The Reauthorization of the Terrorism Risk Insurance Act of 2002

1[House Hearing, 119 Congress]2[From the U.S. Government Publishing Office]34                  THE REAUTHORIZATION OF THE TERRORISM5                       RISK INSURANCE ACT OF 20026=======================================================================78                                HEARING910                               BEFORE THE1112                 SUBCOMMITTEE ON HOUSING AND INSURANCE1314                                 OF THE1516                    COMMITTEE ON FINANCIAL SERVICES17                     U.S. HOUSE OF REPRESENTATIVES1819                    ONE HUNDRED NINETEENTH CONGRESS2021                             FIRST SESSION2223                               __________2425                           SEPTEMBER 17, 20252627                               __________2829                           Serial No. 119-403031       Printed for the use of the Committee on Financial Services3233[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]3435                            www.govinfo.gov3637                               __________3839                          U.S. GOVERNMENT PUBLISHING OFFICE4063-035 PDF                       WASHINGTON : 202641=======================================================================4243                 HOUSE COMMITTEE ON FINANCIAL SERVICES4445                    FRENCH HILL, Arkansas, Chairman4647BILL HUIZENGA, Michigan, Vice        MAXINE WATERS, California, Ranking48    Chairman                             Member49FRANK D. LUCAS, Oklahoma             SYLVIA R. GARCIA, Texas, Vice50PETE SESSIONS, Texas                     Ranking Member51ANN WAGNER, Missouri                 NYDIA M. VELAZQUEZ, New York52ANDY BARR, Kentucky                  BRAD SHERMAN, California53ROGER WILLIAMS, Texas                GREGORY W. MEEKS, New York54TOM EMMER, Minnesota                 DAVID SCOTT, Georgia55BARRY LOUDERMILK, Georgia            STEPHEN F. LYNCH, Massachusetts56WARREN DAVIDSON, Ohio                AL GREEN, Texas57JOHN W. ROSE, Tennessee              EMANUEL CLEAVER, Missouri58BRYAN STEIL, Wisconsin               JAMES A. HIMES, Connecticut59WILLIAM R. TIMMONS, IV, South        BILL FOSTER, Illinois60    Carolina                         JOYCE BEATTY, Ohio61MARLIN STUTZMAN, Indiana             JUAN VARGAS, California62RALPH NORMAN, South Carolina         JOSH GOTTHEIMER, New Jersey63DANIEL MEUSER, Pennsylvania          VICENTE GONZALEZ, Texas64YOUNG KIM, California                SEAN CASTEN, Illinois65BYRON DONALDS, Florida               AYANNA PRESSLEY, Massachusetts66ANDREW R. GARBARINO, New York        RASHIDA TLAIB, Michigan67SCOTT FITZGERALD, Wisconsin          RITCHIE TORRES, New York68MIKE FLOOD, Nebraska                 NIKEMA WILLIAMS, Georgia69MICHAEL LAWLER, New York             BRITTANY PETTERSEN, Colorado70MONICA DE LA CRUZ, Texas             CLEO FIELDS, Louisiana71ANDREW OGLES, Tennessee              JANELLE BYNUM, Oregon72ZACHARY NUNN, Iowa                   SAM LICCARDO, California73LISA McCLAIN, Michigan74MARIA SALAZAR, Florida75TROY DOWNING, Montana76MIKE HARIDOPOLOS, Florida77TIM MOORE, North Carolina7879                      Ben Johnson, Staff Director8081                                 ------8283                 SUBCOMMITTEE ON HOUSING AND INSURANCE8485                     MIKE FLOOD, Nebraska, Chairman8687MONICA DE LA CRUZ, Texas, Vice       EMANUEL CLEAVER, Missouri, Ranking88    Chairwoman                           Member89JOHN W. ROSE, Tennessee              NYDIA M. VELAZQUEZ, New York90WILLIAM R. TIMMONS, IV, South        RASHIDA TLAIB, Michigan91    Carolina                         AYANNA PRESSLEY, Massachusetts92RALPH NORMAN, South Carolina         RITCHIE TORRES, New York93ANDREW R. GARBARINO, New York        SYLVIA R. GARCIA, Texas94SCOTT FITZGERALD, Wisconsin          NIKEMA WILLIAMS, Georgia95MICHAEL LAWLER, New York             BRITTANY PETTERSEN, Colorado96MARIA SALAZAR, Florida               JANELLE BYNUM, Oregon97TROY DOWNING, Montana98                         C  O  N  T  E  N  T  S99100                              ----------101102                     Wednesday, September 17, 2025103                           OPENING STATEMENTS104105                                                                   Page106Hon. Mike Flood, Chairman of the Subcommittee on Housing and107  Insurance, a U.S. Representative from Nebraska.................     1108Hon. Emanuel Cleaver, Ranking Member of the Subcommittee on109  Housing and Insurance, a U.S. Representative from Missouri.....     2110111                               WITNESSES112113Mr. Baird Webel, Specialist In Financial Economics, Congressional114  Research Service (CRS).........................................     4115    Prepared statement...........................................     6116Mrs. Elizabeth Heck, Chairman, President, and Chief Executive117  Officer, Greater New York Insurance Companies, on behalf of118  National Association of Mutual Insurance Companies (NAMIC).....    20119    Prepared statement...........................................    22120Ms. Michelle Sartain, President, Marsh U.S. and Canada...........    27121    Prepared statement...........................................    29122Mr. Jason Schupp, Founder and Managing Member, Centers for Better123  Insurance, LLC.................................................    46124    Prepared statement...........................................    48125Commissioner Andrew N. Mais, Connecticut Insurance Department, on126  behalf of National Association of Insurance Commissioners127  (NAIC).........................................................    58128    Prepared statement...........................................    60129130                                APPENDIX131132                   MATERIALS SUBMITTED FOR THE RECORD133134Hon. Mike Flood:135    Coalition to Insure Against Terrorism (CIAT).................    94136    American Property Casualty Insurance Association (APCIA).....    97137    Reinsurance Association of America (RAA).....................   102138Hon. Maxine Waters:139    GAO Highlights...............................................   103140141                 RESPONSES TO QUESTIONS FOR THE RECORD142143Written responses to questions for the record from Representative144  John W. Rose:145    Mr. Baird Webel..............................................   119146    Mrs. Elizabeth Heck..........................................   121147    Mr. Jason Schupp.............................................   124148    Mr. Andrew N. Mais...........................................   126149Written responses to questions for the record from Representative150  Scott Fitzgerald:151    Mrs. Elizabeth Heck..........................................   128152    Mr. Andrew N. Mais...........................................   130153154                              LEGISLATION155156H.R. ------, the TRIA Program Reauthorization Act of 2025........   132157158                  THE REAUTHORIZATION OF THE TERRORISM159                       RISK INSURANCE ACT OF 2002160161                              ----------162163                     Wednesday, September 17, 2025164165             U.S. House of Representatives,166             Subcommittee on Housing and Insurance,167                            Committee on Financial Services168                                                    Washington, DC.169170    The subcommittee met, pursuant to notice, at 10:01 a.m., in171room 2128, Rayburn House Office Building, Hon. Mike Flood172[chairman of the subcommittee] presiding.173    Present: Representatives Flood, Rose, Timmons, Garbarino,174Lawler, De La Cruz, Downing, Cleaver, Velazquez, Tlaib,175Pressley, Torres, Garcia, Williams of Georgia, and Bynum.176    Also present: Representatives Hill, and Waters.177    Chairman Flood. The subcommittee on Housing and Insurance178will come to order. Without objection, this chair is authorized179to declare a recess of the committee at any time.180    This hearing is titled, ``The Reauthorization of the181Terrorism Risk Insurance Act of 2002.''182    Without objection, all members will have 5 legislative days183within which to submit extraneous materials to the chair for184inclusion in the record.185    At this time, I would like to recognize myself for 4186minutes for an opening statement.187188     OPENING STATEMENT OF HON. MIKE FLOOD, CHAIRMAN OF THE189 SUBCOMMITTEE ON HOUSING AND INSURANCE, A U.S. REPRESENTATIVE190                         FROM NEBRASKA191192    I would like to, first of all, thank all of our witnesses193for being with us today, and I very much look forward to194hearing your testimony on the Terrorism Risk Insurance Program.195This program was created in the aftermath of tragedy.196    After the events of September 11, 2001, the risk of197terrorism suddenly became an all-too-real situation for many198Americans. On that terrible day, the unthinkable happened and199the world forever changed.200    After the terrorist attacks of September 11th, terrorism201risk, which was previously something that had been incorporated202directly into the underwriting of commercial property and203casualty insurance, seemed like a risk far too remote and204difficult to quantify and underwrite. As a result, the Federal205Government stepped in with what was initially proposed as a206temporary Federal reinsurance program.207    The Terrorism Risk Insurance Program was created in208November 2002, and it has since been reauthorized four times in2092005, 2007, 2015, and, again, in 2019. The next expiration of210Terrorism Risk Program is at the end of 2027. That may seem211distant, but the reality is that terrorism risk contracts212typically extend for 1 year.213    As we approach 2026, it makes sense to begin conversations214on what a Terrorism Risk Insurance Act (TRIA) reauthorization215should look like and for members of the subcommittee, this216hearing is the first step in the reauthorization process, and217an opportunity to learn more about the Terrorism Risk Insurance218Program.219    We need to know how the program has changed over time, what220the program does well, where it can be improved as we begin221considering reauthorization.222    I have two priorities on this issue. Number one is to work223quickly to provide the certainty required for insurers and224insureds to continue providing terrorism risk insurance, and at225a reasonable cost; and two, to ensure that we work to mitigate226taxpayers' exposure to this program.227    Since the Terrorism Risk Program was created in 2002, we228have been fortunate, knock on wood, there has never been a229certified act of terrorism by the Department of Treasury, nor230have there been events that would have reached the Terrorism231Risk Insurance Program's financial trigger. We, of course, hope232that no future events ever, ever occur that would trigger that.233However, TRIA's value is not just in direct responses to234terrorism events. The program makes it easier to have an235operating market where entities can purchase insurance that236covers terrorism risk, and a well-functioning insurance market237makes it possible for all entities, and entities of all kinds238to purchase insurance against terrorism risks.239    The Terrorism Risk Insurance Program helps our economy240bounce back in the event of an attack, and it provides market241stability and peace of mind in the interim.242    So I look forward to hearing from our expert panel today243and we are going to talk about terrorism risk insurance all244morning. With that, I yield back.245    I now recognize the ranking member of the subcommittee, Mr.246Cleaver, for 4 minutes for an opening statement.247248 OPENING STATEMENT OF HON. EMANUEL CLEAVER, RANKING MEMBER OF249       THE SUBCOMMITTEE ON HOUSING AND INSURANCE, A U.S.250                  REPRESENTATIVE FROM MISSOURI251252    Mr. Cleaver. Thank you, Mr. Chairman, for holding this253important hearing on the reauthorization of the Terrorism Risk254Insurance Program, also known as TRIA.255    I will, for the rest of my life, remember where I was at256the very moment that the report came through on what happened257in New York. I was watching Katie Couric, who is no longer a TV258reporter, saying: Something seems to have flown into a building259here in New York.260    The terrorist attack on September 11, 2001, devastated U.S.261citizens, households and businesses. As a direct result of the262unforeseen and unexpected level of covered losses, insurers263began to explicitly exclude terrorism coverage in commercial264property casualty insurance policies.265    Additionally, due to State laws prohibiting the exclusion266of individual risk elements from workers' compensation267insurance, the potential for enormous liability created a268crisis that impacted employers across the Nation.269    In response, Congress passed, and the President signed,270TRIA into law to stabilize the market for terrorism risk271insurance. Since that time, Congress has been able to come272together and reauthorize the program four more times, most273recently in 2019. Many members were not on the committee during274those reauthorizations, and I hope this hearing is educational275on the value and elements of the program.276    The threat of a terrorist attack on the homeland has not277subsided. According to the 2025 annual threat assessment from278the Office of the Director of National Intelligence, he writes,279and I quote, a diverse set of foreign actors are targeting the280U.S. health and safety, critical infrastructure, industry's281wealth and government. The Department of Homeland Security,282Office of Intelligence and Analysis, 2025 homeland threat283assessment states, ``Foreign terrorist organizations, FTOs, and284their supporters will maintain their enduring intent to conduct285or inspire attacks here in the homeland.''286    The threat of terrorism impacts the entire Nation,287including my home district in the Midwest and I am glad that288Congress has been able to historically work in a bipartisan way289on this program.290    Last Friday I sat down with the insurance industry, many of291which--some of whom are testifying here today, to discuss292priorities for TRIA reauthorization. I heard unanimous293agreement on the need for early and long-term reauthorization.294What I did not hear was any questions about the value of the295program.296    As the Treasury has affirmed, TRIA is effective in making297terrorism risk insurance available and affordable in the298insurance marketplace. I also heard that the uncertainty299surrounding the program has begun to restrict access to300coverage for 2008 and beyond. Early action well before the 2027301sunset of TRIA must be taken to avoid market uncertainty.302    Thank you, Mr. Chairman, and I look forward to working with303you and Chairman Hill and Ranking Member Waters on this effort.304I yield back.305    Chairman Flood. Thank you, Mr. Cleaver. We now recognize306the chairman of the full Financial Services Committee, Mr. Hill307from Arkansas, for 1 minute for an opening statement.308    Chairman Hill. Thank you, Chairman Flood. Today