▶ 0:07:13The 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. Uh this hearing is titled the reauthorization of the terrorism risk insurance act of 2002. Without objection, all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record. At this time, I'd like to recognize myself for four minutes for an opening statement.
▶ 0:07:40I'd like to first of all thank all of our witnesses for being with us today, and I very much look forward to hearing uh your testimony on the terrorism risk insurance program. This program was created in the aftermath of tragedy. After the events of September 11th, 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.
▶ 0:08:06After 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.
▶ 0:08:30The terrorism risk insurance program was uh created in November of 2002 and it has since been reauthorized four times in '05, 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 one year. As we approach 2026, it makes sense to begin conversations on what a TRIA reauthorization should look like.
▶ 0:09:00And for members of the subcommittee, this hearing is a 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.
▶ 0:09:29And 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, uh there has never been a certified act of terrorism by the Department of Treasury, nor has there been uh events that would have reached the terrorism risk insurance program's financial trigger. We of course hope that no future events ever occur uh that would trigger that. However, TRIA's value is not just in direct responses to terrorism events.
▶ 0:09:59The 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 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 uh we are going to talk terrorism risk insurance all morning.
▶ 0:10:29And with that, I yield back. I now recognize the ranking member of the subcommittee, Mr. Clever, for four minutes for an opening statement.
▶ 0:10:37Thank you, Mr. Chairman, for uh holding this important hearing on the reauthorization of 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 uh the report came through um on what happened in New York.
▶ 0:11:00Uh I was watching uh Katie Kurrick uh who's no longer um TV reporter uh something seems to have flown into a building here in New York. Um the terrorist attack attack on September 11th, 2001 devastated US citizens, households, and businesses.
▶ 0:11:26As a direct result of the unforeseen and unexpected level of covered losses, insurers began to explicitly exclude terrorism coverage and commercial commercial property casualty insurance policies.
▶ 0:11:40Additionally, due to state laws prohibiting the exclusion of individual risk elements from workers compens uh 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.
▶ 0:12:08Since 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 authorizations, 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.
▶ 0:12:33According 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 US health and safety, critical infrastructure, industries, wealth, and government.
▶ 0:12:50The Department of Homeland Security uh Office of Intelligence and Analysis 2025 Homeland Threat Assessment states, "Foreign terrorists organizations, FTOS, and their supporters will maintain their enduring intent to conduct or inspire attacks here in the homeland." unquote.
▶ 0:13:12The threat of terrorism impacts the entire nation, including my home district in the Midwest, and I'm 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 uh some of whom are testifying here today, to discuss priorities for TRIA reauthorization. I heard unanimous agreement on the need for L uh early and long-term reauthorization.
▶ 0:13:42Uh 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. Also heard that the uncertainty surrounding the program has begun to restrict access to coverage for 2008 and beyond. Early action well before the 20 27th sunset of TRIA must be taken to avoid market uncertainty.
▶ 0:14:12Thank you, Mr. Chairman, and I look forward to working with you uh and chairman Hill and Ranking Member Waters on this effort. I yield back.
▶ 0:14:20Thank you, Mr. Clever. We now recognize the chairman of the full financial services committee, Mr. Hill from Arkansas, for one minute for an opening statement.
▶ 0:14:32Thank 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. And Congress is often criticized for not always being out in front on a topic. Here we are. Uh TRIA expires in 2027 and I appreciate Chairman Flood and Ranking Member Clever stepping out. Let's get out in front of this.
▶ 0:15:00Let's think it through very carefully and get the uh 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 tariffs attack. I thank Mr. Flood for his work on this. I look forward to the discussion of the committee and I yield
▶ 0:15:26Thank you, Mr. Chairman. Today we welcome the testimony of Mr. Baird Wayel, a specialist in financial economics at the Congressional Research Service. Mrs. Elizabeth Hec, chairman, president and CEO of the Greater New York Insurance Companies here on behalf of the National Association of Mutual Insurance Companies. Miss Michelle Sart Sartine, uh, president of Marsh US and Canada. Uh, Mr.
▶ 0:15:53Jason Shupe, founder and managing member of Centers of Better Insurance LLC, and Mr. Andrew Maize, Commissioner of the Connecticut Insurance Department here on behalf of the National Association of Insurance We thank each of you for taking the time to be here. Each of you will be recognized for five minutes to give an oral presentation of your testimony. Without objection, your written statements will be made part of the record. Mr. Wayable, you are now recognized for five minutes for your oral remarks.
▶ 0:16:25Thank you, Mr. Chairman and ranking member and members of the subcommittee for having me here to testify today. Um, as the chairman said, my name is Bar Wayel. I'm at the Congressional Research Service. And before I go deep into my testimony, especially for people who are listening, just like to make clear who who CRS is. We're 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.
▶ 0:16:53I've been in this role at CRS covering non-health insurance issues since 2003. So I've been a participant in some way in all of the TRIA reauthorizations to this point. And I just like to give a the committee a little bit of a background and overview on on the re authorizations in the past and and what the program does at this So um TRIE is a reinsurance program.
▶ 0:17:17Um the 60 approximately $60 billion in damages in the 911 attacks shocked both the ins primary and reinsurance industries which pulled back. The Congress at the time decided to create a temporary three-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.
▶ 0:17:43It sits in the background where the the regular commercial insurers are required to offer the terrorism insurance. Uh policy holders are not necessarily required to purchase it. Um in the event of a terrorist attack, the federal government would step in to share losses after the fact. Uh this system has a lot of advantages particularly in the sense that it's 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.
▶ 0:18:12There have been no particular outlays in the program because you haven't thank God had a terrorist attack um that that met the thresholds. And so what are these thresholds in the program? There is a program trigger that's currently set at $200 million in aggregate annual losses. So until we had $200 million in in terrorism losses in a year, money would not flow out of the treasury to cover the losses.
▶ 0:18:39There is a 20% individual insurer deductible based on the each insurers's earned premiums from the year before. So each of the insurers would have to cover this 20% amount of losses again before they would receive any assistance from the Treasury. And there is essentially an 8020 co-pay. So as losses go up above those thresholds, the Treasury covers 80% but the private insurers continue to cover 20% of the losses.
▶ 0:19:08through the life of the program, those thresholds have all been adjusted um 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 three-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 isn't going to this isn't going to happen.
▶ 0:19:34And but we have increased the private sector participation in other ways than saying okay private sector you're now taking all of the risk. Couple of 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.
▶ 0:20:01Um, and I know there's been a little bit of industry question and confusion over this um, this figure in exactly how the certification process might take place. And there's also a hundred on the other end of the program, there's a hundred billion dollar threshold such that above a hundred billion dollars, there's no federal coverage and the private sector is not required to to cover an event of that size.
▶ 0:20:24Um, and as I said, both of those thresholds have stayed the same since The final aspect of the program, which is a little unusual, especially for for an insurance situation where normally people pay premiums upfront, is instead of upfront premiums, you have an afterthevent recruitment provisions. So that in the years following a terrorist attack, again, there are various thresholds in in exactly how this would work.
▶ 0:20:50Um, 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 casualty industry after the fact. Um over the years there's been sort of I would say so three different levels of questions about the the in 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?
▶ 0:21:18Um the second question has been are we going to keep the program approximately the same but adjust various of these thresholds in it and the third I think is a broader one of should the program be doing more and cover more aspects that
▶ 0:21:32the gentleman's time is expired
▶ 0:21:33and I'll be happy to answer questions on
▶ 0:21:35thank you very much Mrs. Tech, you are now recognized for five minutes for your opening oral remarks.
▶ 0:21:45Might want to hit your microphone.
▶ 0:21:48Chairman Flood, Ranking Member Cleaver, and members of the committee. My name is Elizabeth Hec, and I am chairman, president, and CEO of 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. If the gentle lady will suspend for just a second. We got to move your microphone a little bit closer to you.
▶ 0:22:10I'm sorry.
