Treasury should Study PPP’s Impact on TRIA
First published May 26, 2020
The Terrorism Risk Insurance Act (TRIA) tries to prevent double payments of policyholder and claimant losses under multiple federal disaster relief programs. When Treasury implemented TRIA’s double payment rules more than 15 years ago it assumed future disaster relief programs would look a lot like those previously rolled out for hurricanes, floods and earthquakes.
COVID-19 has shaken that assumption. The attached comments submitted to Treasury examine the new Paycheck Protection Program and Emergency Paid Sick Leave Act. If used to assist businesses and employees recover after a large-scale terrorist attack, these programs based on these designs risk:
- Tens of billions of dollars in double compensation for lost wages and business interruption; and
- Reduction of an insurer’s effective backstop recovery from the 80% promised in TRIA to 50% or less.
Treasury has the opportunity now to study the design and operation of the disaster relief programs implemented under the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Economic Stabilization (CARES) Act of 2020. It could then advise Congress whether those program designs would produce sound economic outcomes if relied upon in response to catastrophic terrorist attack. If Treasury’s analysis concludes these new programs would not coordinate well with TRIA, it could recommend a statutory fix to TRIA or design enhancements for future relief programs.