we will309discuss the functions of the Terrorism Risk Insurance Act of3102002, or TRIA, and hear from industry professionals on the311current operations and the future ideas for the program. Thank312you for sharing your expertise with us today.313    Congress is often criticized for not always being out in314front on a topic. Here we are, TRIA expires in 2027, and I315appreciate Chairman Flood and Ranking Member Cleaver stepping316out. Let us get out in front of this, let us think it through317very carefully and get the reauthorization completed before the318expiration.319    The program has certainly helped foster stability in the320face of uncertainty allowing our economy to grow while321safeguarding citizens from that existential risk posed by322potential terrorist attack.323    I thank Mr. Flood for his work on this. I look forward to324the discussion of the committee, and I yield back.325    Chairman Flood. Thank you, Mr. Chairman. Today we welcome326the testimony of Mr. Baird Webel, a specialist in financial327economics at the congressional Research Service; Mrs. Elizabeth328Heck, Chairman, President, and CEO of the Greater New York329Insurance Companies here on behalf of the National Association330of Mutual Insurance Companies; Ms. Michelle Sartain, President331of Marsh US and Canada; Mr. Jason Schupp, founder and managing332member of Centers for Better Insurance, LLC; and Mr. Andrew333Mais, Commissioner of the Connecticut Insurance Department,334here on behalf of the National Association of Insurance335Commissioners.336    We thank each of you for taking the time to be here. Each337of you will be recognized for 5 minutes to give an oral338presentation of your testimony. Without objection, your written339statements will be made part of the record.340    Mr. Webel, you are now recognized for 5 minutes for your341oral remarks.342343 STATEMENT OF BAIRD WEBEL, SPECIALIST IN FINANCIAL ECONOMICS,344              CONGRESSIONAL RESEARCH SERVICE (CRS)345346    Mr. Webel. Thank you, Mr. Chairman, and ranking member and347members of the subcommittee for having me here to testify348today.349    As the chairman said, my name is Baird Webel. I am at the350Congressional Research Service. Before I go deep into my351testimony, especially for people who are listening, I would352just like to make clear who CRS is. We are a division of the353Library of Congress. We provide nonpartisan objective research354and analysis, and we do not take positions on legislation or355policy proposals before Congress.356    I have been in this role at CRS covering non-health357insurance issues since 2003, so I have been a participant in358some way in all of the TRIA reauthorizations to this point.359    I would just like to give the committee a little bit of a360background and overview on the reauthorizations in the past and361what the program does at this point.362    So TRIA is a reinsurance program. The approximately $60363billion in damages in the 9/11 attack shocked both the primary364and reinsurance industries, which pulled back. The Congress at365the time decided to create a temporary 3-year program that366stood in the background of the insurance system.367    So unlike, say, the National Flood Insurance Program, this368does not provide terrorism insurance directly to commercial369businesses that might be seeking it. It sits in the background370where the regular commercial insurers are required to offer the371terrorism insurance. Policyholders are not necessarily required372to purchase it. In the event of a terrorist attack, the Federal373Government would step in to share losses after the fact.374    This system has a lot of advantages, particularly in the375sense that it has kept the administration of the TRIA program376pretty lean over the years. Other than the handful of people at377Treasury that act to administer it, there have been no378particular outlays in the program because you have not, thank379God, had a terrorist attack that met the thresholds.380    What are these thresholds in the program? There is a381program trigger that is currently set at $200 million in382aggregate annual losses. So until we had $200 million in383terrorism losses in a year, money would not flow out of the384Treasury to cover the losses.385    There is a 20 percent individual insurer deductible based386on each insurer's earned premiums from the year before. So each387of the insurers would have to cover this 20 percent amount of388losses, again, before they would receive any assistance from389the Treasury and there is essentially an 80/20 copay. So as390losses go up above those thresholds, the Treasury covers 80391percent, but the private insurers continue to cover 20 percent392of the losses.393    Through the life of the program, those thresholds have all394been adjusted and been adjusted in ways to increase the private395sector's participation in terrorism risk. So even though at the396beginning, it was thought that the 3-year program would be397enough to eventually let the program go away and have the398private sector cover all of the risk, the conclusion over the399years has been that this is not going to--this is not going to400happen, but we have increased the private sector participation401in other ways than saying, okay, private sector, you are now402taking all of the risk.403    A couple other thresholds that are in the law that have not404been adjusted over time. There is a $5 million single event405certification threshold. So before Treasury can certify that an406event is an act of terrorism, it must result in $5 million in407losses. I know there has been a little bit of industry question408and confusion over this, this figure and exactly how the409certification process might take place.410    There is also a $100--on the other end of the program there411is a $100 billion threshold such that above a $100 billion412there is no Federal coverage, and the private sector is not413required to cover an event of that size. As I said, both of414those thresholds have stayed the same since 2002.415    The final aspect of the program, which is a little unusual,416especially for an insurance situation where normally people pay417premiums upfront, is instead of upfront premiums, you have an418after-the-event recoupment provision, so that in the years419following a terrorist attack--again, there are various420thresholds in exactly how this would work--but you would have421recoupment of the Federal share of the losses and this is a422broad-based measure that would basically apply to pretty much423the entire commercial property and casualty industry after the424fact.425    Over the years there has been sort of, I would say, so426three different levels of questions about the reauthorizations.427The first is, do we need this program at all? Do we reauthorize428this? Or do we let it go back to the private sector?429    The second question has been, are we going to keep the430program approximately the same, but adjust various of these431thresholds in it?432    The third, I think, is a broader one of should the program433be doing more and cover more aspects----434    Chairman Flood. The gentleman's time has expired.435    Mr. Webel. I will be happy to answer questions on any of436that.437438    [The prepared statement of Mr. Webel follows:]439    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]440441    Chairman Flood. Thank you very much. Mrs. Heck, you are now442recognized for 5 minutes for your opening oral remarks. You443might want to hit your microphone.444445  STATEMENT OF ELIZABETH HECK, CHAIRMAN, PRESIDENT, AND CHIEF446  EXECUTIVE OFFICER, GREATER NEW YORK INSURANCE COMPANIES, ON447 BEHALF OF NATIONAL ASSOCIATION OF MUTUAL INSURANCE COMPANIES448                            (NAMIC)449450    Mrs. Heck. Chairman Flood, Ranking Member Cleaver, and451members of the committee, my name is Elizabeth Heck, and I am452Chairman, President and CEO with Greater New York Mutual453Insurance Company. I am pleased to have the opportunity to454testify in the Terrorism Risk Insurance Program, and the vital455role it plays in helping protect----456    Chairman Flood. If the gentlelady will suspend for just a457second. We have to move your microphone a little bit closer to458you.459    Mrs. Heck. I am sorry.460    Chairman Flood. You are fine. There we go.461    Mrs. Heck. Okay. I am pleased to have the opportunity to462testify in the Terrorism Risk Insurance Program, and the vital463role it plays in helping protect our country and economy.464    I am testifying on behalf of NAMIC, which represents more465than 1,300 member companies. My views are informed by my first-466hand experience as a major writer of terror exposed commercial467property, both before and after the events of 9/11, as a member468representing small and mid-sized insurance companies on FIOA's469advisory committee on risk-sharing mechanisms, as chair of470NAMIC's TRIA task force, and, most importantly, as someone who471was in lower Manhattan that morning.472    Amid the smoke and dust, fire and falling debris, I was473forced to flee my apartment building with my two small children474and my mother. Thankfully we were able to make it safely out of475the city, but like so many others, we never returned home.476    For over 100 years, Greater New York Insurance has provided477policyholders with the vital support necessary to protect and478grow their businesses. The company was formed in the early part479of the 20th century by a group of immigrant property owners who480were denied insurance. These property owners found a way to do481it themselves by forming a mutual insurance company. Today we482write business in 17 States and are the largest writer of483commercial multiperil business in New York.484    After 9/11, every financial institution began requiring485terrorism insurance for development, construction loan486agreements, and new commercial loans on existing properties. In487the new reality, the challenges of trying to underwrite488terrorism coverage became all too apparent, leading to canceled489projects, and insurers scaling back coverage needed by the490business community.491    To understand why TRIA is needed, you must first understand492why terrorism is not insurable in the private market. Unlike493natural disasters, terrorism is driven by human intent that is494adaptive, which makes it unpredictable.495    Wildfires, on the other hand, do not change their paths to496find a way around protective measures. Tornados do not497intentionally aim for population centers, and a hurricane will498not change its path to target only unprepared communities.499Terrorists intentionally seek vulnerabilities to maximize500damage and casualties.501    Further complicating terrorism risk is that the information502that would normally be used to model potential exposure is503understandably classified as a matter of national security.504Because of this, credible modeling for the purpose of505underwriting is simply not feasible.506    The situation in late 2001 and 2002 was dire, and the507gridlock created by this attack posed a real and significant508threat to our economy. My company was deeply involved in509finding the solution because of the unique nature of our510business, and my predecessor of greater New York testified511before this committee several times to explain why a public-512private partnership was essential, and why the program should513work for carriers of all sizes.514    The Terrorism Risk Insurance Act was passed in 2002, which515unlocked the market for commercial development. The program516allows insurers a degree of certainty, enabling companies of517all sizes to offer coverage creating a competitive market and518affordable premiums. In the wake of an attack, insurance519companies are able to understand their obligation, and any520money provided by the Federal Government following an attack521will be repaid with interest in all but the most extreme522scenarios.523    The creators of the program understood the importance of524having a diverse pool of small and mid-sized and large insurers525participate in the program. TRIA works because its mechanisms,526deductibles and recoupment are based on individuals' companies,527which means it scales according to company size.528    If the threshold for Federal involvement, or those529deductibles are increased significantly, offering terrorism530coverage could become a bet-the-company risk for all but the531largest insurers, which would force us and many other companies532out of the market. In turn, this would reduce competition and533the availability of terrorism coverage.534    As we look back nearly 25 years after the attacks, it is535important to recognize how much construction and economic536development TRIA has supported, all virtually at no cost to the537taxpayers.538    I respectfully offer three principles to guide the539committee's work: First, longevity. We recommend extending TRIA54010 years because short-term reauthorizations cause uncertainty.541    Second, simplicity. The program is effective in its current542form and taxpayers are protected. So avoid fixing what is not543broken.544    And third, speed. Because of the timing of insurance545contracts, the sooner the program is reauthorized, the sooner546businesses can move forward.547    Mr. Chairman, and members of the committee, thank you, once548again, for the opportunity to present testimony on this issue549of vital importance to me, NAMIC member companies, the550insurance industry as a whole, and the U.S. economy. I look551forward to answering questions today.552553    [The prepared statement of Mrs. Heck follows:]554    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]555556    Chairman Flood. Thank you very much.557    Ms. Sartain, you are now recognized for 5 minutes for your558oral remarks and if you could pull your microphone close, that559would be great.560561STATEMENT OF MICHELLE SARTAIN, PRESIDENT, MARSH U.S. AND CANADA562563    Ms. Sartain. Good morning, Chairman Flood, Ranking Member564Cleaver, and members of the committee. My name is Michelle565Sartain, and I am President for Marsh's U.S. and Canada566division. I appreciate the opportunity to discuss the567reauthorization of the Terrorism Risk Insurance Program with568you.569    For our company, the impact of terrorism is deeply570personal. Marsh McLennan lost 358 friends and colleagues on571September 11, 2001. Marsh and Guy Carpenter are market leaders572providing risk advisory, analytics and brokerage services to573insurance buyers, insurers and reinsurance companies. As such,574we have a unique perspective on the terrorism insurance market.575    We consider TRIA to be a model public-private partnership.576It restored insurance capacity at a critical time following 9/57711, and it continues to insure a well-functioning terrorism578market today.579    Terrorism Risk Insurance Program Reauthorization Act580(TRIPRA) is the reason that policyholders have access to581affordable and widely available terrorism insurance coverage,582which allows investments to be made, and the economy to583function.584    Today I will address four aspects of TRIA that underscore585its