▶ 0:22:10You're fine. There we go. Um Okay. I'm pleased to have the opportunity to testify on the terrorism risk insurance program and the vital role it plays in helping protect our country and economy. I am testifying on behalf of NAMK which represents more than 1300 member companies.
▶ 0:22:33My views are informed by my firsthand experience as a major writer of terrorexposed commercial property both before and after the events of 911 as a member representing small and midsize insurance companies on Fio's advisory committee on risk sharing mechanisms as chair of NAMK'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.
▶ 0:23:03Thankfully, 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.
▶ 0:23:29Today we write business in 17 states and are the largest writer of commercial commercial multiarel business in New York. After 911, 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.
▶ 0:23:58To 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. Tornadoes do not intentionally aim for population centers, and a hurricane will not change its path to target only unprepared communities.
▶ 0:24:24Terrorists 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.
▶ 0:24:54My company was deeply involved in finding a solution because of the unique nature of our business and my predecessor at 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.
▶ 0:25:18The program allows insurers a degree of certainty enabling companies of all sizes to offer coverage creating a competitive market in 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 midsized and large insurers participate in the program.
▶ 0:25:47TRIA works because its mechanisms, deductibles, and recruitment 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.
▶ 0:26:15As we look back nearly 25 years after the attacks, it's 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 isn't broken.
▶ 0:26:45And 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, NAK member companies, the insurance industry as a whole, and the US economy. I look forward to answering questions today. Thank you very much, Mr. Artain. You are now recognized for five minutes for your oral remarks. And if you could pull your microphone close, that'd be
▶ 0:27:17Good morning, Chairman Flood, Ranking Member Clever, and members of the committee. My name is Michelle Sartine, and I'm president for Marsh's US 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 McClennon lost 358 friends and colleagues on September 11th, 2001.
▶ 0:27:41Marsh 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 911 and it continues to ensure a well functioning terrorism market today.
▶ 0:28:09TRIPRA is the reason that policy holders 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 risks if the program is not reauthorized or is reauthorized too close to its expiration. Third, the role of the program in workers compensation.
▶ 0:28:38And 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 backs stop that shares catastrophic terrorism losses between the private sector and the government by requiring insurers to take cover make coverage available and by setting clear deductibles and loss sharing thresholds. The program stabilizes the market without crowding out private capital.
▶ 0:29:08It 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-risisk urban centers to critical public infrastructure to vital healthcare and educational systems.
▶ 0:29:28According to Marsh data, the health care sector has a 61% tripa uptake rate, one of the highest and education sector has a 47% uptake rate, reflecting a strong reliance on the backs stop to prevent financially devastated losses from terrorism. Hospitals and ed education systems represent symbolic high impact targets um because they hold concentrated large numbers of vulnerable individuals and America's youth.
▶ 0:29:55Without TRIA, healthcare and education sectors, indeed many parts of our economy, would be unable to secure insurance required by lenders, bond holders, 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.
▶ 0:30:21Without certainty, policy holders face higher premiums, narrower terms, and outright non-renewal. For sectors like commercial real estate, construction and energy where terrorism coverage is contractually or regulatory pro 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.
▶ 0:30:50Thus, terrorism and NBCR attacks cannot be excluded. That means that insurers are exposed to unlimited losses in the event of 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 insolveny without TRIA. The program is essential for maintaining solveny and stability.
▶ 0:31:18Finally, in my written statement, I provide an overview of the commercial market trends concerning things like cyber attacks, 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 US PNC market was profitable in 2024, that was preceded by four years of loss adjusted unprofitability. For catastrophic scenarios, the private market alone cannot provide sufficient coverage.
▶ 0:31:48Reauthorization signals stability to the US and global markets, reassuring investors and policyh holders 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 critical have access to critical coverage. Thank you for holding the hearing early and I look forward to your questions.
▶ 0:32:13Thank you very much. Mr. Shupe, you are now recognized for five minutes for your oral remarks.
▶ 0:32:18Chairman Flood, Ranking Member Clever, and members of the subcommittee. Good morning. My name is Jason Shupe 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.
▶ 0:32:48In 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 specialurpose insurance companies known as captives to access the terrorism risk insurance program.
▶ 0:33:17In fact, this data proves that after a large terrorist attack, up to 96 cents out of every dollar 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.
▶ 0:33:46By controlling both sides of the negotiations and with the comfort that the federal program will bear 80% 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,
▶ 0:34:16biological, chemical, and radiological terrorist attacks. Under this one policy, the terrorism risk insurance program is on the hook for up to $1 billion dollar 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.
▶ 0:34:42Indeed, in half the scenarios the Treasury has tested, captive insurers and their large corporate parents take at least 90% of program benefits. Unfortunately, this problem is much much worse than simply sophisticated companies figuring out how to exploit benefits under a federal program.
▶ 0:35:05Treasury is required by statute to recoup 140% of program payments through sirch charges on all property and casualty policy holders. In other words, whatever the program pays to captive insurers, Treasury then marks up by an additional 40% and bills all American commercial property and casualty policy holders.
▶ 0:35:33And one scenario the Treasury developed in Washington DC, a truck bomb over at Metro Center, captive insurers would receive $2.1 billion from the back stop, but captive policyh holders would wind up paying less than 10% of that amount in sir charges, somewhere around $200 In stunning contrast, all other insurers participating in the program would receive a total of only $243 million, but their policyh
▶ 0:36:03holders would pay 12 times that amount in search charges, an astounding $3.1 billion. Treasury's data shows after a major terrorism attack, captives and large corporations get billions of dollars but only pay millions of dollars in search charges.
▶ 0:36:23On the flip side, the insurers of small businesses, local governments, and nonprofits receive millions of dollars and their policy holders pay billions of dollars back into the 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% of US licensed captives.
▶ 0:36:51And even then, Treasury has no idea who owns My through my own research, I've 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.
▶ 0:37:1210 years ago, the Federal Housing 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 lowcost loans to their ineligible corporate parents. There are solutions and I look forward to discussing those in questions and answers. Thank you.
▶ 0:37:30Thank you, Commissioner Mays. You are now recognized for five minutes for your oral remarks. Chairman Hill, Chairman Flood, Ranking Member Cleaver, members of the committee. My name is Andrew Mays. I'm the insurance commissioner for the great state of Connecticut and past president of the National Association of Insurance Commissioners or NIC, 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.
▶ 0:38:00Thank you for inviting me to testify today before this committee and thank you for addressing this important issue more than two years before TRIA, the Terrorism Risk Insurance Act is set to expire as noted on December 31st, 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.
▶ 0:38:27Furthermore, 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 of our communities and the economy. State insurance regulators have supported TRIA since its inception. Our job is clear.
▶ 0:38:54We 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.
▶ 0:39:14Absent 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.
▶ 0:39:43But this 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 solveny. And furthermore, policyh holders lack sufficient knowledge to truly mitigate their risk. Elsewhere, you can choose to drive carefully or not.
▶ 0:40:12You 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's 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.
▶ 0:40:36The 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 US 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.
▶ 0:41:06TRIA 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.
▶ 0:41:30Businesses 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 backs stop. The stability has come at little cost to the federal government. Fortunately, with no claims paid since its creation, knock and wood again, while ensuring a market that takes on billions of dollars in risk that would otherwise go largely uninsured.
▶ 0:42:01It is also worth noting how TRIA handles more exotic terrorism risks, 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 backs stop for losses the insurer has already contracted to cover.
▶ 0:42:23And this keeps insurers responsible for their coverage choices while ensuring 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.
▶ 0:42:42Thank you, sir. Well, we'll now turn to member questions. I now recognize myself for five 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?
▶ 0:43:03Oh, yeah. It's your microphone.
▶ 0:43:06I have to get this right, but thank you for the question. uh you know prior to the attacks on uh September 11th the concept of terrorism didn't even exist in insurance contracts. So overnight we all of a sudden had this exposure that could potentially sink you know every insurance company. So you know immediately after the attacks a companies had to recognize that exposure and pair down concentrations.
