Terrorism Risk Insurance Act (TRIA)

Prior to September 11, 2001, when the World Trade Center in New York City was attacked by terrorists and destroyed, business insurers generally neither charged for nor excluded terrorism coverage because the chance of property damage from terrorist acts was considered minute. After 9/11, insurers reassessed that risk. For a year, terrorism coverage was scarce, as reinsurers were unwilling to reinsure policies in urban areas perceived to be vulnerable to attack.

In November, 2002, the Terrorism Risk Insurance Act (TRIA) was signed into law to ensure that American businesses would have access to affordable terrorism insurance.

The Act authorized the creation of a federal reinsurance plan, providing a system of shared public and private compensation for insured losses resulting from acts of terrorism. The federal government’s involvement helps offer some certainty for businesses, and enables the commercial insurance market to function, even though the threat of terrorism remains.

In January 2015, the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) was passed to extend TRIA through December 2020. It also made several changes to the reinsurance program, including reducing the federal share of insured terrorism losses incrementally through 2020, increasing the trigger threshold for federal involvement in insured terrorism losses incrementally through 2020, and increasing the mandatory recoupment of federal losses incrementally through 2020.

TRIA reduces uncertainty and allows insurance companies and businesses to be better prepared in the event of a terrorist attack.

In the News

2017

• Why pricing terrorism risk remains a challenge for CRE insurers - Elina Tarkazikis, National Mortgage News (09/11/2017)
  

  The Terrorism Risk Insurance Act was created after 9/11 to serve as a crucial federal backstop for commercial real estate insurers, but an analysis of alternatives to fund the program reveals the continued challenges of measuring and predicting terror risk. . . . Congress developed TRIA to share terrorism losses between the government and insurers and promote widespread availability and affordability of terrorism coverage. Coverage is limited to incidents the government certifies as an act of terror and only kicks in once insurers' losses reach a certain threshold, $120 million in 2016. . . .The program is designed for the government to recoup its losses in the event of a terror attack, but doesn't require insurers to charge policyholders upfront for the government-backed coverage. As a result, private insurers include a nominal charge for terrorism risk coverage, if they charge for it at all, according to a Government Accountability Office report published earlier this year. . . .After 9/11, insurers generally stopped covering terrorism risk because losses would have been too high compared with the premiums they could charge, leaving CRE property owners without adequate coverage. Now, efforts to ensure the government can recoup its losses after an attack could increase insurance costs and discourage CRE policyholders from obtaining insurance backed by TRIA. . . . Under the current structure of the act, in some instances, federal losses may be recouped through premium surcharges on policyholders with eligible coverage. But depending on the size of the terrorism event and the cumulative premiums of affected insurers, the federal government may not be held accountable to recoup all of its losses, presenting another challenge. . . . A federal charge on insurers or policyholders could help pay for the federal share of potential losses or replace the current recoupment structure, or be paid to the Treasury as a promise of payment, but determining the price of such a charge would be difficult, the GAO said.

2016

• Terrorism-Insurance Picture Is Uncertain in Chelsea - Leslie Scism and Mara Gay, The Wall Street Journal (09/20/2016)
  While many Americans consider the bomb that went off Saturday in New York City to be terrorism, some property owners who sustained damage have reason to shy away from that term when it comes to insurance. So far, it appears that the damage from the blast was contained to a limited area near where the device detonated in Manhattan’s Chelsea neighborhood. That means property owners will have less to repair, and they may have less reason to worry about the potentially costly complexities of a federal terrorism-insurance law... Congress passed the law, originally known as the Terrorism Risk Insurance Act, following the Sept. 11, 2001, terror attacks to help insurers pay claims stemming from possibly catastrophic damage from future attacks. It now is called the Terrorism Risk Insurance Program Reauthorization Act…Under the law, businesses’ ordinary property-insurance policies will generally cover claims for small-scale damage from terrorism. The terrorism insurance program is triggered only when aggregate damage tops $5 million—the threshold for the federal government to certify an event as terrorism.
• U.S. Treasury Seeks Terrorism Data from Insurers - Insurancejournal.com (03/04/2016)
  The U.S. Department of the Treasury’s Federal Insurance Office (FIO) is requesting that insurers voluntarily submit insurance data regarding their participation in the Terrorism Risk Insurance Program (TRIP).