importance. First, the key features of the program that586have helped its overall effectiveness.587    Second, the risk if the program is not reauthorized, or is588reauthorized too close to its expiration.589    Third, the role of the program in Workers' Compensation.590    Finally, the trends in the commercial marketplace that591emphasize the importance of TRIA.592    First, the program's design has proven remarkably effective593over the past two decades. TRIA provides transparent Federal594backstop that shares catastrophic terrorism losses between the595private sector and the government. By requiring insurers to596make coverage available, and by setting clear deductibles and597loss-sharing thresholds, the program stabilizes the market598without crowding out private capital. It has fostered healthy599competition and enabled the development of private market600products that expand protection and complement TRIA.601    Its existence ensures the broad availability of coverage602across all sectors, from businesses in high-risk urban centers,603to critical public infrastructure, to vital healthcare and604educational systems.605    According to Marsh data, the healthcare sector has a 61606percent TRIPRA uptake rate, one of the highest, and the607education sector has a 47 percent uptake rate, reflecting a608strong reliance on the backstop to prevent financially609devastated losses from terrorism. Hospitals and education610systems represent symbolic high-impact targets because they611hold concentrated large numbers of vulnerable individuals and612America's youth.613    Without TRIA, healthcare and education sectors, indeed many614parts of our economy, would be unable to secure insurance615required by lenders, bondholders and governing boards at a616reasonable and predictable cost.617    Second, failing to reauthorize, or reauthorizing too close618to the program's sunset date has serious consequences.619Uncertainty alone causes markets to withdraw coverage, insurers620to pull back, and capital markets to tighten. Without621certainty, policyholders face higher premiums, narrower terms,622and outright nonrenewal.623    For sectors like commercial real estate, construction and624energy where terrorism coverage is contractually or625regulatorily required, it could stall transactions, slow626development, and ripple across the broader economy.627    Third, the program is especially vital to the Workers'628Compensation market. Workers' Compensation policies do not629include any stated policy limits or specific perils. Thus,630terrorism and nuclear, biological, chemical, or radiological631(NBCR) attacks cannot be excluded. That means that insurers are632exposed to unlimited losses in the event of an attack. Insurers633can only reduce their exposure by limiting the number of634employers for which they underwrite coverage, especially in635areas of high-employee concentration.636    State funded Workers' Compensation pools could be exposed637to significant losses and insolvency without TRIA. The program638is essential for maintaining solvency and stability.639    Finally, in my written statement, I provide an overview of640the commercial market trends concerning things like641cyberattacks, the role of captives, and trends in violent642attacks. Broadly rising geopolitical instability and the643evolving nature of terrorism underscore the continued644importance of TRIA.645    While the U.S. P&C market was profitable in 2024, that was646proceeded by 4 years of loss suggested unprofitability. For647catastrophic scenarios, the private market alone cannot provide648sufficient coverage. Reauthorization signals stability to the649U.S. and global markets, reassuring investors and policyholders650alike.651    In short, TRIA has worked exactly as intended. It protects652taxpayers by requiring meaningful private participation,653supports economic resilience, and ensures that American654businesses and workers have access to critical coverage.655    Thank you for holding the hearing early, and I look forward656to your questions.657658    [The prepared statement of Ms. Sartain follows:]659    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]660661    Chairman Flood. Thank you very much. Mr. Schupp, you are662now recognized for 5 minutes for your oral remarks.663664STATEMENT OF JASON SCHUPP, FOUNDER AND MANAGING MEMBER, CENTERS665                   FOR BETTER INSURANCE, LLC666667    Mr. Schupp. Chairman Flood, Ranking Member Cleaver, and668members of the subcommittee, good morning.669    My name is Jason Schupp, and I have been closely involved670with TRIA since the legislation was first introduced nearly 25671years ago.672    After retiring from the insurance industry, I formed673Centers for Better Insurance as a self-funded platform to674provide policymakers, regulators, and other insurance industry675stakeholders with independent analysis of important insurance676laws and regulations, including TRIA.677    In 2015, Congress directed Treasury to collect extensive678information from participating insurers and publish an analysis679of that data every other year. We now have the benefit of 10680years of data, and five reports from Treasury.681    Each of Treasury's reports reveals that large corporations682have established their own special purpose insurance companies,683known as captives, to access the Terrorism Risk Insurance684Program. In fact, this data proves that after a large terrorist685attack, up to $0.96 out of every $1 that would be paid out686under the program would go to large corporations through their687captive insurance subsidiaries.688    The officers and directors of a captive are almost always689the executives of the parent organization, such as its CFO,690general counsel, head of tax, and risk manager.691    By controlling both sides of the negotiations, and with the692comfort that the Federal program will bear 80 percent of693terrorism losses, captive owners have been very generous with694themselves.695    As an illustration, for a mere $10 million premium, the New696York Times company negotiated a $1.3 billion terrorism697insurance policy with its captive that even includes coverage698for nuclear, biological, chemical, and radiological terrorist699attacks. Under this one policy, the Terrorism Risk Insurance700Program is on the hook for up to $1 billion of losses after the701captive satisfies a token $20,000 deductible.702    The New York Times is hardly unique. Amazon, for example,703negotiated a $2 billion terrorism insurance policy with its704captive. Indeed, in half the scenarios the Treasury has tested,705captive insurers and their large corporate parents take at706least 90 percent of program benefits.707    Unfortunately this problem is much, much worse than simply708sophisticated companies figuring out how to exploit benefits709under a Federal program. Treasury is required by statute to710recoup 140 percent of program payments through surcharges on711all property and casualty policyholders. In other words,712whatever the program pays to captive insurers, Treasury then713marks up by an additional 40 percent and bills all American714commercial property and casualty policyholders.715    In one scenario the Treasury developed in Washington D.C.,716a truck bomb over at Metro Center, captive insurers would717receive $2.1 billion from the backstop, but captive718policyholders would wind up paying less than 10 percent of that719amount in surcharges. Somewhere around $200 million.720    In stunning contrast, all other insurers participating in721the program would receive a total of only $243 million, but722their policyholders would pay 12 times that amount in723surcharges, an astounding $3.1 billion.724    Treasury's data shows after a major terrorism attack,725captive and large corporations get billions of dollars, but726only paid millions of dollars in surcharges. On the flip side,727the insurers of small businesses, local governments and non-728profits receive millions of dollars, and their policyholders729pay billions of dollars back into the program.730    The real picture is probably even more lopsided than731Treasury's reports reveal because of State secrecy laws that732protect captives and their owners, Treasury collects data from733only about 15 percent of U.S. licensed captives, and even then,734Treasury has no idea who owns them.735    Through my own research I have uncovered a captive insurer736licensed right here in the District of Columbia that is737ultimately owned by a sanctioned Chinese military company.738    This is not the first time captive insurers have been739structured to undermine a Federal program. Ten years ago the740Federal Housing and Financing Agency kicked captive insurers741out of the Federal home loan bank system after it learned that742these captives had been used to funnel $35 billion in low-cost743loans to their ineligible corporate parents.744    There are solutions, and I look forward to discussing those745in questions and answers. Thank you.746747    [The prepared statement of Mr. Schupp follows:]748    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]749750    Chairman Flood. Thank you. Commissioner Mais, you are now751recognized for 5 minutes for your oral remarks.752753STATEMENT OF COMMISSIONER ANDREW N. MAIS, CONNECTICUT INSURANCE754  DEPARTMENT, ON BEHALF OF NATIONAL ASSOCIATION OF INSURANCE755                      COMMISSIONERS (NAIC)756757    Mr. Mais. Chairman Hill, Chairman Flood, Ranking Member758Cleaver, members of the committee, my name is Andrew Mais. I am759the insurance commissioner for the great State of Connecticut,760and past president of the National Association of Insurance761Commissioners, or NAIC, which represents the primary insurance762regulators of the 50 States, the District of Columbia, and the763five territories, and I do appreciate the opportunity to be764here today. Thank you for inviting me to testify today before765this committee and thank you for addressing this important766issue more than 2 years before TRIA, the Terrorism Risk767Insurance Act, is set to expire, as noted, on December 31,7682027.769    Your forethought is both appreciated and necessary as770insurance and reinsurance contracts and decisions to deploy771capital are made months, if not years, in advance.772    Furthermore, business decisions that depend on access to773commercial insurance from deciding to break ground on a774commercial space, to starting a new business, or building more775housing are often years in the making, so understanding that776insurance will be available is critical to supporting the777continued growth for communities and the economy.778    State insurance regulators have supported TRIA since its779inception. Our job is clear, we want to make sure insurers can780pay claims, keep the market stable, and ensure that coverage is781available and TRIA is the best type of partnership between the782private market and the government.783    The government's involvement in this instance creates the784appetite for a private market to exist and let me be clear785here, absent TRIA, or a similar solution, we do not believe786private insurance carriers would make meaningful capacity for787affordable commercial terrorism coverage available, and this is788especially true for smaller and mutual companies.789    Insurance is well-suited to protect against losses from790events where one can make reasonable assumptions about the791frequency and severity of loss: car accidents, house fires,792slip-and-fall injuries, for example but the basic concept of793insurability does not apply to terrorism where neither the794regulators, nor the industry possesses the necessary insight or795data to anticipate the frequency or severity of a terrorist796attack, or its impact on the insurance industry solvency.797    And furthermore, policyholders lack sufficient knowledge to798truly mitigate their risk. Elsewhere, you can choose to drive799carefully or not, you can install smoke alarms or not, but800terrorism is ultimately an attack on the values that we all801share as Americans regardless of whether it is a foreign or802domestic actor, and regardless of where it occurs. If our803government is the embodiment of the values that terrorists are804attacking, it stands to reason that the government does bear805some responsibility to absorb the financial impact of such an806attack.807    The tragic 9/11 attacks resulted in more than $40 billion808in total insured losses, of which nearly $25 billion was just809property losses. Now, at the time of the attack, that was810greater than the historic average natural disaster losses of811the entire U.S. property casualty industry in a typical year.812    Insurers have a tremendous capacity to absorb losses, but813they are vulnerable to a ``tail'' event with massive impact.814TRIA removes that ``tail'' event risk. By doing so, the private815market can manage at least one variable, severity, and offer816coverage at reasonable prices.817    To keep commercial coverage available, we support a long-818term TRIA reauthorization of 7 to 10 years. TRIA stabilizes not819only the insurance sector, but the broader economy. Businesses820and consumers that live, work and shop in communities in every821State benefit from a stable insurance sector which provides822commercial terrorism insurance only because TRIA exists as a823backstop.824    This stability has come at little cost to the Federal825Government, fortunately with no claims paid since its creation,826knock on wood again, while insuring a market that takes on827billions of dollars in risk that would otherwise go largely828uninsured.829    It is also worth noting how TRIA handles more exotic830terrorism risk, including, as mentioned, nuclear, biological,831chemical and radiological events, or NBCR. TRIA does not force832insurers to cover these extreme risks, nor does it override833policy exclusions. It only provides a backstop for losses the834insurer has already contracted to cover, and this keeps835insurers responsible for their coverage choices while insuring836a Federal safety net for extreme terrorism events.837    Without TRIA the question is simple, should taxpayers cover838the first dollar of losses, or the first dollar after the839insurance industry has paid out more than $53 billion. Thank840you, sir.841842    [The prepared statement of Mr. Mais follows:]843    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]844845    Chairman Flood. Thank you, sir. We will now turn to member846questions. I now recognize myself for 5 minutes for some847questions.848    Mrs. Heck, kind of a two-part question to start with you.849Can you describe the State of the market before the terrorist850attack September 11, 2001, and then how did the market react in851the aftermath of September 11th?852    Mrs. Heck. Thank you.853    Chairman Flood. Your microphone.854    Mrs. Heck. I have to get this right but thank you for the855question.856    Prior to the attacks on September 11th, the concept of857terrorism did not even exist in insurance contracts. So858overnight we all of a sudden had this exposure that could859potentially sink every insurance company.860    Immediately after the