▶ 0:43:34So exclusions were added to policies, companies were withdrawing from markets. It caused um you know banks to to stop lending, construction projects halted. So essentially the economy just froze in place until TRIA was uh put together.
▶ 0:43:52Now the uh 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.
▶ 0:44:07Thank you for that. Uh Miss Sartine, 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. uh if we failed to reauthorize TRIA by let's say January 1, 2027, what would happen to this market? And then number two, what kinds of effects would we see if the program fully lapsed and was not reauthorized in 2028?
▶ 0:44:33Thank you for the question. The insurance market requires stability and they need to understand what they're on the hook for. So if we wait too long to reauthorize TRIA, many insurance companies will start withdrawing coverage, limiting coverage or placing 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, um the markets do the same thing. They start limiting coverage.
▶ 0:45:03They start increasing prices and they look to sunset the coverage. I don't believe that terrorism coverage would exist if TRIPRA does not is not
▶ 0:45:13Thank you for that. Mr. Wable, uh because TRIA has never been tested, uh the mandatory recruitment provision in the program has never been tested either. Can you help explain how mandatory recruitment works under TRIA? And has there ever been an attempt to conduct an analysis of how recruitment would work in practice?
▶ 0:45:31Um yeah, the recruitment basically I mean it it is It 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's a there is ability to to change what the premiums look like. The total amount under the law is supposed to be recouped is 140% of the outlays. There is a time schedule in the law depending on when exactly that the terrorism attack occurs and when these recruitments have to come back.
▶ 0:46:01um this time frame is frankly a little unrealistic I think particularly for a large-scale attack. So I I would expect a future Congress to definitely revisit those provisions in the aftermath of a of attack at the end of the program.
▶ 0:46:17Thank you for that. Okay, fast fact here. You might not know this, but when the Corn Huskers are playing football in Lincoln, the stadium becomes the third largest city in Nebraska. uh 90,000 people uh descend to watch the Huskers play football. Miss Sartine, talk to me about the impact TRIA's non-authorization would have on colleges and universities uh given their role in America and what all happens there.
▶ 0:46:45Absolutely. Um 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 uh part of the American culture and it's also where our young people go to learn and educate and become part of our our economy. So when you have concentrations of individuals in one location, unfortunately they become a prime target for potential terrorist attacks.
▶ 0:47:13The universities need to make sure that they can ensure um the property as well as the individuals and TRIA provides the backs stop that gives them confidence to secure both the private insurance that's available in the market as well as what's available through the backs stop.
▶ 0:47:27Thank you very much. With that, I yield back. I now recognize the ranking member of the full financial services committee, Miss Waters, for five
▶ 0:47:36Thank you very much. Um, Commissioner when TRIO was first established in 2002, it was designed as a temporary program with the 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 carrier carriers would not fill that gap. Since then, TRIA has been four times.
▶ 0:48:06In your view, if TRIA were to expire, would the tri private market be able and willing to absorb these risk without jeopardizing market stability or coverage ability, 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?
▶ 0:48:35Thank you, Ranking Member Waters. Uh, one of the important things that we all face, everybody who's run a business, everybody who's 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.
▶ 0:49:01So for instance, if TRIO were to expire and not be renewed, what we would expect is that all the uh coverages that would begin after January 2026, that would be filled with uncertainty. I would expect that as uh Miss Sartine said, what happened if TRIA were not renewed would be the same thing as we saw after 911. The coverage was not available. coverage was. And even if it were, it would have been too expensive.
▶ 0:49:30And we had significant problems, significant knock-on problems, including with mortgages and with buildings. You know, we simply were not able to have a s we 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. Big part of that is that this is not a normal risk.
▶ 0:49:57Again, to go back to normal risk, if you've got pretty much everything else, even your natural catastrophe risk, those are huge. But we can do things to help mitigate the damage. And we know, we can have a good idea. We can model that damage. Well, terrorism, we have no control over. Terrorism is hard to price properly.
▶ 0:50:20So what would happen is that even if terrorism insurance were by some magic affordable it would be unavailable or so if it were available it would be unaffordable and that's 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 backs stop providing that certainty. Thank you.
▶ 0:50:50Um let me just um speculate here for a moment. Uh you probably you know have been involved in a lot of conversations about what happened in California in our uh with u one of our communities in particular um have suffered greatly and there are a lot of problems uh that we are we're finding out about as it relates to what happens when you have this kind of catastrophe.
▶ 0:51:18And one of them um and I don't want to have to ask this question of you because it you know it it may be way out of your range here but um a person receiving disability for example um had devast devastation and the insurance company of course was responsible because he paid his premiums. He's paid up all of that.
▶ 0:51:41Uh but he's being told now that if he takes the insurance money that he loses his disability and uh if he doesn't take his disability even though the insurance company is going to pay up uh he still need money to live on uh every day. And so I just made aware of this problem and I'm taking a look at it. But all these kinds of problems are surfacing as it relates to insurance. And I'm sure you've heard about a lot of these.
▶ 0:52:11If you have any suggestions at all based on, you know, anything that you know or you're hearing uh 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.
▶ 0:52:28Uh thank you, Congresswoman. The northstar for US 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 over the
▶ 0:52:52gentle time is expired. Thank you. All right. Uh the chairman of the full committee, gentleman from Arkansas, Mr. Hill is now recognized for five minutes.
▶ 0:53:01Thank you, Chairman Slood. Thanks again to the panel for your constructive help on thinking through this reauthorization. Mr. Wayel, let's start with you. Thanks for all of your advice to Congress over many, many years on this topic. I think you've now studied all four reauthorizations. What is your uh observation about this program's effectiveness? In other words, you've now seen it be reauthorized. What's your view on some of the things you've heard today as to the essential nature of it?
▶ 0:53:32I mean, I think it's obviously been very effective in in keeping the market going. Um, it's also, I'd observe, you know, an insurance program that never actually has to operate or pay out always looks very effective. And so, I think that there are some questions and probably uh 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 it be going forward?
▶ 0:54:00And 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 permanent program were were all the structures that were put in place when is it a temporary program does that make sense if it's going to be around for for the duration? Mhm.
▶ 0:54:20Would you does does Treasury to your knowledge do like tabletop exercises uh on this and had they have you do you feel that you're not the inspector general of Treasury or this program? But from your observation I
▶ 0:54:33is the government functioning in a way like they're prepared to
▶ 0:54:36I believe so. I mean, I I have had interaction with the the Treasury and Fio office o on various things of this over the years, and I've always gotten, you know, what I needed out of them when I had questions. And I I I believe in general that they are doing a good job of being prepared. Um, but I've also, as a creature of Congress over the years, observed that sometimes it's not a bad thing for Congress to ask questions,
▶ 0:54:59Yeah. So you think as a part of this we should we should do that and and have the committee assess the operational aspects that the authorization directs at the treasury. I
▶ 0:55:10I think that's as I said always a reasonable thing for Congress to do
▶ 0:55:14and um when you look at these reauthorizations do you have comments on uh whether both policy holders and insurers have a clear set of expectations about the how the program would work if it ever were deployed. How do you feel about that? I I mean I think that there I think that the expectations really aren't as clear as they could be especially in the realm of nuclear, biological, chemical, radiological.
▶ 0:55:40Um in I remember past hearings where I would hear, you know, people in your seats talk about scenarios where that this would be particularly needed. Um, and the sort of typical disaster scenario for a high level terrorist attack goes to a suitcase nuclear weapon in Manhattan or or bombing a a a chemical train that's going through a area.
▶ 0:56:03And I remember thinking to myself in various points, it's like that wouldn't 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's a hole in the expectations particularly when it comes to that.
