Terrorism Risk Insurance Program: Renewed and Restructured

Terrorism Risk Insurance Program: Renewed and Restructured

Dr. Robert P. Hartwig, CPCU and Claire Wilkinson
March 31, 2015

Summary

Since its initial enactment in 2002 following the September 11, 2001, terrorist attack, the terrorism risk insurance program has been revised and extended three times. The most recent extension—the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA)—ensures its continuation until December 31, 2020.

TRIPRA renews the original Terrorism Risk Insurance Act (TRIA). From its inception the program was designed as a terrorism risk sharing mechanism between the public and private sector—with an overwhelming share of the risk being borne by private insurers, a share that has increased steadily over time. Today, all but the very largest (and least likely) terrorist attacks would be financed entirely within the private sector.

TRIA has cost taxpayers virtually nothing, yet the law continues to provide tangible benefits to the U.S. economy in the form of terrorism insurance market stability, affordability and availability.

TRIA’s renewed structure provides at least eight distinct layers of taxpayer protection. Key provisions of the new law (H.R. 26) are as follows:

  • TRIA is extended for six years until December 31, 2020;
  • An act of terrorism must be certified by the Treasury Secretary, in consultation with the Secretary of Homeland Security and the Attorney General of the United States;
  • The trigger required to activate the program gradually increases to $200 million from the previous $100 million;
  • The industrywide retention (the amount of losses covered by the industry through deductibles and co-payments) increases to $37.5 billion up from $27.5 billion (via $2 billion annual increments starting in 2015).

Enactment of the 2015 reauthorization legislation has brought clarity and stability to policyholders and the insurance marketplace once again. With the federal program restored, insurers must make available terrorism coverage to their commercial clients.

 

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