attacks, companies had to recognize861that exposure and pare down concentration. So exclusions were862added to policies, companies were withdrawing from markets, it863caused banks to stop lending, construction projects halted, so864essentially the economy just froze in place until TRIA was put865together.866    Now, the TRIA program was put together in 2002, and almost867overnight the markets began to behave in a way that was868competitive, and it made coverage available and affordable, and869it continues to work that way today.870    Chairman Flood. Thank you for that. Ms. Sartain, you did a871nice job in your opening remarks talking about the implications872of what failure to reauthorize TRIA would mean. Two-part873question for you, if we fail to reauthorize TRIA by, let us874say, January 1, 2027, what will happen to this market?875    Number two, what kinds of effects would we see if the876program fully lapsed and was not reauthorized in 2028?877    Ms. Sartain. Thank you for the question. The insurance878market requires stability, and they need to understand what879they are on the hook for. If we wait too long to reauthorize880TRIA, many insurance companies will start withdrawing coverage,881limiting coverage, replacing sunset provisions in their policy,882which means they can write the coverage, but if TRIA is not883reauthorized, the coverage will go away.884    If TRIA is not reauthorized, as we saw in 2015 where it885lapsed for about 12 days, the markets do the same thing, they886start limiting coverage, they start increasing prices, and they887look to sunset the coverage. I do not believe that terrorism888coverage would exist if TRIPRA is not reauthorized.889    Chairman Flood. Thank you for that. Mr. Webel, because TRIA890has never been tested, the mandatory recoupment provision in891the program has never been tested either. Can you help explain892how mandatory recoupment works under TRIA, and has there ever893been an attempt to conduct an analysis of how recoupment would894work in practice?895    Mr. Webel. Yes. The recoupment basically, I mean, is896subject to a significant amount of Treasury discretion as to897exactly the percentages that would be placed and how they would898be placed. There is ability to change what the premiums look899like.900    The total amount under the law that is supposed to be901recouped is 140 percent of the outlays. There is a time902schedule in the law, depending on when exactly the terrorism903attack occurs and when these recoupments have to come back.904    This timeframe is, frankly, a little unrealistic, I think,905particularly for a large-scale attack, so I would expect a906future Congress to definitely revisit those provisions in the907aftermath of an attack at the end of the program.908    Chairman Flood. Thank you for that. Okay. Fast fact here,909you might not know this, but when the Cornhuskers are playing910football in Lincoln, the stadium becomes the third largest city911in Nebraska. Ninety thousand people descend to watch the912Huskers play football.913    Ms. Sartain, talk to me about the impact TRIA's non-914authorization would have on colleges and universities given915their role in America and what all happens there?916    Ms. Sartain. Absolutely. Colleges and universities and917educational systems are some of the biggest buyers of terrorism918risk insurance. As I mentioned in my comments, they represent a919symbolic part of the American culture, and it is also where our920young people go to learn and educate and become part of our921economy. So when you have concentrations of individuals in one922location, unfortunately they become a prime target for923potential terrorist attacks.924    The universities need to make sure that they can insure the925property, as well as the individuals, and TRIA provides the926backstop that gives them confidence to secure both the private927insurance that is available in the market, as well as what is928available through the backstop.929    Chairman Flood. Thank you very much. With that, I yield930back. I now recognize the ranking member of the full Financial931Services Committee, Ms. Waters, for 5 minutes.932    Ms. Waters. Thank you very much. Commissioner Mais, when933TRIA was first established in 2002, it was designed as a934temporary program with expectation that the private insurance935market would eventually assume the risk of terrorism coverage936and affordability. However, time has shown that absent TRIA,937private insurance carriers would not fill that gap. Since then,938TRIA has been reauthorized four times.939    In your view, if TRIA were to expire, would the private940market be able and willing to absorb these risks without941jeopardizing market stability or coverage availability?942    What are the benefits of having a longer reauthorization,943say, 10 years, or even longer, to our communities in order to944provide stability and consistency for their economic945development?946    Mr. Mais. Thank you, Ranking Member Waters. One of the947important things that we all face, everybody who has run a948business, everybody who is a regulator understands that949certainty is important.950    When it comes to insurance, that certainty is even more951important because, as I mentioned in my opening statement, the952capital commitments that are necessary are made in advance, and953the coverage has to be available in advance.954    For instance, if TRIA were to expire and not be renewed,955what we would expect is that all the coverages that would begin956after January 2026, that would be filled with uncertainty. I957would expect that, as Ms. Sartain said, what happened if TRIA958were not renewed, would be the same thing as we saw after 9/11;959the coverage was not available, coverage was--and even if it960were, it would have been too expensive, and we had significant961problems, significant knock-on problems, including what962mortgages and what buildings we simply were not able to have a963sit--we were not able to have the insurance coverage that964provided businesses with the certainty that they could965continue, which means that communities were affected.966    A big part of that is that this is not a normal risk.967Again, to go back to normal risk, if you have pretty much968everything else, even your natural catastrophic risk, those are969huge, but we can do things to help mitigate the damage, and we970know we could have a good idea, we can model that damage well.971    Terrorism we have no control over. Terrorism is hard to972price properly. So what would happen is that even if terrorism973insurance were, by some magic, affordable, it would be974unavailable--or if it were available, it would be unaffordable,975and that is what we are afraid of.976    We as regulators want to make sure that, A, the insurers977are around to pay the claims, that consumers get the coverage978they need, and all of this is made possible when it comes to979terrorism because we have TRIA as a backstop providing that980certainty. Thank you.981    Ms. Waters. Let me just speculate here for a moment. You982probably have been involved in a lot of conversations about983what happened in California and our wildfires. One of our984communities, in particular, has suffered greatly, and there are985a lot of problems that we are finding out about as it relates986to what happens when you have this kind of catastrophe.987    One of them, and I do not want to have to ask this question988of you because it may be way out of your range here, but a989person receiving disability, for example, had devastation and990the insurance company, of course, was responsible because he991had paid his premiums, he has paid up all of that, but he is992being told now that if he takes the insurance money, that he993loses his disability and if he does not take his disability,994even though the insurance company is going to pay up, he still995needs money to live on every day. So, I was just made aware of996this problem, and I am taking a look at it, but all of these997kinds of problems are surfacing as it relates to insurance. I998am sure you have heard about a lot of these.999    If you have any suggestions at all based on anything that1000you know, or you are hearing that needs to be corrected, what1001needs to be strengthened, needs to protect our premium payers,1002I would certainly like to have you share that with us.1003    Mr. Mais. Thank you, Congresswoman. The north star for U.S.1004State insurance regulators is consumer protection. No system is1005perfect, we do recognize that, and that is exactly why we have1006systems in place to address this.1007    You speak of the wildfires in California, I will tell you1008it was probably a month or two ago that we--a whole bunch of us1009insurance regulators from all----1010    Chairman Flood. The gentlelady's time has expired. Thank1011you. All right. The chairman of the full committee----1012    Ms. Waters. Thank you.1013    Chairman Flood. Gentleman from Arkansas, Mr. Hill, is1014recognized for 5 minutes.1015    Chairman Hill. Thank you, Chairman Flood. Thanks again to1016the panel for your constructive help on thinking through this1017reauthorization.1018    Mr. Webel, let us start with you. Thanks for all of your1019advice to Congress over many, many years on this topic. I think1020you have now studied all four reauthorizations.1021    What is your observation about this program's1022effectiveness? In other words, you have now seen it be1023reauthorized, what is your view on some of the things you have1024heard today as to the essential nature of it?1025    Mr. Webel. I mean, I think it has obviously been very1026effective in keeping the market going. It is, also, I1027observed--you know, an insurance program that never actually1028has to operate or payout always looks very effective. So, I1029think that there are some questions and probably appropriate1030congressional oversight of Treasury in terms of are they1031prepared, if we did have an attack, what do their systems look1032like, what would be going forward.1033    Particularly since it was set as a temporary program to1034begin with, whether or not if--as listening to people, it seems1035like it may be a permanent, essentially a permanent program,1036were all the structures that were put in place when it was a1037temporary program, does that make sense if it is going to be1038around for the duration.1039    Chairman Hill. Would you--does Treasury, to your knowledge,1040do like tabletop exercises on this, and had they--do you feel1041that you are not the Inspector General of Treasury of this1042program, but from your observation, is the government1043functioning in a way like they are prepared to operate?1044    Mr. Webel. I believe so. I mean, I have had interaction1045with the Treasury and the Freedom of Information Act (FOIA)1046office on various things of this over the years, and I have1047always gotten what I needed out of them when I had questions. I1048believe in general that they are doing a good job of being1049prepared, but I have also, as a creature of Congress over the1050years, observed that sometimes it is not a bad thing for1051Congress to ask questions, too.1052    Chairman Hill. Yes. So you think as a part of this we1053should do that and have the committee assess the operational1054aspects that the authorization directs of the Treasury?1055    Mr. Webel. I think that is, as I said, always a reasonable1056thing for Congress to do.1057    Chairman Hill. When you look at these reauthorizations, do1058you have comments on whether both policyholders and insurers1059have a clear set of expectations about how the program would1060work if it ever were deployed, how do you feel about that?1061    Mr. Webel. I mean, I think that they are--I think that the1062expectations really are not as clear as they could be,1063especially in the realm of nuclear, biological, chemical, and1064radiological.1065    I remember past hearings where I would hear people in your1066seats talk about scenarios where this would be particularly1067needed, and the sort of typical disaster scenario for a high-1068level terrorist attack goes to a suitcase nuclear weapon in1069Manhattan, or bombing a chemical train that is going through an1070area, and I remember thinking to myself in various points of1071like, that would not be covered under TRIA because most private1072policies would exclude that sort of thing and the program works1073through those private policies.1074    So I think there is a hole in the expectations,1075particularly when it comes to that.1076    Chairman Hill. Well, I think your perspective is really1077helpful, and I appreciate the panel's views as well. I mean, I1078think that clarity of what we are insuring and what we are not1079insuring and how it works in practice is very important and it1080should be assessed carefully. I want to thank you, Mr.1081Chairman, for the hearing, Mr. Cleaver, and I yield back.1082    Chairman Flood. The gentleman yields back. The ranking1083member of the subcommittee, gentleman from Missouri, Mr.1084Cleaver, is now recognized for 5 minutes.1085    Mr. Cleaver. Thank you, Mr. Chairman. Mr. Webel, the1086chairman and I are from the same center of the country,1087Nebraska, Missouri, and so, there is sometimes this misguided1088perception that only the west coast or the east coast, New York1089or Los Angeles are places that should think about TRIA. Will1090you please explain why TRIA is important in different regions1091of the country?1092    Mr. Webel. Sure. I am from the southern part of Illinois,1093so I--a long way from Chicago, so I do understand.1094    I think that the chairman mentioned, particularly at1095Nebraska stadium, it is full of people. Educational1096institutions need terrorism coverage, too. We have large-scale1097universities across the country. There is any number of1098potential places that a terrorist could attack that would cause1099damage that people do not think about, and it is precisely--the1100terrorists are seeking those sorts of places to attack.1101    So I do think that the coverage is needed in places outside1102of Los Angeles and New York, and that TRIA has helped get1103coverage to those places.1104    Mr. Cleaver. Thank you very much. Mr. Mais, in your1105testimony this morning you note, and I quote, the question is1106simple, should taxpayers cover the first dollar losses or the1107first dollar after the insurance industry, unquote. I actually1108agree with you that with or without TRIA, the Federal1109Government would step in, and TRIA is the best outcome for1110taxpayers.1111    How long would you like to see TRIA reauthorized, you know,1112understanding the tradeoffs and so forth?1113    Mr. Mais. Short answer to that is as long as possible but1114it is certainly up to this committee, but certainty for all of1115us is best.1116    Mr. Cleaver. Actually, it is not up to this committee, but1117I do think that the entire Congress would very likely agree1118with what you just said. I just want to make sure that it gets1119on the record.1120    Mrs. Heck, over the years some have argued that TRIA is1121effectively crowding out the private reinsurance