▶ 0:56:20Well, I think your perspective is really helpful and appreciate the panel's views as well. I mean I think that clarity of what we're ensuring and what we're not ensuring and how it works in practice is very important and it should be assessed carefully and I want to thank you Mr. Chairman for the hearing Mr. Clever and I yield back.
▶ 0:56:38Gentleman yields back. The ranking member of the subcommittee gentleman from Missouri Mr. Clever is now recognized for five minutes. Thank you, Mr. Chairman. Um, Mr. Weeble, uh, you know, the chairman and I are from the sane center of the country, uh, Nebraska, Missouri.
▶ 0:57:00And so there is sometimes this misguided perception that uh only the west coast or the east coast, New York or Los Angeles uh uh are places that should think about uh TRIA. Uh would you please explain why TRIA is important in different regions of the
▶ 0:57:27Sure. Um, and I'm from the southern part of Illinois, so I a long way from Chicago. So I do understand and I think that the the chairman mentioned particularly, you know, a Nebraska stadium that's full of people. Um, educational institutions need terrorism coverage, too. We have largecale universities across the country. There's any number of of potential places that a that a terrorist could could attack that would cause damage that people don't think about.
▶ 0:57:56and it's precisely the terrorists are seeking those sorts of places to attack. Um, so I do think that the that the coverage is is needed in places outside of Los Angeles and New York and that the TRIA has helped get coverage to those places.
▶ 0:58:11Thank you very much. Uh, Mr. May, um, in in uh, 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?
▶ 0:58:32And I I actually agree with uh you that with or without uh TRIA, the federal government would step in and TRIA uh is the best outcome for taxpayers. Uh but how long would you like to see TRIA uh you know understanding the you know tradeoffs and so forth.
▶ 0:58:54Short answer to that is as long as possible that is certainly up to this committee but certainty for all of us is
▶ 0:59:02U yeah actually it's not up to this committee but I do think that the entire um Congress uh would very likely agree with uh uh what what you just said. I just want to make sure that gets on the on the record.
▶ 0:59:18Uh, Miss Heck, uh, over the years, uh, some have argued that, uh, 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, uh, then I would expect them to lobby against TRIA uh, in order to push out the competition.
▶ 0:59:48uh and and yet that is not the case. In fact, in 2024, Treasury uh report stated that quote, "Treasury has no has not observed any aspects uh of the program that have discouraged or impeded in insurers from providing property and casualty claims. uh and that TRIA is um is actually uh not crowding out the private sector. What say you?
▶ 1:00:19Uh thank you for the question. Uh the the program actually encourages the private marketplace. If the program weren't in place, there would be very few market participants. And we saw that in the aftermath of 911. And of course in 2014 even though it was only for for 12 days we saw the the market reaction. So it's precisely because of the program that we see um private participation.
▶ 1:00:46Now, one thing that I want to impress upon you is the fact that in order for the coverage to be available and affordable, it's important to have a range of carriers involved in the program, which means making it possible for small, midsized, and large carriers to participate, which means that the triggers and the deductibles matter.
▶ 1:01:09Thank you. Uh, Mr. Chairman, I yield
▶ 1:01:11Gentleman yields back. The gentleman from Tennessee, Mr. Rose is now recognized for 5 minutes.
▶ 1:01:16Thank you, Chairman Flood and Ranking Member Cleaver for holding this uh important hearing and thank you to our witnesses for being with with us today. Miss Heck, I want to follow up on where Congressman Clever just was and and and Mr.
▶ 1:01:29Uh web I'll come to you as well because I'm kind of curious why why do you believe a private market would would not naturally form here and be robust uh what what's your I mean I have my own in intuition or suspicion there but tell me why you think that's true if TRIA was gone it it because we well first of all we don't have to guess because we saw it happen and the reasons for that is because the exposure
▶ 1:02:00is too large and too unpredictable that uh a carrier the private market isn't willing to put their capital at risk at something that they can't quantify.
▶ 1:02:11Impossible to underwrite.
▶ 1:02:12It is it's impossible. So the uh you know because of the um the uh and the fact that terrorists can change where they attack just because they choose to. You can't use the past to be able to predict the future. and any of the metrics that could help in in trying to model that exposure is protected as a national as a matter of national security. So, it's just not
▶ 1:02:38So, so isn't a part of that kind of the implied or implicit belief that the government will backs stop this uh would be required to in some way. Do you think that's true? Is that what is also driving the those who might desire the coverage to not go seek it out because they think well u government's going to be there for us?
▶ 1:03:02Yeah. I actually think it's the opposite because the back stop is there uh there the private market is willing to put out uh limits because because they're able to understand what that exposure is. Every insurance company has to manage their capital and the the issue with a terrorism attack is that it is so potentially catastrophic that it could sink the company.
▶ 1:03:26So companies aren't willing to put their balance sheets at risk because you know it c would cause multiple insolvenies. So because the backs stop is there uh to and the government can step in it makes it possible to put out limits because there's some certainty and the really good uh uh news about the program is that taxpayers are fully protected because the every dollar is paid back 40% higher than what the government outlays.
▶ 1:03:55So, it's it's just a way to smooth the losses so that carriers can put some uh you know, put put out limits
▶ 1:04:02and and but I but I have some skepticism about whether we would actually recover that money after the fact. And so I wonder should shouldn't there be a more proactive plan for um you know putting putting something away for a rainy day if you will?
▶ 1:04:20Uh well,
▶ 1:04:21even even though this has never been triggered, right? Not once. you know, in my opinion, it isn't necessary because what we've seen over the past 24 years is having the backs stop in place, it's it's allowed for a viable market.
▶ 1:04:36Um I you know I don't know that that would necessarily add anything because at the end of the day the uh 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 than um what is provided for in the statute.
▶ 1:04:57Do you think that uh we should in some way index the triggering numbers so that over time they don't become small enough that they're maybe uh ineffective? So the $5 million and $200 million trigger I mean if we index index those from when TRIA was originally put in place they'd be quite different today. Should we do that so that the program doesn't become kind of obsolete in that regard?
▶ 1:05:25Well, I I I'll talk about the two uh triggers separately. So, uh, with regard to the $200 million trigger, I do not think that that trigger should be, uh, changed in any way because the trigger actually prevents market participation on for small carriers because of the way that the make available provision works, which requires every company to offer the coverage.
▶ 1:05:52If uh 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've exhausted their deductible, but they can't recover under the program because the trigger is too high. The large companies aren't impacted by the trigger. So, I would argue the trigger doesn't do much to uh protect taxpayers in any way.
▶ 1:06:19Thank you. My time's expired. I appreciate your answers.
▶ 1:06:23Gentleman yields back. The gentleoman from New York, Miss Velasquez, is now recognized for five minutes.
▶ 1:06:28Thank you, Mr. Chairman, and ranking member for this important hearing. For me, this is deeply, deeply personal. Um, I know exactly what I was primary day in New York City for mayor and I was standing in front of his 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.
▶ 1:06:59So, I would like to ask you by a show of hands, does anyone on the panel think the trio program should not be reauthorized? Good. Um, Mr.
▶ 1:07:13pertain 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?
▶ 1:07:30Thank you for the question. Again, insurance companies and policy holders 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 policy holders um losing coverage, seeing increased premiums or or seeing some set provisions in the policies that were placed.
▶ 1:07:56So by reauthorizing early, we allow the insurance market to continue to function well and smoothly um as well as managing the expense associated with this risk.
▶ 1:08:06Thank you. Uh Mr. Shu, 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
▶ 1:08:23Certainly. Um, thank you. In the early years of the program, Treasury had acute concerns that a captive insurance company, which remember is is just a subsidiary of a non- insurance company, most Fortune 500 companies have one, that because the deductible, which we've talked about, is 20% of prior year direct premium, that that deductible by utilizing a captive would be tiny.
▶ 1:08:52So, 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 uh last year they had total premium in their cap of about $800,000, maybe $850,000. That gives them a $19,000 deductible under the program. After that, Treasury's on the hook for 80% of losses. In contrast, a company like an AIG or a Travelers may have a backs stop deductible of $2 billion.
