025, statement from the Coalition to
Insure Against Terrorism; a September 17, 2025, statement from
the American Property Casualty Association; and a September 17,
2025, statement from the Reinsurance Association of America.
Those will be entered without objection.
[The information referred to can be found in the appendix
on pages 94-102.]
Chairman Flood. I would like to thank all of our witnesses
for your testimony today.
Without objection, all members will have 5 legislative days
to submit additional written questions for the witnesses to the
chair. The questions will be forwarded to the witnesses for
their response.
Witnesses, please respond no later than October 22, 2025.
This hearing is now adjourned.
[Whereupon, at 11:54 a.m., the subcommittee was adjourned.]
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