market by1122providing Federal reinsurance. If the private reinsurance1123industry were willing and able to provide this coverage, then I1124would expect them to lobby against TRIA in order to push out1125the competition, and yet that is not the case. In fact, in 20241126the Treasury report stated, and I quote, Treasury has no--has1127not observed any aspects of the program that have discouraged1128or impeded insurers from providing property and casualty1129claims, and that TRIA is actually not crowding out the private1130sector. What say you?1131    Mrs. Heck. Thank you for the question. The program actually1132encourages the private marketplace. If the program were not in1133place there would be very few market participants. We saw that1134in the aftermath of 9/11, and, of course, in 2014, even though1135it was only for 12 days, we saw the market reaction. So it is1136precisely because of the program that we see private1137participation.1138    Now, one thing that I want to press upon you is the fact1139that in order for the coverage to be available and affordable,1140it is important to have a range of carriers involved in the1141program, which means making it possible for small, mid-sized,1142and large carriers to participate, which means that the1143triggers and the deductibles matter.1144    Mr. Cleaver. Thank you. Mr. Chairman, I yield back.1145    Chairman Flood. The gentleman yields back. The gentleman1146from Tennessee, Mr. Rose, is now recognized for 5 minutes.1147    Mr. Rose. Thank you, Chairman Flood and Ranking Member1148Cleaver for holding this important hearing and thank you to our1149witnesses for being with us today.1150    Mrs. Heck, I want to follow up on where Congressman Cleaver1151just was, and Mr. Webel, I will come to you as well because I1152am kind of curious why, why do you believe a private market1153would not naturally form here and be robust, what is your--I1154mean, I have my own intuition or suspicion there, but tell me1155why you think that is true if TRIA was gone.1156    Mrs. Heck. Because we--well, first of all, we do not have1157to guess because we saw it happen. The reason for that is1158because the exposure is too large and too unpredictable that a1159carrier, the private market is not willing to put their capital1160at risk at something that they cannot quantify.1161    Mr. Rose. Impossible to underwrite.1162    Mrs. Heck. It is. It is impossible. So because of the1163unpredictability, and the fact that terrorists can change where1164they attack just because they choose to, you cannot use the1165past to be able to predict the future. Any of the metrics that1166could help in trying to model that exposure is protected as a1167matter of national security, so it is just not possible.1168    Mr. Rose. So is not a part of that kind of the implied or1169implicit belief that the government will backstop this, would1170be required to in some way, do you think that is true, is that1171what is also driving those who might desire the coverage to not1172go seek it out because they think, well, the government is1173going to be there for us?1174    Mrs. Heck. Yes. I actually think it is the opposite,1175because the backstop is there the private market is willing to1176put out limits, because they are able to understand what that1177exposure is.1178    Every insurance company has to manage their capital and the1179issue with a terrorism attack is that it is so potentially1180catastrophic that it could sink the company. So companies are1181not willing to put their balance sheets at risk because it1182would cause multiple insolvencies. So because the backstop is1183there and the government can step in, it makes it possible to1184put out limits because there is some certainty. The really good1185news about the program is that taxpayers are fully protected1186because every dollar is paid back 40 percent higher than what1187the government outlays. So it is just a way to smooth the1188losses so that carriers can put some--you know, put out limits.1189    Mr. Rose. But I have some skepticism about whether we would1190actually recover that money after the fact, and so I wonder,1191should there not be a more proactive plan for putting something1192away for a rainy day, if you will?1193    Mrs. Heck. Well----1194    Mr. Rose. Even though this has never been triggered, right,1195not once.1196    Mrs. Heck. In my opinion, it is not necessary because what1197we have seen over the past 24 years is having the backstop in1198place, it has allowed for a viable market.1199    I do not know that would necessarily add anything because1200at the end of the day the Treasury Department has the authority1201embedded in the law to collect the money, and they also have1202the authority to be able to collect more than what is provided1203for in the statute.1204    Mr. Rose. Do you think that we should, in some way, index1205the triggering numbers so that over time they do not become1206small enough that they are maybe ineffective?1207    So the $5 million and $200 million trigger, I mean, if we1208index those from when TRIA was originally put in place, they1209would be quite different today. Should we do that so that the1210program does not become kind of obsolete in that regard?1211    Mrs. Heck. Well, I will talk about the two triggers1212separately. So with regard to the $200 million trigger, I do1213not think that trigger should be changed in any way because the1214trigger actually prevents market participation for small1215carriers.1216    Because of the way that the make-available provision works,1217which requires every company to offer the coverage if--for1218every eligible line of business, a smaller company could be in1219a position where a scenario happens. They have made the1220coverage available. They sustained losses. They have exhausted1221their deductible, but they cannot recover under the program1222because the trigger is too high.1223    The large companies are not impacted by the trigger, so I1224would argue, the trigger does not do much to protect taxpayers1225in any way.1226    Mr. Rose. Thank you. My time is expired. I appreciate your1227answers.1228    Chairman Flood. The gentleman yields back. The gentlewoman1229from New York, Ms. Velazquez, is now recognized for 5 minutes.1230    Ms. Velazquez. Thank you, Mr. Chairman and Ranking Member,1231for this important hearing. For me, this is deeply, deeply1232personal. I know exactly where I was, primary day in New York1233City for mayor, and I was standing in front of a school.1234    My staff called me and said, Something happened at the1235World Trade Center. Then another call, another tower, and I1236realized that something was really, really wrong.1237    So I would like to ask you, by a show of hands, does anyone1238on the panel think the TRIA program should not be reauthorized?1239    Good.1240    Ms. Sartain, the program is not currently set to expire1241until 2027, but can you explain why it is important to1242reauthorize the program early and why a long-term1243reauthorization is needed?1244    Ms. Sartain. Thank you for the question. Again, insurance1245companies and policyholders require stability so that they can1246make future plans.1247    As we saw in 2015 when TRIA lapsed, insurance companies1248needed to respond to limit the capital that they had exposed,1249and so we saw policyholders losing coverage, seeing increased1250premiums, or seeing some set provisions in the policies that1251were placed.1252    So by reauthorizing early, we allow the insurance market to1253continue to function well and smoothly, as well as managing the1254expense associated with this risk.1255    Ms. Velazquez. Thank you.1256    Mr. Schupp, you say in your testimony, and I quote,1257Treasury repeatedly raised concerns that captive insurers could1258be structured to gain the program. Can you please explain this1259statement?1260    Mr. Schupp. Certainly. Thank you. In the early years of the1261program, Treasury had acute concerns that a captive insurance1262company which, remember, is just a subsidiary of a noninsurance1263company--most Fortune 500 companies have one--that because the1264deductible which we have talked about is 20 percent of prior-1265year, direct-earned premium, that deductible, by utilizing a1266captive, would be tiny.1267    So in my example of the New York Times, and I picked them1268because I can get to that data--this data is very hard to1269find--they have, last year, they had total premium in their1270captive of about $800,000, maybe $850,000.1271    That gives them a $19,000 deductible under the program.1272After that, Treasury is on the hook for 80 percent of losses.1273    In contrast, a company like an AIG or a Travelers may have1274a backstop deductible of $2 billion.1275    Ms. Velazquez. How should we address this concern?1276    Mr. Schupp. I think there are two ways to address it:1277Number one is information, some transparency, both to Treasury1278and to the public.1279    So Treasury is not able to collect data from these1280captives. It is shooting in the dark, where everyone else gets1281data through the NAIC, all the other participants. So who is1282actually participating in it and who is behind them, what1283corporations are actually running it.1284    Second, there is a way to--very simple way to cutoff the1285subsidies that are running, and I cover that in my testimony.1286    Ms. Velazquez. Thank you.1287    Ms. Sartain and Mrs. Heck, if you please also address this1288question.1289    Every time we discuss the reauthorization of TRIA, we1290debate the program's triggers. Currently, the Federal1291Government provides co-insurance of 80 percent of losses up to1292$100 billion cap if the loss exceeds initial deductible of 201293percent of an insurer's annual premiums for commercial1294property.1295    Do you think adjustment to any of these levels are1296necessary, even for inflation?1297    Ms. Sartain. Maybe just two ways to think about that.1298Because of the way that insurance is underwritten, based on the1299values of the buildings or the risk within it, there is an1300automatic indexing that comes through the premiums that are1301charged.1302    Second, when it comes to what the triggers are, I think the1303most important thing is that there is certainty as to what1304those triggers are, and there is not a shock to the insurance1305markets or the policyholders as to the change in those1306triggers.1307    In terms of changing the triggers, I would suggest that1308there be a thorough study of the impact of those triggers on1309policyholders and the broader economy.1310    Ms. Velazquez. Do you have anything to add?1311    Mrs. Heck. Oh, yes. So to add to with what Ms. Sartain1312said, just to give you an example, my company, for example, our1313deductible post-9/11, in 2002, was $10 million, and today it is1314$250 million.1315    So to Ms. Sartain's point, there is an automatic indexing1316that happens because the basis for calculating the deductible--1317--1318    Chairman Flood. The gentlelady's time is expired.1319    Ms. Heck [continuing]. has already considered inflation.1320    Chairman Flood. Thank you very much. The gentlelady yields1321back.1322    Ms. Velazquez. Thank you. I yield back.1323    Chairman Flood. The gentleman from Montana--in fact, he is1324the former insurance czar of Montana, Mr. Downing, is now1325recognized for 5 minutes.1326    Mr. Downing. Well, Thank you, Chairman Flood, thank you,1327Ranking Member, and thank you to the witnesses for being here1328today.1329    And, Commissioner Mais, great to see you. Please send my1330regards back to my former colleagues.1331    The Terrorism Risk Insurance Program was essential to1332stabilizing insurance markets after the September 11th attacks,1333and I am glad we are having this hearing to evaluate the1334effectiveness of the program and its future.1335    As many of you know, I have long called for the elimination1336of the Federal Insurance Office, or FIO, under Dodd-Frank. FIO1337is directed to assist the Treasury Secretary in administering1338the Terrorism Risk Insurance Program.1339    However, this program existed nearly a decade prior to the1340creation of FIO and, as far as I know, without any issues.1341    I am going to start with Mr. Heck--Mrs. Heck. I'm sorry.1342    Can you tell me what role FIO plays in the Terrorism Risk1343Insurance Program and how it operated prior to the creation of1344FIO under Dodd-Frank?1345    Mrs. Heck. So, yes, so prior to the creation of FIO, the1346program functioned just fine. There is a small office, the1347Terrorism Risk Insurance Program (TRIP) office is part of FIO.1348There is a small number of people that participate, and there1349is no reason why those people could not continue to operate in1350the event of attack.1351    Mr. Downing. Right. So to be clear, the program operated1352just fine before FIO?1353    Mrs. Heck. Correct.1354    Mr. Downing. If FIO was eliminated today, how would that1355impact the program?1356    Mrs. Heck. I do not think that it would impact the program1357at all. I think that, again, there are a few people within the1358TRIP office which is a sub segment of FIO that could continue1359to administer the program and assist the Treasury Department1360after an event.1361    Mr. Downing. Right. Thank you.1362    Mr. Webel, what are your thoughts on FIO and TRIA?1363    Mr. Webel. I think that, I mean, since the last--say, the1364last 10-plus years, it has felt like there has been more1365activity because of FIO but that is also coinciding with the1366additional responsibilities put by Congress when they1367reauthorized it in 2015.1368    So you see a lot more activity. There are a lot more1369reports coming out under FIO, but it is not necessarily clear.1370Is that because of FIO or is that because of the fact that1371Congress has basically asked the Treasury to do this.1372    Mr. Downing. All right. Thank you.1373    So as mentioned earlier in this hearing, TRIA was intended1374to be temporary until the private markets stabilized and were1375able to accurately model and price in the risk of terrorism.1376    Mr. Webel, to you again. Has the program met these goals?1377    Mr. Webel. Strictly speaking, no. I mean, it is a 3-year1378temporary program. It is 22 years later. It is still here. So1379if you take the Congress at the time that said it is going to1380be 3 years, then it did not meet the goal of going out of1381existence.1382    I think it has met the goals of backstopping a terrorism1383market and mitigating some of the broader economic damage that1384a lack of terrorism insurance would have.1385    Mr. Downing. So staying with you, Mr. Webel, what might the1386private market look like when a Federal backstop is no longer1387needed?1388    Mr. Webel. I mean, I think that--I think it would look1389different--certainly very different in a sense that there are1390all the problems about modeling terrorism that other people1391have gone into. It would definitely be smaller.1392    I think a lot of the risk would remain on bank balance1393sheets, much as you see in some other areas where if a bank has1394a choice