▶ 1:09:23How should we address this concern?
▶ 1:09:24I 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 it it's shooting in the dark where everyone else gets data through the NIC, all the other participants. So, who's actually participating in it and who are who's behind them? What corporations are actually running it?
▶ 1:09:46Secondly, there's a way to very simple way to cut off the subsidi subsidies that are running um and and uh I covered that in my
▶ 1:09:56Thank you. Uh Mr. T, Miss Heck, if you please um 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% of losses up to a hundred billion dollar cap if the loss exceed initial deductible of 20% of uninsurers annual premiums for commercial property.
▶ 1:10:25Do you think adjustment to any of these levels are necessary even for inflation?
▶ 1:10:32Maybe just two ways to think about that. um because of the way that insure insurance is underwritten based on the values of um the buildings or the risk um within it there is an automatic indexing that comes through the premiums that are charged. Secondly, 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's not a shock to the insurance markets or the policyh holders as to the change in those triggers.
▶ 1:11:00Um, 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 to add.
▶ 1:11:18Um, yeah. So uh to add to add to with uh with um what Miss Artine said just to give you an example my company for example our deductible uh post 911 in 2002 was $10 million and today it's $250 million so to Miss Sartine's point there is an automatic indexing that happens because the basis for calculating the
▶ 1:11:43the gentle considers inflation thank you very much gentle lady yields back.
▶ 1:11:47Thank you. for you. But
▶ 1:11:48uh the gentleman from Montana, in fact, he's the former insurance zar of Montana. Mr. Downey is now recognized for 5 minutes. Well, thank you uh Chairman Flood. Thank you, uh the ranking member, and uh thank you to the witnesses uh for being here today. And uh Commissioner Maize, great to see you. Please send my regards back to my former colleagues.
▶ 1:12:11Um, the terrorism risks insurance program was essential to stabilizing insurance markets after the September 11th attacks. And I'm glad we're having this hearing to evaluate the effectiveness of the program and in and its future. As many of you know, you know, I've longed called for the elimination of the Federal Insurance Office or Fio under DoddFrank. You know, Fio is directed to assist the Treasury Secretary in administering the terrorism risk insurance program.
▶ 1:12:39However, this program existed nearly a decade prior to the creation of Fio and as far as I know without any issues. Um I'm going to start uh with um I'm going start with Mr. Hec or Mrs. Hec, I'm sorry. Um can you uh tell me what role Fio plays in the terror terrorism risk insurance program and how it operated prior to the creation of Fio under DoddFrank?
▶ 1:13:03Yeah. So um yeah. So if so prior to the creation of Fio the uh program functioned just fine. Uh there is a small office the trip office is part of Fio. Um it there's a you know a small number of people that participate and there is no reason why those people couldn't continue to uh operate in the event of attack.
▶ 1:13:23Right. So to be clear the program operated just fine before Fio.
▶ 1:13:27If FIO was eliminated today how would that impact the program?
▶ 1:13:31I don't think it would impact the program at all. I think that again there are a few people within the trip office which is a subsegment of Fio that um could you know uh continue to administer the program and and assist the uh the the Treasury Department after an event.
▶ 1:13:49Right. Thank you. Uh Mr. Wayel, what are your thoughts on Fio and the Entre? Um I think that I mean since the last say the last 10 plus years there's there's felt like there's been more activity because of Fio but that's also coincided with the additional responsibilities put by Congress when they reauthorized it in 2015.
▶ 1:14:13So you see a lot more activity the a lot more reports coming out under Fio but it's it's not necessarily clear is that because of Fio or is that because of the fact that Congress has basically asked the the Treasury to do this.
▶ 1:14:26Thank you. So uh as mentioned earlier in this hearing uh TRIA was intended to be temporary until the private markets stabilized and were able to accurately model in price and the risk of terrorism. Uh Mr. Wayolf to you again. Has the program met these goals?
▶ 1:14:44Uh, strictly speaking, no. I mean, it's a three-year temporary program. It's 22 years later, it's still here. So, if you take the Congress at the time that said it's going to be three years, then it did not meet the goal of going out of existence. Um, I think it has met the goals of backstopping a terrorism market and, you know, mitigating some of the broader economic damage that a lack of terrorism insurance would have.
▶ 1:15:09So, so staying with you, Mr. What might the private market look like um when a federal backs stop is no longer needed?
▶ 1:15:17I I 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 be it would be 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 can't get terrorism coverage are they going to still back the project in some cases they probably would.
▶ 1:15:45So the risk would still be there but it would probably be more diffuse throughout the financial
▶ 1:15:50So what would if any what would the alternatives be to a federal program? I I 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 was essentially be taking on the risk
▶ 1:16:10and how are other countries um how do they account for this risk?
▶ 1:16:14Most other countries or many other countries do have some forms of of of back stops. Some of them have terrorism specific. some of them roll it into a broader catastrophic program that doesn't just cover terrorism, but also might cover wind or flood or or other catastrophic events.
▶ 1:16:32Right. Thank you. Uh Mrs. Hec, I saw you kind of wiggle there when I was asking that. So, uh it seems you might have something to say about the private market uh without a federal backs stop.
▶ 1:16:41Yeah, I what I I would argue that without the program, there really wouldn't 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 recruitment so that taxpayers are protected. So in a sense, what TRIA is doing is it's preventing the government.
▶ 1:17:09Gentlemen, his time is expired. Thank
▶ 1:17:11Thank you, Mr. Chairman. I yield.
▶ 1:17:12Gentleman yields back. The gentleoman from Massachusetts, Miss Presley, is now recognized for five minutes.
▶ 1:17:20Thank you. Every year, thousands of people from every walk of life come together from around the world for the Boston Marathon. Starting in Hopkin, runners traverse 26.2 long miles past schools, homes, and businesses towards the finish line in Boston's CPPley 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.
▶ 1:17:48The terrorist attack of 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 in 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.
▶ 1:18:11This was signed into law in 2022 its legislation to extend 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 uh for the general public.
▶ 1:18:34Uh TRIA is a form of insurance to cover the economic losses to businesses and is critical to rebuilding community after 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.
▶ 1:18:59In 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. Mr.
▶ 1:19:29Can you explain why Treasury may take lengthening time periods to classify a terrorist attack?
▶ 1:19:36I mean, I think there's obvious difficulties in terms of attribution of terrorist attack. Um, who exactly performed it. That's that's critical in determining a certification. I think in the case particularly of the of the bombing in Boston, the biggest issue was 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.
▶ 1:20:02And so I I think that in in some ways a lot of the the difficulties here revolve around the integration of what is a reinsurance program TRIA in primary insurance coverage which is the the coverage that the insurers are are are 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 be then be a negotiation between them.
▶ 1:20:30But the the this intermixing of the two causes, I think, confusion.
▶ 1:20:36Thank you so much, Mr. Webin. Commissioner Ma, insurers and businesses alike want certainty on the timing of whether an event would be declared an act of terrorism. What are the consequences of delays in getting a response from Treasury?
▶ 1:20:49The consequences of delays in getting a response from Treasury postevent. Is You know, I'm I'm uncertain as to how to respond to that because frankly, TRIA is run by Treasury. There are very definite uh requirements that must be met as we saw in the Boston Marathon as was just
▶ 1:21:10Okay, fair enough. Let me ask a question because the the clock is ticking here. Uh Mr. Webble and Commissioner Ma 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?
▶ 1:21:35I mean, I think it would certainly help the primary insurers to have certainty to to pay out or not to pay out based on their policies that are revolve around
▶ 1:21:45And again, I would defer to Treasury and the Congress, but certainty always
▶ 1:21:50Okay. 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. Gentlewoman yields back. Quick announcement. Don't be alarmed if you hear jets overhead in about 15 minutes.
