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Terrorism risk insurance report issued.

The report by the President's Working Group on Financial Markets--mandated by the Terrorism Risk Insurance Extension Act of 2005 (TRIEA)--did not make any specific recommendations regarding the federal government's future involvement in ensuring availability of terrorism coverage after TRIEA expires at the end of 2007. However, its conclusions leave the administration some leeway to support extending some sort of federal presence in the terrorism insurance market. The U.S. House Financial Services Committee's Investigations and Oversight, and Capital Markets Subcommittees held a hearing on the future of terrorism insurance in September 2006. IREM and NAR submitted a joint statement for the record, making the following points:

* 84 percent of outstanding commercial mortgages require terrorism insurance.

* Without terrorism coverage it is very difficult to finance commercial real estate transactions.

* Extreme fluctuations in terrorism insurance rates impact both the operating expenses of a commercial property and the value of the property.

* Increases in terrorism coverage cannot be passed on to tenants in triple net lease deals or in multifamily projects where rents are federally subsidized.

IREM and NAR support the creation of a semi-private mutual reinsurer subject to Treasury and Congressional oversight. This will ensure the long-term availability of terrorism coverage. The reinsurance proposal, developed by the Real Estate Roundtable, would create Homeland Security Mutual, a reinsurer privately funded but supported by the federal government until Homeland Security Mutual reaches $30 billion in reinsurance capacity.

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Article Details
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Publication:Journal of Property Management
Article Type:Brief article
Geographic Code:1USA
Date:Jan 1, 2007
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