between writing a loan and you cannot get terrorism1395coverage, are they going to still back the project? In some1396cases, they probably would.1397    So the risk would still be there, but it would probably be1398more diffused throughout the financial sector.1399    Mr. Downing. So what would, if any, what would the1400alternatives be to a Federal program?1401    Mr. Webel. I mean, you would have some more private1402reinsurance perhaps. You would have some primary insurers that1403might continue to take on some of the risk, or as I said, you1404would have banks and lenders that would essentially be taking1405on the risk.1406    Mr. Downing. How are other countries, how do they account1407for this risk?1408    Mr. Webel. Most other countries or many other countries do1409have some forms of backstops. Some of them there terrorism-1410specific. Some of them roll it into a broader, catastrophic1411program that does not just cover terrorism but also might cover1412wind or flood or other catastrophic events.1413    Mr. Downing. All right. Thank you.1414    Mrs. Heck, I saw you kind of wiggle there when I was asking1415that, so it seems you might have something to say about the1416private market without a Federal backstop.1417    Mrs. Heck. Yes. I would argue that without the program1418there really would not be much of a private market and to your1419question as to what would happen after event, I think the1420Federal Government would probably feel the need to step in to1421be able to stabilize the economy.1422    The way the TRIA program works, it actually allows for that1423to happen with recoupment so that taxpayers are protected. So1424in a sense, what TRIA is doing is, it is preventing the1425government----1426    Chairman Flood. The gentlelady's time is expired.1427    Mr. Downing. Thank you, Mr. Chairman. I yield.1428    Chairman Flood. The gentleman yields back. The gentlewoman1429from Massachusetts, Ms. Pressley, is now recognized for 51430minutes.1431    Ms. Pressley. Thank you.1432    Every year, thousands of people from every walk of life1433come together from around the world for the Boston Marathon.1434Starting in Hopkinton, runners traverse 26.2 long miles past1435schools, homes, and businesses, toward the finish line in1436Boston's Copley Square.1437    In April 2013, what was supposed to be a festive Monday1438celebration for the Boston community with smiles and hugs1439turned into a nightmare we will never forget. The terrorist1440attack at the finish line robbed us of precious souls, injured1441hundreds who are still recovering from physical injuries and1442invisible wounds, and traumatized thousands.1443    My neighbors and our community are still healing from1444tragedy, which is why I drafted, in close partnership with1445marathon survivors, the Post-Disaster Mental Health Response1446Act. This was signed into law in 2022.1447    It is legislation to extend Federal Emergency Management1448Agency's (FEMA's) crisis counseling supports to survivors of1449terrorist attacks, and it is why I especially appreciate1450today's hearing focused on reauthorizing the Terrorism Risk1451Insurance Act, also known as TRIA.1452    For the general public, TRIA is a form of insurance to1453cover the economic losses to businesses and is critical to1454rebuilding community after a terrorist attack. It supports1455brick-and-mortar shops that are physically damaged, and it1456helps business owners pay their employers, so no worker has to1457worry about bills while focusing on recovery.1458    But TRIA could be strengthened to better meet the needs of1459cities and States. In the aftermath of the Boston Marathon1460bombing, businesses waited for weeks, months, and ultimately1461more than a year to learn if the Treasury Secretary would1462classify the assault on our city as a terrorist attack.1463    That classification is the essential first step in1464determining if insurance payouts will be backed by the1465government.1466    Now, Mr. Webel, can you explain why Treasury may take1467lengthened time periods to classify a terrorist attack?1468    Mr. Webel. I mean, I think there is obvious difficulties in1469terms of attribution of terrorist attack, who exactly performed1470it, that is critical in determining the certification.1471    I think in the case, particular of the bombing in Boston,1472the biggest issue was the insured losses not meeting the $51473million certification and the fact that it is property casualty1474losses, not losses to life and limb and health insurance that1475count.1476    So I think that in some ways, a lot of the difficulties1477here revolve around the integration of what is a reinsurance1478program, TRIA, in primary insurance coverage, which is the1479coverage that the insurers are giving to the businesses that1480were around the bombing.1481    In most cases, primary insurance would go ahead and pay,1482whereas if there was reinsurance coverage in the private1483sector, there would then be----1484    Ms. Pressley. Thank you.1485    Mr. Webel [continuing]. a negotiation between them but this1486intermixing of the two causes, I think, confusion.1487    Ms. Pressley. Thank you so much, Mr. Webel.1488    Commissioner Mais, insurers and businesses alike want1489certainty on the timing of whether an event will be declared an1490act of terrorism. What are the consequences of delays in1491getting a response from Treasury?1492    Mr. Mais. The consequences of delays in getting a response1493from Treasury post-event, is that what you are----1494    Ms. Pressley. Yes.1495    Mr. Mais. I am uncertain as to how to respond to that1496because, frankly, TRIA is run by Treasury. There are very1497definite requirements that must be met. As we saw in the Boston1498Marathon, as was just explained----1499    Ms. Pressley. Okay, fair enough. Let me ask a question1500because the clock is ticking here.1501    Mr. Webel and Commissioner Mais, there is a proposal to1502require Treasury to respond to requests for classification from1503a Governor within 6 months, and even if denied, a Governor can1504make the request again. This would offer certainty around1505response timing, but not finality for an answer.1506    How could such a system help or hinder the current process1507for TRIA?1508    Mr. Webel. I mean, I think it would certainly help the1509primary insurers to have certainty to pay out or not to pay out1510based on their policies that revolve around certification.1511    Mr. Mais. Again, I would defer to Treasury and the1512Congress, but certainty always helps.1513    Ms. Pressley. Okay. Thank you.1514    I truly pray that no community experiences a terrorist1515attack. No one should have to live with that pain, that fear,1516and that trauma.1517    To my neighbors still struggling in the aftermath and1518grieving the loss of a loved one, or what could have been, know1519that your Congresswoman sees you and your family.1520    I yield back.1521    Chairman Flood. The gentlewoman yields back.1522    A quick announcement. Do not be alarmed if you hear jets1523overhead in any 15 minutes. The Blue Angels are doing a1524scheduled flyover. So I figured with this group of people here1525today, I want to put you as ease.1526    The gentleman from New York, Mr. Lawler, is now recognized1527for 5 minutes.1528    Mr. Lawler. Thank you for that notification, Mr. Chairman.1529    We are here just a few days removed from the 24th1530anniversary of September 11th, a day that forever changed our1531country.1532    Unfortunately, the reality 24 years later is that we still1533have to deal with the threat of terrorism. There are people who1534do not like us and do not like the ideals and the values of1535this Nation.1536    We are grappling with the ramifications of the unholy1537alliance between Russia, Iran, China, and North Korea, and1538those who seek to undermine and destabilize the free world.1539    We are also dealing with a rise in extremism. In my1540district, the immediate suburbs of New York City, and where a1541large portion of my constituents commute into New York City for1542work, we have deeply felt the impact of past attacks and remain1543concerned for the future.1544    Today, my district continues to deal with the ramifications1545of 9/11, with first responders continuing to die from 9/11-1546related health illnesses.1547    New York remains arguably the largest target of terrorism1548in the world. It is critical for our businesses and developers1549to know both that they have this coverage and that the coverage1550is stable and sustainable for the long term.1551    Mr. Webel, or Ms. Sartain, what, if any, alternatives are1552there to a free, Federal reinsurance terrorism backstop? How do1553other countries handle terrorism risk insurance?1554    Mr. Webel. Other countries, as I mentioned, have various1555mixed programs. Some focus specifically on terrorism; some1556rolled into a more general catastrophic backstop.1557    In terms of what a program might look like outside of TRIA,1558obviously most insurance that you get have premiums of some1559kind up front, and it would not be impossible to envision a1560situation where some of the premium dollars that currently flow1561to primary insurers--and Treasury has estimated that over the1562life of TRIA, it is probably in the $60-to $70 billion of1563terrorism premium that has been collected by primary insurers.1564You could envision a situation where some of that was shared1565with Treasury for the backstop.1566    The downside to that is that would it increase the cost of1567terrorism insurance and so to the degree that you want to1568increase people purchasing the terrorism insurance so that it1569is in place after an event. If you were to charge premiums for1570TRIA up front, you would obviously lower that participation1571rate.1572    Mr. Lawler. Mrs. Heck or Mr. Schupp, how important is it1573for TRIA to have clear rules and expectations for both1574policyholders and insurers, and are there steps that Congress1575can take to increase certainty in this process should an event1576ever be certified under TRIA?1577    Mrs. Heck. First of all, having clear rules and certainty1578is critical. It is critical both to insurance companies who are1579providing the coverage, and the business community who need the1580coverage. So that is absolutely important.1581    With regard to certainty, should there be any changes to1582the program, the program has proven over the past 24 years that1583it is really working the way it is designed. So we do not feel1584that any legislative changes are necessary.1585    What we do think is important is that there is swift1586reauthorization for as long a term as possible, and that is1587going to provide the most certainty to the market.1588    The second thing that we think is critically important is1589to not increase the trigger to the extent that it would keep1590out the smaller companies, because in order to have a market1591that is thriving and robust and affordable, it is important to1592have as many companies to participat in the program as1593possible.1594    Mr. Lawler. Thank you.1595    Mr. Schupp. If I may very briefly, you have to keep in mind1596that the provisions of TRIA have made their way into the1597insurance contracts, into the reinsurance contracts. So when1598something changes here, it has that downstream effect and1599creates contractual uncertainty.1600    It is not just a program that hangs behind, but it is1601actually infiltrated the contracts themselves. So any changes1602need to be done very early and thoughtfully.1603    Mr. Lawler. All right. With the TRIA set to expire at the1604end of 2027, obviously anything that would change, or the1605reauthorization, needs to be in 2026 to give certainty to the1606marketplace.1607    Ms. Sartain, TRIA includes a mandatory make-available1608provision that requires all insurers to offer terrorism1609coverage to their insureds.1610    How has that requirement impacted the operations of small1611and larger insurers?1612    Ms. Sartain. It has required that everybody participates,1613which means that there is more capacity available in the market1614than would otherwise be the case.1615    Mr. Lawler. Thank you. I yield back.1616    Chairman Flood. The gentleman yields back. The gentlewoman1617from Michigan, Ms. Tlaib, is now recognized for 5 minutes.1618    Ms. Tlaib. Thank you, Mr. Chairman.1619    We all know for insurance to really work, it must be able1620to, I guess, model and predict the likelihood of an event1621occurring, right, in addition to its impact.1622    However, terrorism risk, and we are talking about this, is1623incredibly unique here. Much of the information about terrorism1624risk is not publicly available, right?1625    The number of terror events also does not give one a large1626sample size to draw from in making certain future predictions.1627    So Commissioner Mais, you touched on this in your1628testimony, but can you give a little bit more detail about why1629private insurance industry is not well-suited to addressing1630terrorism risk in particular?1631    It is not just what I said, those factors, but also--and no1632offense to anybody, it is very pro--just let the private1633insurance companies do whatever they want--they just do not1634do--we almost always have to force them to do what is right1635here, even with high risks, because they are all very driven by1636profit and so forth.1637    I get it, you want to keep the company going and moving but1638I think right here, in this unique situation, I think it is1639important for, I think, my residents who are listening in, to1640understand why we have to have this in place.1641    Mr. Mais. Thank you, Congresswoman, and, yes, you are1642absolutely correct. The quality of that risk is simply, it is1643so difficult to predict, so you cannot properly price for it.1644    As regulators, we need to ensure that there is solvency. If1645you cannot tell what the result is going to be, the frequency,1646or the severity, then you are pretty much out there flying1647blind. For us as regulators, it would make it difficult to1648ensure that consumers get the coverage they deserve.1649    Ms. Tlaib. Despite this, someone might still think the1650private market should be responsible for this reinsure--you1651know, insurance, not the government.1652    So, Mr. Webel, when the program briefly lapsed at the end1653of 2014, did we see private insurers move to exclude terrorism1654losses?1655    Mr. Webel. Generally, yes. There are provisions put in the1656contracts calling for that.1657    Ms. Tlaib. I would like to turn to recoupment because I1658think--starting with mandatory recoupment.1659    Mr. Webel, in your testimony, you write that the mandatory1660recoupment would be equal to 140 percent of the difference1661between the aggregate retention amount and the total amount of1662insured losses that were not reimbursed by the government,1663direct quote from your testimony.1664    First, can you help us understand, okay--my mom's1665watching--like, help people understand, because the public need1666to understand why this is important here. That is