▶ 1:22:19The Blue Angels are doing a scheduled flyover. So I figured with this group of people here today want to put you at ease. The gentleman from New York, Mr. Lawler is now recognized for 5 minutes.
▶ 1:22:31Thank you for that notification, Mr. Chairman. Uh we're 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, do not like the ideals and the values of this nation.
▶ 1:22:56And 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.
▶ 1:23:24And to today, my district continues to deal with the ramifications of 9/11 with first responders uh 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 who know both that they have the this coverage and that the coverage is stable and sustainable for the long term. Mr.
▶ 1:23:51Reubel or Miss Sartine, what if any alternatives are there to a free federal reinsurance terrorism back stop? How do other countries handle terrorism risk
▶ 1:24:06Um, other countries, as I mentioned, h have a a various mix of programs. Some focus specifically on terrorism, some rolled into a more general catastrophic backs stop. in terms of what a what a program might look like outside of TRIA. Um obviously most insurance that you get have premiums of some kind upfront.
▶ 1:24:29Um and you know it wouldn't be impossible to envision a situation where some of the premium dollars that currently flow to primary insurers and Treasury's estimated that over the life of TRIA it's probably in the in the 60 to 70 billion dollars of terrorism premium that's been collected by primary insurers. um you could envision a situation where some of that was shared with Treasury for the backs stop. The downside to that is that would increase the cost of terrorism insurance.
▶ 1:24:58And so to the degree that you want to increase people purchasing the terrorism insurance so that's in place after an event, if you were to charge premiums for TRIA upfront, you would obviously lower that participation rate.
▶ 1:25:12Mrs. Hec or Mr. up. How important is it for TRIA to have clear rules and expectations for both policyh holders and insurers? And are there steps that Congress can take to increase certainty in this process should an event ever be certified under TRIA?
▶ 1:25:30So, first of all, having clear rules and certainty is critical. It's critical both to insurance companies who are providing the coverage and the business community who needs the coverage. So that's absolutely important. Um with regard to certainty, uh should there be any changes to the program, the program has proven over the past 24 years that it's really working the way it's designed. So uh we don't feel that any legislative changes are necessary.
▶ 1:26:00What we do think is important is that there is a swift reauthorization um for as long a term as possible and that is going to provide the most certainty to the market. The second thing that uh we think is is critically important is to not increase uh the triggers to the extent that it would keep out the smaller companies because uh in order to have a market that is thriving and robust and affordable, it's important to have as many companies participate
▶ 1:26:30in the program as possible.
▶ 1:26:32Thank you. I if I may very briefly uh 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's not just a program that hangs behind but it's actually infiltrated uh the contracts themselves. So the any changes need to be done very early and thoughtfully.
▶ 1:27:00All right. With the TRIA set to expire at the end of 27, obviously anything uh that would change or the reauthorization needs to be in 2026 to give certainty to uh the marketplace. Uh Miss Sartine, 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?
▶ 1:27:29It's required that everybody participates, which means that there is um more capacity available in the market than would otherwise be the case.
▶ 1:27:37Thank you. I yield back. Gentleman yields back. The gentleoman from Michigan, Miss Tibb, is now recognized for five minutes.
▶ 1:27:43Thank you, Mr. Chairman. Um, 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're talking about this, is is incredibly unique here. Uh, much of the information about terrorism risk is not publicly available, right?
▶ 1:28:04The number of catastroph uh terror events also doesn't give one a large sample size um to draw from in making certain future uh predictions. So, Commissioner Maize, you you touched on this in your testimony. Um, but can you give a little bit more detail about why private insurance industry is not well suited to addressing terrorism risk in particular, and it's not just what what I said, those factors, but also and and no offense to anybody, it's very pro, you know, just let the private insurance companies do whatever they want.
▶ 1:28:33They just don't do we almost has always have to force them to do what is right here even with high risks because they're all you know very driven by profit and and so forth and I get it. You want to keep the company going and moving but I think right here it's in this unique situation I think it's important for I think my residents who are listening in to understand why the why we have to have this in place. Thank you, Congresswoman. And yes, you are absolutely correct.
▶ 1:29:00The quality of that risk is simply, it's so difficult to predict. So, you cannot properly price for it. As regulators, we need to ensure that there's solveny. If you can't tell what the result is going to be, the frequency or the severity, then you're pretty much out there flying blind. And for us as regulators, it would make it difficult to ensure that consumers get the coverage they deserve.
▶ 1:29:26And despite this, you know, someone might still think the private market um should be able should be responsible for this reinsure, you know, insurance, not the government. So, Mr. Webble, when the program briefly lapsed in the end of 2014, did we see private insurers u move to exclude terrorism losses?
▶ 1:29:44Uh general, yes, there were there are provisions put in the contracts calling for that. Um, I'd like to turn to recruitment because I think um, starting with mandatory uh, recruitment. Mr. Rebel, in your testimony, you write that the mandatory recruitment would be equal to 140% of the difference between the aggregate retention amount and the total amount of insured losses that were not reimbursed by the government. Um, direct quote from your testimony. First, can you help us understand? Okay, my mom's watching.
▶ 1:30:14Like, help people understand because the public need to understand why this is important here. Um, that's my first question to understand that sentence and explain aggregate retention. Second is the recruitment percentage has changed over time from 100% to 140%. Are you you know what is the rationale around that change?
▶ 1:30:34Sure. the the rational for that um I think largely revolves around congressional budget office scoring
▶ 1:30:41and that postevent recoupment actually would get deducted by insurance companies from other taxes. So therefore the even though it's being paid to the government, it would result in less taxes being to the government in other places. And so therefore the amount in past reauthorization was increased essentially to allow for this budgetneutral scoring with regard to to to CBO.
▶ 1:31:07Okay. Um Commissioner M, how do you feel about the congressional uh congressionally determined parameters within the Treasury Secretary uh um which this Treasury Secretary um makes that decision. We follow the law and uh
▶ 1:31:25are they too restrictive, too loose?
▶ 1:31:28Again, we are here to follow the law. Are there Congress proposed?
▶ 1:31:33There are no that is really not up to us to discuss as state insurance regulators. We just need to make sure that the uh coverage is there and that the companies are solvent.
▶ 1:31:42So, every time I bring up private insurance companies, the auto insurance industry comes to mind in my district. Everybody's smiling. They probably know. I got on this committee to work on that issue. Does anybody here on this panel know anything about what's going on with the auto insurance industry? Anyone? Oh, Mr. Sh. 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 whether or not you're a good driver?
▶ 1:32:13Does anybody know? How about How about
▶ 1:32:16zip code? How about whether or not you have a PhD or you're married? What the heck does that have to do whether or not somebody's a good driver or not? How is that a predictor? Studies show that somebody with the 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.
▶ 1:32:34Don't you think that's discriminatory?
▶ 1:32:37So insurance is discriminatory, right? By its nature. It's supposed to be,
▶ 1:32:41but they're asking for the GPA of our
▶ 1:32:44but it's not supposed
▶ 1:32:45What the hell does that have to do with whether or not we're a good driver?
▶ 1:32:48But it should not be unfairly discriminatory. And I think those are
▶ 1:32:51I think non-driving factors should be
▶ 1:32:54Thank you.
▶ 1:32:55Gentlewoman yields back. The gentleoman from Texas, Miss Dea Cruz, is now recognized for five minutes.
▶ 1:33:01Thank you, Mr. Chairman, for holding this hearing today. Um, I I enjoy serving as a vice chair of housing and insurance committee. It's an area that I worked in. Um, and I'm sorry, I worked in housing and insurance for over 20 years.
▶ 1:33:19So, this is a meaningful area and I'm I was uh taken back by the uh comments because unless you've actually worked in the insurance industry, then you have a better understanding of why these factors are important. And so, I would uh encourage my colleague to actually meet with people who work in the industry and to understand the statistics and what drives actual costs.
