News Alert — Terrorism Risk Insurance Act (TRIA)

The Senate adjourned in December without reauthorizing the Terrorism Risk Insurance Act (TRIA). Members of the Professional Insurance Agents, our trade association, including a Lawley representative, visited Washington last March to meet with Congressmen and Senators, urging them to extend the act. Politics prevailed and the act was allowed to expire.

Prior to 9/11, insurance companies included terrorism coverage in all business insurance policies, as the perceived risk was insignificant. After the industry paid $44 Billion in claims for 9/11, many insurance companies excluded terrorism from their policies, placing in limbo large construction projects across the country. Financial institutions were concerned about the viability of their loans.

TRIA provided a financial backstop for the insurance industry, providing “reinsurance” for aggregate terrorism losses above $27.5 Billion, up to $100 Billion. In return, insurance companies were required to offer terrorism coverage.

Now that TRIA is set to expire, insurance companies have the right to exclude terrorism coverage, except for workers’ compensation. However, the industry fully expects that Congress will focus on extending TRIA, perhaps retroactively, when they return early January. (The Senator that blocked the bill from coming to the floor for a vote is retiring.)
Our insurance companies are taking a wait and see approach for the next few weeks. Their communications include statements such as “business as usual”; “current Terrorism guidelines and processes will remain in place pending legislative action”.

If Congress fails to act, insurance companies will strongly consider including exclusions for nuclear, biological, chemical and radiological terrorism events. However, there are markets that stand ready to offer stand-alone terrorism policies.

We are monitoring the situation and will contact you if your coverage will be affected should Congress fail to act. Meanwhile, if you have any questions, please contact us here.

,