The Terrorism Risk Insurance Act (TRIA) was set to expire at the end of 2014 but, as of yesterday evening, President Barack Obama signed into law a six-year reauthorization of the act.
Prior to 9/11 attacks, terrorism insurance was lumped into most commercial policies at minimal cost, but this quickly changed. The attacks on American soil cost the insurance industry more than $30 billion in insurance claims.
To help the United States recover from future terrorism acts, the United States Congress enacted the TRIP to serve as a federal reinsurance backstop against losses arising from terrorism acts.
The reauthorization of TRIA has most recently been praised by The Independent Insurance Agents & Brokers of American as well as Property Casualty Insurers Association of American (PCI).
Another strong supporter is the National Association of Realtors, who said without the act, organizations that build large venues like convention centers and sports arenas would be at financial risk if something were to happen.
Under the revised act, federal assistance would start when losses reach $100 million with an increase of $20 million per year, so that by year 2020, the loss threshold would be $200 million.
If the act was not reauthorized for another six years, most insurance companies would most likely be unable to offer terrorism insurance coverage at all. The construction of large venues would also most likely stop and even some high-profile public events might be canceled.
“[This] provides a crucial framework for economic recovery in the wake of a catastrophic terrorist attack,” said Chris Polychron, National Association of Realtors president in a statement following the vote.
He also said many commercial property owners are required by their mortgage lenders to carry terrorism insurance.
“A well-functioning private terrorism insurance marketplace has been preserved because Congress and the Administration made TRIA’s reauthorization an immediate priority,” said The American Insurance Association President and CEO, Leigh Ann Pusey. “The program, which has overwhelming bipartisan support, will continue to protect our nation’s economy against major acts of terrorism.