▶ 1:33:50That put aside, um, coming from the insurance world, the private insurance world, including auto and housing insurance, um, it's interesting to learn about this largescale federally backed insurance program. Very recently, 911 just passed. A sad day in our nation's history and uh a day of complete terror um especially for our fellow citizens in New York City.
▶ 1:34:19And while we hope that a terrorist attack like that never happens again, we do need to be prepared should something happen. And that's why we're in Congress. So creating the terrorism risk insurance act or TRIA was very important and is very important.
▶ 1:34:40This 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. Um, 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.
▶ 1:35:07For 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. Um, Miss Sartine, excuse excuse if I didn't quite get that right.
▶ 1:35:35Um, 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?
▶ 1:35:53The short answer is yes. Um, Marsh McClennon Companies also employs people in uh in Texas as we do across the United States. uh and the energy sector is an important um sector that we serve. Understanding that um energy security is key to the security of this country. Without TRIA um terrorism insurance would prevent projects from moving forward, prevent things from moving around the country um and and limit the recovery in the event unfortunate event of a terrorist act.
▶ 1:36:25Now as a nation uh we are moving towards 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.
▶ 1:36:47Thankfully, 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?
▶ 1:37:10Um, so, uh, the first thing, by the way, Congresswoman, I, um, applaud your comments earlier in your testimony. I mean, one thing that I would like to point out is that insurance companies aren't motivated by profit. What we're motivated by is providing coverage for our policyh holders and being there after a loss, which means that it's very important that the industry remains solvent and be able to uh, cover those losses. So with regard to the current program, what we found is that it works.
▶ 1:37:40And I think what's most important is that we renew it swiftly for a long-term um uh for a long term so that the program is there to keep the markets
▶ 1:37:52Thank you. And in regards to my earlier comments, one of the things that I like about the insurance industry is that is based on facts and not feelings. With that, I yield back. Gentlewoman yields back. The gentleoman from Georgia, Miss Williams, is now recognized for five
▶ 1:38:09Thank you, Chairman Flood and Ranking Member Clever 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 is centered in Atlanta where we have a lot of largecale national security events.
▶ 1:38:34And while we can't predict when and where a terrorist attack could happen to our 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's a stark reminder of what happened almost 30 years ago when the Centennial Olympic Park buming happened during the 1996 Olympics.
▶ 1:39:02Now, this was pre-tria being implemented. So, that wasn't 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're on as you've heard today we all agree that this is a program that should exist and this coverage is very important. Mr.
▶ 1:39:30Webble I'd imagine that most people perceive TRIA 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. But also I heard our chairman when he talked about college football and um Mr. Timmons, you know, this weekend when Georgia Tech beat Clemson in Atlanta, there were a lot of people in the city of Atlanta.
▶ 1:39:57And so I'm thinking about Atlanta hosting these largecale national security events. According to Treasury's 2024 data call, take up rates for terrorism risk insurance relatively high across the country by policy count. Can you explain why TRIA is important in different regions of the country?
▶ 1:40:16I mean, I think the large scale events that you mentioned are a big deal. I think also the critical infrastructure that that your colleague mentioned is is a big deal as well. The the truth of the matter is is things can happen in wide swaths of the country that can that can cause a lot of economic damage and a lot of spillover effects um in the transportation system in in gatherings etc.
▶ 1:40:38And so it really is a situation where that terrorism coverage, you know, it can have a big effect outside of the the larger metropolitan areas.
▶ 1:40:49So I'm also thinking about um representing a city that has already been impacted by an act of terrorism. It's a a constant reminder of why this is important. I also represent the world's busiest and most efficient airport at Hartsville Jackson International. And I remember a cyber a cyber security attack that um grounded flights and that has an impact worldwide.
▶ 1:41:13And then I'm thinking about um just the the ransom that the city of Atlanta had to pay and that is not covered um 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 I know Tria doesn't speak directly to cyber insurance, Treasury has provided guidance to clarify that cyber insurance is included when it is a writen line of insurance that is subject to the program.
▶ 1:41:42Commissioner Maize, do you believe anything further needs to be done to clarify or expand coverage 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 cyber risk? I do understand the desire to have cyber insurance as a separate line. But I think what we've seen is that that market has expanded.
▶ 1:42:06If we look at the number of policies, it's increased 11.7% from 2022 to 2023. We've got 16.66 billion in written premium in 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.
▶ 1:42:33Thank you. And I'm going to be running out of time soon, but Miss 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'm thinking down the road of big events that we're already planning for in Atlanta and just everything that we're hearing in this day and age giving a piece of mind to our communities.
▶ 1:43:01Uh so first of all again uh we've proven the the program has proven that it works. It's been 24 years and the market has really stabilized by the program. So the longer that we can extend it the more stability that we will introduce into the market. And I think uh to um just some other things to remember.
▶ 1:43:21Gentleoman's time is expired.
▶ 1:43:23Thank you, Mr. Chairman.
▶ 1:43:24The gentleman from South Carolina, Mr. Timonss, is now recognized for five
▶ 1:43:30Thank you, Mr. Chairman. Uh Mr. Wayel, I'm going to be directing my questions to you. So, let's go back to 911 terrorist attack from Afghanistan and we spent hundreds of millions, billions of dollars making victims whole. and we spent $2.3 trillion in Afghanistan. Um that was our response to a kinetic attack using airplanes to crash into multiple targets. I want to talk about cyber security.
▶ 1:43:58So we have nationstate cyber security attacks that attack our businesses here in the US on a regular basis and the federal government doesn't really make whole the victims or the business and we obviously um expect these businesses to have uh cyber insurance and I don't understand the difference between a kinetic attack that costs hundreds of millions billions of dollars in damage from a foreign nation ape uh versus
▶ 1:44:29a cyber security 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
▶ 1:44:45I mean should I will leave up to Congress. Um but I do think it's a it's a very valid question in terms of you know how much does the source of an attack or the source of the damage matter. Um, 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 pre or post 911 that maybe you could have tried to exclude those under a war exclusion on some policies but that the I think
▶ 1:45:16for partly public relations reasons insurers decided they didn't want to go down that road because it would have been a public relations disaster if they had um but these are questions that I definitely need to be fleshed out in the world that we're in because the attribution of cyber attacks may be very murky and and it may be very hard to certify a terrorist attack under TRIA because you're not really sure where this is coming from.
▶ 1:45:41How can a insurance or reinsurance company appropriately underwrite an attack from China, Iran, Russia, North Korea? I mean, the the 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 non-starter. So, how can you actually effectively underwrite that?
▶ 1:46:05Well, and I think that's a lot of the reason why from the insurer perspective, they tend to exclude nation state attacks as acts of war and want to say, "No, we're not going to cover that if it's a if it's a nation state actor." um for the individual companies I think that that there obviously needs to be US government involvement in helping people in cyber security and understanding things.
▶ 1:46:27Um but in some ways that the you know a lot of it comes down to hardening your cyber defenses whether it's a nation state attack or whether it's a ransomware from a criminal gang that just wants to extort money.
▶ 1:46:40So our commander-in-chief his favorite word is tariffs and my question is this. Should the US use tariffs to uh penalize nation state attacks to then make the victims and the businesses whole and just create the status quo of if you're going to engage in cyber attacks or I'll go one further.
▶ 1:47:00If 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. And then you say, "All right, um, this is the new status quo.
▶ 1:47:28Continue to attack US businesses and you will be penalized financially." Is that a reasonable approach to this
▶ 1:47:36I mean, honestly, it's not an approach that I've ever really analyzed or thought about. I mean, I think that it's I mean, how you approach this is is probably a policy question above my pay
▶ 1:47:50Would 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 miss?
▶ 1:48:07You know, I couldn't opine on tariffs per se, but one thing I I would like to say about cyber is that within the TRIA program, again, if if an event is certified by the the Treasury Secretary, then it would be covered under the TRIO program. So, when you distinguish between non-terror events, uh, you know, I would urge Congress to think about, uh, you know, is it mod, you know, can you model it? Is there a private market?