2015

• Hit By School Violence, Colorado Mulls Districts' Liability - Kristen Wyatt, AP (04/14/2015)
  A novel approach to make public schools liable for campus violence under a measure is advancing in Colorado, even as lawmakers from both parties wonder whether liability will prevent the next mass shooting. The bill that won bipartisan approval 4-1 in the Senate Judiciary Committee waives the state's governmental immunity and allows victims or their relatives to collect up to $350,000 for violence "when the harm is reasonably foreseeable."
• How Lloyd’s joined the war on global terror - Marion Dakers, Telegraph (03/28/2015)
  In the United States, more than 60% of companies now buy terrorism cover, rising to three quarters in New York, according to figures from Marsh.
• Congress Renews Post-Terrorist Attack Insurance Payments - Brian Naylor, NPR (01/08/2015)
  The Terrorism Risk Insurance Program — known as TRIA — guarantees insurance payments in the event of a terrorist attack, and it actually lapsed at the end of December.

2014

• With TRIA Renewal Efforts Killed, Some Predict Market Chaos - Mark Hollmer, Insurance Journal (12/18/2014)
  Property/casualty insurance industry groups, business associations and observers alike were quick to condemn the death of TRIA renewal for 2014. Without federal terrorism reinsurance in place for 2015, they predicted canceled coverage, market chaos and more unless the measure can be renewed in the new, Republican-led Congress.
• House Approves 6-Year Federal Terrorism Insurance Extension - Michael R. Crittenden, Wall Street Journal (12/10/2014)
  

  The U.S. House on Wednesday voted 417-7 to approve a six-year extension of the federal terrorism insurance program that included changes to the 2010 Dodd-Frank financial law.

• Nigeria-UK terrorism insurance deals may face legislation hiccups - Modestus Anaesoronye, Business Day Online (12/03/2014)
  Nigerian local insurers discussing partnership with UK firms on terrorism and kidnapping insurance would need to watch new legislations coming from the UK government on the emerging challenges.
• Senate Backs Extension of Federal Terrorism Insurance Program - Michael R. Crittendon, Wall Street Journal (07/17/2014)
  U.S. Senate lawmakers on Thursday overwhelmingly approved legislation to extend a federal terrorism insurance program for seven years, stressing the need for the government to continue providing a backstop to the private sector in the event of a major terrorist attack.
• Competition leads reinsurers to drop terrorism exclusion clauses [in U.K.] - Callum Brodie , Post Online (06/30/2014)
  According to the Financial Times, the terrorism exclusion withdrawal coincides with the decision to relax other terms and conditions amid an increasingly softening market.
• House Republicans Unveil Terrorism Risk Insurance Bill - Victoria Finkle , Mortgage Servicing News (06/17/2014)
  The TRIA Reform Act of 2014 would reauthorize the terrorism risk insurance program, which provides a government backstop for insurers and reinsurers in the event of a catastrophic terrorist event, for five years, while increasing the role private companies would play in the market.
• Extending the Terrorism Risk Insurance Act will help US business - Thomas J. Donohue , The Hill (05/13/2014)
  For the last dozen years, the Terrorism Risk Insurance Act, or TRIA, has been quietly but effectively safeguarding the U.S. economy against potential ruin.

2013

• Lloyd’s Favours TRIA Renewal - Lloyds.com (11/21/2013)
  Lloyd's Director of Risk Management & General Counsel, Sean McGovern, recently testified before the US House Committee on Financial Services at a hearing to examine the Terrorism Risk Insurance Act (TRIA).

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