Tag Archives: TRIA renewal

Terrorism Risk

Terrorism risk insurance program renewal advances in Senate

Leave a comment

A bill to reauthorize the Terrorism Risk Insurance Act (TRIA) of 2002 was passed on November 20 by the U.S. Senate Committee on Banking, Housing, and Urban Affairs. The unanimous decision was made only a day after the U.S. House of Representatives voted to renew the federally backed terrorism insurance coverage backstop program, which is set to expire in December 2020.

The bill includes a provision to study cyber terrorism and the availability and affordability of coverage, specifically for places of worship.

“The bill being considered today would not only avoid significant uncertainty in the marketplace, but it also preserves the taxpayer reforms included in the last reauthorization,” said Senate Banking Committee chairman  Mike Crapo (R-Idaho) in a statement.

The 2015 reauthorization “required the private insurance industry to absorb and cover the losses for all but the largest acts of terror”, Sen. Crapo said. This included requiring total insurance industry insured losses for certified acts of terror to exceed $200 million before federal assistance would become available and increasing the industry’s aggregate retention amount to $37.5 billion.

The decision was met with resounding approval from insurance industry representatives and other stakeholders.

The next steps are for the Senate Banking Committee version to be approved by the full Senate,  any differences between the two measures (which are said to be virtually identical) to be reconciled, and the final bill to be signed into law by President Trump.

Jimi Grande, senior vice president of government affairs at the National Association of Mutual Insurance Companies (NAMIC) said, “With passage of TRIA reauthorization legislation out of the House on Monday, today’s unanimous passage of an identical bill out of the Senate Banking Committee demonstrates that there is little daylight between the two chambers or between the two sides of the aisle. There is no reason Congress shouldn’t be able to get a bill to the president’s desk by the end of the year.”

To get an idea of what could happen without a government terrorism backstop we’ve been searching our database for news items that appeared in the aftermath of the terrorist attacks on September 11, 2001, before the federal program was in place. Below is an abstract citing a Wall Street Journal article about the impact on workers’ compensation. This line would be one of the most affected by a lack of a backstop because, unlike other insurance lines, workers’ compensation insurers have no choice but to include terrorism coverage in their policies.

Business Risk, Terrorism Risk

A world without TRIA: The formation of a federal terrorism insurance backstop

Leave a comment

On September 11, 2001 terrorists hijacked commercial airliners and flew them into the World Trade Center towers and the Pentagon. The attacks remain the deadliest and most expensive terrorist incidents in U.S. history, with insurance losses totaling about $47.0 billion in 2019 dollars, according to I.I.I. estimates.

In the wake of the attacks the U.S. Congress enacted the Terrorism Risk Insurance Act of 2002 (TRIA). The act creating a federal backstop for catastrophic terrorism losses that is designed to keep terrorism risk insurance available and affordable. It was renewed in 2005, 2007 and again in 2015. The act is set to expire on December 31, 2020.

Over the next months the Triple-I Blog will run stories featuring key participants in the terrorism risk insurance market and highlight news stories from our database from the periods immediately following 9/11 (before TRIA) and 2015 (when TRIA briefly lapsed).

Below is an abstract from the I.I.I. database citing a BestWeek article from October 1, 2001. The article refers to the fact that the heaviest insured losses were absorbed by foreign and domestic reinsurers, the insurers of insurance companies. Because of the lack of public data on, or modeling of, the scope and nature of the terrorism risk, reinsurers felt unable to accurately price for such risks and largely withdrew from the market for terrorism risk insurance in the months following September 11, 2001

For more on the importance of a federal terrorism backstop read the I.I.I. report, A World Without TRIA: Incalculable Risk.

Business Risk, Terrorism Risk

I.I.I. report contemplates a world without TRIA

Leave a comment

Terrorism, by design, is unpredictable, hugely destructive, and to date uninsurable through private market methods alone.

Few events demonstrate this better than the 9/11 attacks, in which terrorists hijacked commercial airliners and flew them into the World Trade Center towers and the Pentagon. The attacks remain the deadliest and most expensive terrorist incidents in U.S. history, with insurance losses totaling about $47.0 billion in 2019 dollars, according to I.I.I. estimates.

U.S. and international insurers were able to pay virtually all the claims from the 9/11 attacks and their aftermath. But insurers also made it clear that they could not, on their own, cover future losses caused intentionally by people acting strategically to attack select targets intentionally. In response to these concerns, the U.S. Congress enacted the Terrorism Risk Insurance Act of 2002 (TRIA), creating a federal backstop for catastrophic terrorism losses that is designed to keep terrorism risk insurance available and affordable. Renewed in 2005, 2007 and again in 2015, the act is set to expire on December 31, 2020.

Although the expiration is still more than a year away, U.S. commercial insurers are preparing for the possibility that the federal backstop might expire, and federal financial assistance is unavailable for a catastrophic terrorist event.

A new I.I.I. report, A World Without TRIA: Incalculable Risk, concludes that the terrorism insurance market is more robust than in the immediate aftermath of 9/11, but – similar to the situation in 2015 – does not appear to have the ability to bear all terrorism risk.

In this context, the report offers a historical overview of TRIA – why it exists and how it functions – to inform the discussion about the potential consequences should the program disappear. The report discusses:

  • Commercial terrorism risk insurance before the 9/1 1 attacks
  • How the attacks changed the terrorism risk insurance marketplace
  • The enactment of the federal Terrorism Risk Insurance Act and the program’s structure
  • What happened when the program briefly expired in 2015
  • How a failure to reauthorize the program in 2020 could affect terrorism risk insurance

Over the next months the Triple-I Blog will run stories featuring key participants in the terrorism risk insurance market and highlight news stories from our database from the periods immediately following 9/11 (before TRIA) and 2015 (when TRIA briefly lapsed). You can follow the topic here.