▶ 1:48:34and Commissioner May, you know, mentioned that there is a growing market. So,
▶ 1:48:38I'm out of time. I'm going to have to yield back. Thank you so much.
▶ 1:48:41gentleman yields back. The gentleman from New York, Mr. Torres, is now recognized for 5 minutes.
▶ 1:48:46Thank you, Mr. Chair. As a New Yorker who came of age 911, terrorism is no abstraction to me. 24 years after 911, the spectre 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 decades since 911. And those threats show no signs of subsiding.
▶ 1:49:09In 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 cyber terrorism. um what exactly is the difference between a cyber attack in cyber terrorism or cyber war in cyber terrorism or a cyber crime in cyber terrorism because these lines can easily get blurred if I may.
▶ 1:49:39So 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 or the individuals behind the attack is to influence the people or the policy of the United States in in the context of cyber attacks. It's extremely difficult to figure out who's behind them and the motivation. That's one of the challenges with certifying a cyber cyber act as an act of terrorism under the existing
▶ 1:50:07Uh what if it were a cyber attack on the part of a foreign government that's hostile to the United States? Would that qualify as a cyber terrorist event? So the statute does include damage to infrastructure which was always understood to mean electronic um u 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's unreable by the courts.
▶ 1:50:34So really uh an act of terrorism is whatever the secretary of treasur
▶ 1:50:38I have a question about the scope of the Treasury Secretary's authority right is it is it just right or is it excessive and and should judicial review be permitted or prohibited?
▶ 1:50:49It it's a desire to have finality and quickness. Um so the idea was a single person would make that decision but we have seen that that can take a lot of time. Um my own belief is you could make changes and get to a really bad decision.
▶ 1:51:06What it sounds like apart from the 5 million loss threshold, terrorism is whatever the Treasury Secretary says it is, you know, Justice Potter Stewart once said, I can't 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.
▶ 1:51:22My belief is a practical matter that's
▶ 1:51:24And is that excessive discretion or should there be some judicial review? a judicial review would create enormous uncertainty um that that is not
▶ 1:51:35as regarding the necessity of TRIA. Is is it fair to say and I'll direct the question as 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 Shria few businesses in America could survive a catastrophic terrorist event
▶ 1:51:58that's absolutely correct and we've had 24 years of experience to see what happens when there is a backs stop and we've seen it happen twice once after 911 and then again in 2014 when the program was allowed to elapse.
▶ 1:52:12Right. Yeah. I just find it strange that we're debating the viability of a private market without TRIA as if we have no life experience. Like what what what was um 911's immediate impact on financing and terrorism insurance? What happened was overnight a a new catastrophic exposure just emerged and insurance companies had to really pair back um otherwise they risked insolveny.
▶ 1:52:40So you know they uh the the TRIA program really stepped in and made it possible to be able the for the economy to
▶ 1:52:49One of the most common complaints I've heard about insurance has been inflation. It feels to me inflation has been particularly pronounced in the insurance market. Have those same inflationary pressures affected terrorism risk coverage? What's been the impact of inflation on terrorism risk
▶ 1:53:05Actually, the way the program was uh it's it's actually somewhat um embedded in the coverage. So, uh it act in in what the um the insurance market the private market accepts. the underlying deductibles uh are based on premiums that are essentially indexed for inflation because they grow over time. Um so uh in general those
▶ 1:53:31because it's a percentage
▶ 1:53:33it's a now the percentage has grown which means that the um the private market has picked up additional um uh additional exposure but it's also grown just because the underlying premiums have grown. So, for example, my company, our deductible uh after immediately uh after 9/11 under the program was $10 million and today it's $250 million. So, it's grown significantly.
▶ 1:53:57Gentleman's time is
▶ 1:53:58Thank you.
▶ 1:53:58gentleman yields back. The gentleman from New York, Mr. Garino, is now recognized for five minutes.
▶ 1:54:04Thank you very much, uh Mr. Chairman, and thank you for all the witnesses for being here today. Uh, TRIA is a program created following the horrific attacks on 911, an event that uh, deeply and personally affected all of us. As a result of this attack, insurers and reinsurers began to recognize real yet difficult to model risk that resulted from terrorism insurance. Terrorism insurance was becoming less accessible, increasingly unaffordable, especially in the dense urban areas like New York.
▶ 1:54:31Uh, Miss Hec, 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 911? I know you touched on a little bit uh, but post 911 that led to TRIA and how the program was designed to help.
▶ 1:54:49Yeah, the the program uh, so immediately after 911 uh, 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.
▶ 1:55:09Um it allows for a robust market by making it possible for small, midsize and large companies to participate and and taxpayers are really fully protected under the program. So when you think about it, all of the stakeholders um it it it manages all of the um concerns of every stakeholder. While TRIA is not supposed to expire until the end of 2027, I'm glad we're doing this uh today and we're looking at RIOT.
▶ 1:55:39Um Miss Hec, you highlighted in your written testimony that TRIA needs to be extended next year in 2026. Uh can you please explain what happens if Congress doesn't extend the program by the end of next year? What would happen to insurance contracts in 2027?
▶ 1:55:56Yeah, because the way that insurance contracts are written because of the timing, it's important to get this reauthorized before we get into 2027 or what will happen is if if policies lapse the expiration of the program, then there will be exclusions attached to it and we risk running um having that same disruption that we saw in 2014.
▶ 1:56:18Say that again. If if it does lapse, what will happen? if it lapses without a reauthorization, exclusions will be attached to the policies um so that we run the risk of having the same problem that we had in 2014 when the program was allowed to lapse.
▶ 1:56:34And I hope it doesn't lapse. I'm sure the chairman and other members of uh the House hope it doesn't last. Unfortunately, a lot of other things have lapsed because uh of our colleagues over in the Senate, specifically one of them, um I won't mention his name, but uh hopefully that does not happen here. as chairman of the House Homeland Security Committee and I'm going to ask you about cyber um just just like um Mr. Torres did.
▶ 1:56:59Um I held a hearing last J July about the importance of securing operational technology systems from cyber adversaries. Um this includes water treatment facilities, energy grids and transportation systems just to name a few. If if a cyber terrorism event caused physical damage to these critical infrastructure systems under the TRIA framework, uh would uh would that those attacks be covered?
▶ 1:57:25A a terror a a cyber attack that is deemed a terrorist event would be covered under the program,
▶ 1:57:33right? Um and that is as as we heard the previous member asked, that's if it's deemed a terrorism event by the Treasury
▶ 1:57:39by the Treasury Secretary. Um there have been people have that have come to me and talk about you know the creation of a a cyber back stop uh federal backs stop for cyber attacks. Uh some have suggested tying it to TRIA. I do not think that's the the right way to go. If we're going to do something I think it should be done separately and something this committee uh should look at if if if it should be done separately.
▶ 1:58:05Uh so I think it was very important to put on the record that as TRIA is currently written it does currently uh cover cyber terrorism events. Uh I have about 45 seconds left. Um a lot of times when we re reauthorize something um we just reauthorized the law from 10 years prior uh without any updates. any of the and you might have said something already, but are there any updates that you would like to see put into this uh that you know would help the law run better? Mr.
▶ 1:58:36Shep.
▶ 1:58:36Yeah, I do believe that uh Congress could increase the data collection um abilities of Treasury to reach in particular to some of the more opaque structures such as captives and alien insurers where data from the NIC is very
▶ 1:58:53I appreciate that and I'm down to 10 seconds. So if any of you else have any ideas would if you could submit them in writing that would be great. But uh thank you Mr. Chairman. I yield back.
▶ 1:59:01Gentleman yields back. I now ask unanimous consent to enter the following statements into the record. A September 15, 2025 statement from the Coalition to Ensure 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. I'd like to thank all of our witnesses for your testimony today.
▶ 1:59:29Without objection, all members will have five 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.