my first1667question, to understand that sentence and explain aggregate1668retention.1669    Second is, the recoupment percentage has changed over time1670from 100 percent to 140 percent. Are you--you know, what is the1671rationale around that change?1672    Mr. Webel. Sure. The rationale for that, I think, largely1673revolves around Congressional Budget Office scoring rules, and1674that post-event recoupment actually would get deducted by1675insurance companies from other taxes.1676    So therefore, even though it is being paid to the1677government, it would result in less taxes being given to the1678government in other places. Therefore, the amount in past1679reauthorization was increased essentially to allow for this1680budget-neutral scoring with regard to Congressional Budget1681Office (CBO).1682    Ms. Tlaib. Okay. Commissioner Mais, how do you feel about1683the congressionally determined parameters within the Treasury1684Secretary--which the Treasury Secretary makes that decision?1685    Mr. Mais. We follow the law and the----1686    Ms. Tlaib. Are they too restrictive, too loose?1687    Mr. Mais. Again, we are here to follow the law. Congress1688decided there was----1689    Ms. Tlaib. Are there any changes that you would propose?1690    Mr. Mais. There are no--that is really not up to us to1691discuss as State insurance regulators. We just----1692    Ms. Tlaib. Yes.1693    Mr. Mais [continuing]. need to make sure that the coverage1694is there and that the companies are solvent.1695    Ms. Tlaib. Every time I bring up private insurance1696companies, the auto insurance industry comes to mind in my1697district. Everybody is smiling. They probably know. I got on1698this committee to work on that issue.1699    Does anybody here on this panel know anything about what is1700going on with the auto insurance industry? Anyone?1701    Oh, Mr. Schupp.1702    Well, because why are they now asking for non-driving1703factors like the GPA--literally your GPA of your student in1704college? What does that have to do with whether or not you are1705a good driver? Does anybody know?1706    How about ZIP code? How about whether or not you have a1707Ph.D. or are you married? What the heck does that have to do1708with whether somebody is a good driver or not? How is that a1709predictor?1710    Studies show that somebody with a DUI, because he has a1711high credit score, is paying three times less than the person1712with no DUI but has a lower credit score. Do you not think that1713is discriminatory?1714    Mr. Schupp. So insurance is discriminatory, right, by its1715nature. It is supposed to be discriminatory----1716    Ms. Tlaib. But they are asking for the GPA of our kids.1717    Mr. Schupp. But it is not supposed to be----1718    Ms. Tlaib. What the hell does that have to do with whether1719or not we are a good driver?1720    Mr. Schupp. But it should not be unfairly discriminatory,1721and I think those are the questions----1722    Ms. Tlaib. I think non-driving factors should be1723prohibited.1724    Thank you.1725    Chairman Flood. The gentlewoman yields back. The1726gentlewoman from Texas, Ms. De La Cruz, is now recognized for 51727minutes.1728    Ms. De La Cruz. Thank you, Mr. Chairman, for holding this1729hearing today.1730    I enjoyed serving as the vice chair of Housing and1731Insurance Committee. It is an area that I worked in and--I am1732sorry--I worked in housing and insurance for over 20 years, so1733this is a meaningful area. I was taken back by the1734Congresswoman's comments because unless you have actually1735worked in the insurance industry, then you have a better1736understanding of why these factors are important.1737    And so, I would encourage my colleague to actually meet1738with people who work in the industry and who understand the1739statistics and what drives actual cost.1740    That put aside, coming from the insurance world, the1741private insurance world, including auto and housing insurance,1742it is interesting to learn about this large-scale, federally1743backed insurance program.1744    Very recently 9/11 just passed, a sad day in our Nation's1745history and a day of complete terror, especially for our fellow1746citizens in New York City. While we hope that a terrorist1747attack like that never happens again, we do need to be prepared1748should something happen, and that is why we are in Congress.1749    So creating the Terrorism Risk Insurance Act, or TRIA, was1750very important, and is very important.1751    This is a bill that has been reauthorized four times in a1752bipartisan manner, and helps our country, our communities, and1753our businesses be prepared for the future.1754    One benefit of TRIA is that it helps Americans get reliable1755and affordable energy by facilitating insurance of critical1756energy projects built right here in the United States.1757    For Texas and my district, this means TRIA supports jobs,1758as my State is home to many energy-producing companies,1759workers, and projects. TRIA makes terrorism insurance remain1760both available and affordable to energy producers in Texas and1761across America.1762    Ms. Sartain--excuse if I did not quite get that right--1763without TRIA, is it fair to say that insurance would be unable1764to offer this coverage which would leave critical1765infrastructure like refineries, pipelines, and power plants1766exposed to catastrophic financial loss?1767    Ms. Sartain. The short answer is yes. Marsh McLennan1768Companies also employs people in Texas as we do across the1769United States, and the energy sector is an important sector1770that we serve, understanding that energy security is key to the1771security of this country.1772    Without TRIA, terrorism insurance would prevent projects1773from moving forward, prevent things from moving around the1774country, and limit the recovery in the event--unfortunate event1775of a terrorist act.1776    Ms. De La Cruz. Now, as a Nation, we are moving toward1777energy dominance, and TRIA is vital to both our national energy1778security and economic resilience. TRIA's role in stabilizing1779the insurance market gives energy companies the confidence to1780invest in long-term infrastructure and workforce development.1781    Thankfully, the Treasury has never designated an event that1782would activate TRIA provisions, and I hope, quite frankly, that1783it never does.1784    How can we continue to ensure the program is properly1785prepared for the future, and are there any potential changes to1786the program the witnesses would like to briefly discuss?1787    Mrs. Heck.The first thing, by the way, Congresswoman, I1788applaud your comments earlier in your testimony.1789    I mean, one thing that I would like to point out is that1790insurance companies are not motivated by profit. What we are1791motivated by is providing coverage for our policyholders and1792being there after a loss, which means that it is very important1793that the industry remain solvent and be able to cover those1794losses.1795    With regard to the current program, what we found is that1796it works, and I think what is most important is that we renew1797it swiftly for a long term--for a long term so that the program1798is there to keep the market stabilized.1799    Ms. De La Cruz. Thank you. In regard to my earlier1800comments, one of the things that I like about the insurance1801industry is that it is based on facts and not feelings.1802    With that, I yield back.1803    Chairman Flood. The gentlewoman yields back. The1804gentlewoman from Georgia, Ms. Williams, is now recognized for 51805minutes.1806    Ms. Williams of Georgia. Thank you, Chairman Flood and1807Ranking Member Cleaver, for this hearing today, and thank you1808to all of our witnesses, because this is a conversation that I1809really want to understand better and make sure that my district1810understands.1811    I represent Georgia's Fifth Congressional District, a1812region with a very vibrant business community, and it is1813centered in Atlanta where we have a lot of large-scale national1814security events.1815    While we cannot predict when and where a terrorist attack1816could happen on our American soil, we know that sometimes big1817events are a draw, and so that brings a lot of things to mind1818for me.1819    The city of Atlanta is preparing to host the World Cup next1820year, and it is a stark reminder of what happened almost 301821years ago when the Centennial Olympic Park bombing happened1822during the 1996 Olympics.1823    Now, this was pre-TRIA being implemented, so that was not1824something that businesses and the community of Atlanta had1825access to, which is why this is so important to me.1826    Terrorism risk insurance, or TRIA, is such an important1827program and, quite frankly, a program that no matter what side1828of the aisle you are on, as you have heard today, we all agree1829that this is a program that should exist, and this coverage is1830very important.1831    Mr. Webel, I would imagine that most people perceive TRIA1832as being a regional issue for big cities--New York, we heard1833about the Boston Marathon. Atlanta, in my mind, is, like, up1834there on that list.1835    Also, I heard our chairman when he talked about college1836football--and, Mr. Timmons, this weekend when Georgia Tech beat1837Clemson in Atlanta, there were a lot of people in the city of1838Atlanta.1839    [Laughter].1840    So, I am thinking about Atlanta hosting these large-scale1841national security events.1842    According to Treasury's 2024 data call, takeup rates for1843terrorism risk insurance are relatively high across the country1844by policy count. Can you explain why TRIA is important in1845different regions of the country?1846    Mr. Webel. I mean, I think the large-scale events that you1847mentioned are a big deal. I think also the critical1848infrastructure that your colleague mentioned is a big deal as1849well.1850    The truth of the matter is, things can happen in wide1851swaths of the country that can cause a lot of economic damage1852and a lot of spillover effects, in the transportation system,1853in gatherings, et cetera.1854    And so iI1855    Ms. Williams of Georgia. So I am also thinking about1856representing a city that has already been impacted by an act of1857terrorism. It is a constant reminder of why this is important.1858    I also represent the world's busiest and most efficient1859airport, at Hartsfield-Jackson International, and I remember a1860cybersecurity attack that grounded flights, and that has an1861impact worldwide.1862    Then I am thinking about just the ransom that the city of1863Atlanta had to pay, and that is not covered by TRIA, and we1864were trying to figure it all out.1865    It left so many constituents unable to pay their water and1866utility bills on time, our airport was grounded, and while TRIA1867does not speak directly to cyber insurance, Treasury has1868provided guidance to clarify that cyber insurance is included1869when it is a written line of insurance that is subject to the1870program.1871    Commissioner Mais, do you believe anything further needs to1872be done to clarify or expand TRIA's coverage of cyber1873insurance, and as an insurance regulator, do you believe the1874industry has the tools to provide sufficient and affordable1875coverage for current-day cyberrisk?1876    Mr. Mais. I do understand the desire to have cyber1877insurance as a separate line, but I think what we have seen is1878that market has expanded. If we look at the number of policies,1879it has increased 11.7 percent from 2022 to 2023. We have $16.661880billion in written premium and the private market.1881    TRIA exists to ensure that the private--to fill in where1882the private market cannot. If the private market is evolving1883and providing coverage, I am worried about unintended1884consequences if we intervene.1885    Ms. Williams of Georgia. Thank you.1886    I am going to be running out of time soon, but, Mrs. Heck,1887given that TRIA has been extended four times since its1888inception, what are the benefits of having a longer1889reauthorization, say 10 years or more, so that our communities1890can have the stability and consistency for their economic1891development?1892    I am thinking down the road of big events that we are1893already planning for in Atlanta, and just everything that we1894are hearing in this day and age, giving a peace of mind to our1895communities.1896    Mrs. Heck. First of all, again, we have proven--the program1897has proven that it works. It has been 24 years, and the market1898has really stabilized by the program. The longer that we can1899extend it, the more stability that we will introduce into the1900market.1901    I think to--just some other things to remember----1902    Chairman Flood. The gentlewoman's time is expired.1903    Ms. Williams of Georgia. Thank you, Mr. Chairman.1904    Chairman Flood. The gentleman from South Carolina, Mr.1905Timmons, is now recognized for 5 minutes.1906    Mr. Timmons. Thank you, Mr. Chairman.1907    Mr. Webel, I am going to be directing my questions to you.1908    Let us go back to 9/11, terrorist attack from Afghanistan,1909and we spent hundreds of millions--billions of dollars making1910victims whole, and we spent $2.3 trillion in Afghanistan. That1911was our response to a kinetic attack using airplanes to crash1912into multiple targets.1913    I want to talk about cybersecurity. So we have nation-State1914cybersecurity attacks that attack our businesses here in the1915U.S. on a regular basis, and the Federal Government does not1916really make whole the victims or the business.1917    We obviously expect these businesses to have cyber1918insurance, and I do not understand the difference between a1919kinetic attack that costs hundreds of millions, billions of1920dollars in damage from a foreign nation State, versus a1921cybersecurity attack that costs hundreds of millions of1922dollars, billions of dollars to a business and to victims.1923    Should we view these things similarly, and should we create1924legislation to make victims and businesses whole from nation-1925State attacks?1926    Mr. Webel. I mean, ``should,'' I will leave up to Congress,1927but I do think it is a very valid question in terms of how much1928does the source of an attack or the source of the damage1929matter.1930    The nation-State actor is an interesting question because1931then you start getting into acts of war and war exclusions1932and--I mean, I do recall seeing some serious analyses post-9/111933that maybe you could have tried to exclude those under a war1934exclusion on some policies, but that the--I think, for partly1935public relations reasons, insurers decided they did not want to1936go down that road because it would have been a public relations1937disaster if they had, but these are questions that I think1938definitely need to be fleshed out in the world that we are in,1939because the attribution of cyberattacks may be very murky, and1940it may be very hard to certify a terrorist attack under TRIA1941because you are not really sure where this is coming from.1942    Mr. Timmons. How can an insurance or reinsurance