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Lending Industry Pushes for Terrorism Insurance
The Mortgage Bankers Association (MBA) testified before the U.S. House of Representatives to advocate for a long-term terrorism insurance solution that would make terrorism insurance both available and affordable.
"The availability and affordability of terrorism insurance affects the entire $2.8 trillion commercial and multifamily real estate finance industry. Failure to ensure a long-term solution would cause great market uncertainty and significant risk exposure to this important economic sector," says Steven Graves, vice chair of MBA’s commercial real estate/multifamily finance board of governors.
MBA will be evaluating specific long-term terrorism solution proposals based on a set of principles that will ensure adequate insurance for terrorism, as required by commercial real estate finance lenders and servicers. These principles include:
Widely Available - Terrorism insurance needs to be widely available, which would require the existing "make available" provision in Terrorism Risk Insurance Extension Act of 2005 (TRIEA) be included in a long-term terrorism insurance solution.
No Interruptions - The long-term terrorism insurance solution should be crafted in a manner that eliminates short-term interruptions in terrorism insurance availability or price shocks when it is implemented.
Affordable - Terrorism insurance needs to be priced in an affordable manner.
All-Peril Coverage - Terrorism insurance will cover all-perils including nuclear, biological, chemical and radiological threats.
All Terrorism Sources - Terrorism insurance should cover both foreign and domestic source terrorist events.
Lender/Servicer Notifications - Lenders/servicers are listed as mortgagee, loss payee and additional insured depending on the loan documentation and as such they are entitled to specific notifications of coverage lapses, gaps, and renewals. Any long-term solution needs to preserve and implement the required notification.