company1943appropriately underwrite an attack from China, Iran, Russia,1944North Korea?1945    I mean, the resource disparity between a company that is1946spending hundreds of millions, billions of dollars to protect1947their data and protect their customers' data, versus the1948Chinese Government is just a nonstarter. How can you actually1949effectively underwrite that?1950    Mr. Webel. Well, I think that is a lot of the reasons why1951from the insurer perspective, they tend to exclude nation-State1952attacks as acts of war and want to say: No, we are not going to1953cover that if it is a nation-State actor.1954    For the individual companies, I think that there obviously1955needs to be U.S. Government involvement in helping people in1956cybersecurity in understanding things.1957    But in some ways, that the--you know, a lot of it comes1958down to hardening your cyberdefenses whether it is a nation-1959State attack, or whether it is a ransomware from a criminal1960gang that just wants to extort money.1961    Mr. Timmons. So our Commander in Chief, his favorite word1962is tariffs, and my question is this: Should the U.S. use1963tariffs to penalize nation-State attacks to then make the1964victims and the businesses whole, and just create the status1965quo of, if you are going to engage in cyberattacks--or I will1966go one further.1967    If you allow a criminal organization to operate undeterred1968within your sovereign borders--I mean, we could do the same1969thing to a foreign country that is allowing a criminal1970organization to operate within their borders--again, whatever1971the damages are to the business and to the victims, you make1972them whole. You then levy tariffs against the nation-State that1973is either responsible directly or is harboring the criminals1974indirectly.1975    Then you say: All right, this is the new status quo.1976Continue to attack U.S. businesses and you will be penalized1977financially. Is that a reasonable approach to this problem?1978    Mr. Webel. Honestly it is not an approach that I have ever1979really analyzed or thought about. I mean, I think that it--I1980mean, how you approach this is probably a policy question above1981my pay grade.1982    Mr. Timmons. Would anybody else on the panel like to1983address that question about the proposal to levy tariffs to1984deter nation-state and--nation-states that are allowing1985criminal organizations to operate within their borders as a1986deterrent method? Anybody? Mrs. Heck?1987    Mrs. Heck. I could not opine on tariffs per se, but one1988thing I would like to say about cyber is that within the TRIA1989program, again, if an event is certified by the Treasury1990Secretary, then it would be covered under the TRIA program.1991    So when you distinguish between non-terror events I would1992urge Congress to think about is it--you know, can you model it,1993is there a private market. Commissioner Mais mentioned that1994there is a growing market. So----1995    Mr. Timmons. I am out of time. I am going to have to yield1996back. Thank you so much.1997    Mrs. Heck. Okay.1998    Chairman Flood. The gentleman yields back. The gentleman1999from New York, Mr. Torres, is now recognized for 5 minutes.2000    Mr. Torres. Thank you, Mr. Chair.2001    As a New Yorker who came of age amid 9/11, terrorism is no2002abstraction to me. Twenty-four years after 9/11, the specter of2003terrorism continues to haunt America's largest city, which in20042025 alone has seen an average of one terror plot per month.2005    Terror threats have grown dramatically in the decade since20069/11, and those threats show no signs of subsiding. In the age2007of emerging technologies like cyber and AI, the complexity of2008terrorism is rising rapidly in real time.2009    I want to follow up on a number of the questions asked. I2010have a question about the applicability of TRIA to2011cyberterrorism.2012    What exactly is the difference between a cyberattack and2013cyberterrorism, or cyberwar and cyberterrorism, or cybercrime2014and cyberterrorism, because these lines can easily get blurred?2015    Mr. Schupp. If I may, so if we look at the statute, what it2016really focuses on is the intention of the actor. That is the2017starting point, the intent of the actor, the individuals behind2018the attack, is to influence the people or the policy of the2019United States.2020    In the context of cyberattacks, it is extremely difficult2021to figure out who is behind them and the motivation. That is2022one of the challenges with certifying a cyber act as an act of2023terrorism under the existing structure.2024    Mr. Torres. What if it were a cyber attack on the part of a2025foreign government that is hostile to the United States, would2026that qualify as a cyberterrorist event?2027    Mr. Schupp. So the statute does include damage to2028infrastructure which was always understood to mean electronic2029infrastructure, but remember the decision to certify is a2030political decision, not a legal decision. The Secretary of2031Treasury has the sole discretion to certify, and it is2032unreviewable by the courts.2033    So really an act of terrorism is whatever the Secretary of2034Treasury says.2035    Mr. Torres. I have question about the scope of the Treasury2036Secretary's authority, right? Is it just right or is it2037excessive, and should judicial review be permitted or2038prohibited?2039    Mr. Schupp. It is a desire to have finality and quickness.2040So the idea was that a single person would make that decision,2041but we have seen that it can take a lot of time.2042    Mr. Torres. Yes.2043    Mr. Schupp. My own belief is, you could make changes and2044get to a really bad decision quickly----2045    Mr. Torres. It sounds like apart from the $5 million loss2046threshold, terrorism is whatever the Treasury Secretary says it2047is. As you know, Justice Potter Stewart once said, ``I cannot2048define it, but I know it when I see it,'' and that seems to be2049the standard we apply to the meaning of terrorism for the2050purpose of TRIA.2051    Mr. Schupp. My belief as a practical matter, is true.2052    Mr. Torres. Okay, and is that excessive discretion, or2053should there be some judicial review?2054    Mr. Schupp. Judicial review would create enormous2055uncertainty that is not tolerable.2056    Mr. Torres. Regarding the necessity of TRIA, is it fair to2057say--and I will direct the question to Mrs. Heck--that without2058TRIA, there would be no financing or far less financing of2059projects, without TRIA there would be no operational terrorism2060risk insurance market, and without TRIA, few businesses in2061America could survive a catastrophic terrorist event?2062    Mrs. Heck. That is absolutely correct, and we have had 242063years of experience to see what happens when there is a2064backstop. We have seen it happen twice--once after 9/11, and2065then again in 2014 when the program was allowed to lapse.2066    Mr. Torres. Right. I just find it strange that we are2067debating the viability of a private market without TRIA as if2068we have no life experience. Like, what was 9/11's immediate2069impact on financing and terrorism insurance?2070    Mrs. Heck. What happened was, overnight a new catastrophic2071exposure just emerged, and insurance companies had to really2072pare back. Otherwise, they risked insolvency. So the TRIA2073program really stepped in and made it possible to be able--for2074the economy to continue.2075    Mr. Torres. One of the most common complaints I have heard2076about insurance has been inflation. It feels to me that2077inflation has been particularly pronounced in the insurance2078market.2079    Have those same inflationary pressures affected terrorism2080risk coverage? What has been the impact of inflation on2081terrorism risk coverage?2082    Mrs. Heck. Actually, the way the program was designed, it2083is actually somewhat embedded in the coverage. So in what the--2084the insurance market, the private market accepts, the2085underlying deductibles are based on premiums that are2086essentially indexed for inflation because they grow over time.2087    In general, those----2088    Mr. Torres. Because it is a percentage?2089    Mrs. Heck. Now the percentage has grown, which means that2090the private market has picked up additional--additional2091exposure, but it has also grown just because the underlying2092premiums have grown.2093    For example, my company, our deductible after--immediately2094after 9/11 under the program was $10 million, and today, it is2095$250 million. So it has grown significantly.2096    Mr. Torres. Thank you.2097    Chairman Flood. The gentleman's time is----2098    Mr. Torres. Thank you.2099    Chairman Flood. The gentleman yields back. The gentleman2100from New York, Mr. Garbarino, is now recognized for 5 minutes.2101    Mr. Garbarino. Thank you very much, Mr. Chairman, and thank2102you for all the witnesses for being here today.2103    TRIA is a program created following the horrific attacks on21049/11, an event that deeply and personally affected all of us.2105As a result of this attack, insurers and reinsurers began to2106realize the real, yet-difficult-to-model risk that resulted2107from terrorism insurance.2108    Terrorism insurance was becoming less accessible and2109increasingly unaffordable, especially in the dense urban areas2110like New York.2111    Mrs. Heck, as a large writer of commercial real estate in2112New York City, your company was intimately involved in the2113creation of the TRIA program.2114    Can you help this committee recall the circumstances post-21159/11--I know you touched on it a little bit--but post-9/11 that2116led to TRIA and how the program was designed to help?2117    Mrs. Heck. Yes. The program--so immediately after 9/11,2118development stopped, and what the program did is made it2119possible for there to be a viable market, and the program does2120that really in three ways: It provides certainty to insurance2121companies so that insurance companies can manage that exposure;2122it allows for a robust market by making it possible for small,2123midsize, and large companies to participate and taxpayers are2124really fully protected under the program.2125    So when you think about it, all of the stakeholders, it2126manages all of the concerns of every stakeholder.2127    Mr. Garbarino. While TRIA is not supposed to expire until2128the end of 2027, I am glad we are doing this today and know2129that we are looking at reauth--Mrs. Heck, you highlight in your2130written testimony that TRIA needs to be extended next year in21312026.2132    Can you please explain what happens if Congress does not2133extend the program by the end of next year, what would happen2134to insurance contracts in 2027?2135    Mrs. Heck. Yes, because of the way that insurance contracts2136are written, because of the timing, it is important to get this2137reauthorized before we get into 2027, or what will happen is,2138if policies lapse, the expiration of the program, then there2139will be exclusions attached to it, and we risk running--having2140that same disruption that we saw in 2014.2141    Mr. Garbarino. Say that again. If it does lapse, what will2142happen?2143    Mrs. Heck. If it lapses without reauthorization, exclusions2144will be attached to the policies so that we run the risk of2145having the same problem that we had in 2014, when the program2146was allowed to lapse.2147    Mr. Garbarino. I hope it does not lapse, and I am sure the2148chairman and other members of the House hope it does not lapse.2149Unfortunately, a lot of other things have lapsed because of our2150colleagues over in the Senate, specifically one of them--I will2151not mention his name--but hopefully that does not happen here.2152    As chairman of the House Homeland Security Committee--and I2153am going to ask you about cyber just like Mr. Torres did--I2154held a hearing last July about the importance of securing2155operational technology systems from cyber adversaries.2156    This includes water treatment facilities, energy grids, and2157transportation systems, just to name a few.2158    If a cyberterrorism event caused physical damage to these2159critical infrastructure systems, under the TRIA framework,2160would those attacks be covered?2161    Mrs. Heck. A terror--a cyberattack that is deemed a2162terrorist event would be covered under the program.2163    Mr. Garbarino. Great, that is, as we heard the previous2164member ask, that is if it is deemed a terrorism event by the2165Treasury Secretary?2166    Mrs. Heck. By the Treasury Secretary.2167    Mr. Garbarino. There have been people that have come to me2168and talk about the creation of a cyber backstop--Federal2169backstop for cyberattacks. Some have suggested tying it to2170TRIA. I do not think that is the right way to go.2171    If we are going to do something, I think it should be done2172separately, and something this committee should look at, if it2173should be done separately.2174    So I think it was very important to put on the record that2175as TRIA's currently written, it does currently cover2176cyberterrorism events.2177    I have about 45 seconds left. A lot of times when we2178reauthorize something, we just reauthorize the law from 102179years prior without any updates. You might have said something2180already, but are there any updates that you would like to see2181put into this, that would help the law run better? Mr. Schupp?2182    Mr. Schupp. Yes, I do believe that Congress could increase2183the data collection abilities of Treasury to reach, in2184particular, to some of the more opaque structures, such as2185captives and alien insurers where data from the NAIC is very2186limited.2187    Mr. Garbarino. I appreciate that. I am down to 10 seconds,2188so if any of you else have any ideas, if you could submit them2189in writing, that would be great.2190    Thank you, Mr. Chairman. I yield back.2191    Chairman Flood. The gentleman yields back. I now ask2192unanimous consent to enter the following statements into the2193record--a September 15, 2025, statement from the Coalition to2194Insure Against Terrorism; a September 17, 2025, statement from2195the American Property Casualty Association; and a September 17,21962025, statement from the Reinsurance Association of America.2197    Those will be entered without objection.21982199    [The information referred to can be found in the appendix2200on pages 94-102.]22012202    Chairman Flood. I would like to thank all of our witnesses2203for your testimony today.2204    Without objection, all members will have 5 legislative days2205to submit additional written questions for the witnesses to the2206chair. The questions will be forwarded to the witnesses for2207their response.2208    Witnesses, please respond no later than October 22, 2025.2209    This hearing is now adjourned.22102211    [Whereupon, at 11:54 a.m., the subcommittee was adjourned.]22122213                                APPENDIX22142215                              ----------22162217                   MATERIALS SUBMITTED FOR THE RECORD2218[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]22192220                             [all]