read Read

e-mail E-mailprint Print

last updated on March 13, 2008

TERRORISM RISK INSURANCE

THE ISSUE IS.Due to the tragic events of September 11, 2001, - and the ongoing threat of terrorist attacks, Congress recognized the need to establish a mechanism to assure the financial capacity to pay claims resulting from terrorism.

IT'S IMPORTANT BECAUSE.The September 11 attacks were of a nature and scope unlike any other catastrophe in U.S. history, leaving deep concerns about the insurance industry's ability to provide terrorism coverage. Congress acted to address this situation with the enactment of the Terrorism Risk Insurance Act of 2002 (TRIA).

TRIA created a mechanism under which the federal government would provide a federal reinsurance backstop to commercial insurers in the event of another terrorist attack. TRIA was intended to allow the markets three years to develop adequate terrorism insurance products. However, seven years after the attacks, predicting how, when and where future terrorist attacks against the United States will be launched remains speculative. Acceptance or rejection of TRIA coverage appears to be based on the insureds' perception of their terrorism risk. However, another attack in the United States could change perceptions of risk leading to a shortage of coverage based on today's usage.

On December 26th, 2007, President George W. Bush signed into law, H.R. 2761 - the Terrorism Risk Insurance Program Reauthorization Act of 2007. The newly enacted law extends the program for seven years and adds domestic terrorism to those events covered. The law also includes language for the Government Accountability Office (GAO) to conduct two studies.

Despite efforts, the law does not include a mandate for insurers that offer terrorism coverage to also offer insurance for attacks from nuclear, biological, chemical, and radiological (NBCR) agents. Instead, one of the GAO studies will examine the risk posed by NBCR attacks and make recommendations to Congress. The other study will examine capacity restraints in certain regions of the county, such as lower Manhattan.

The U.S. Treasury Department has issued two interim guidance notices concerning TRIA. The notices provide interim guidelines to insurers, policyholders, state insurance regulators, and the public concerning changes to the Terrorism Risk Insurance Act of 2002. Among the changes are a revised definition of an "act of terrorism" covered by the Act and changes to mandatory availability and disclosure requirements.

NAMIC POSITION.NAMIC commends Congress for passing a long-term extension of TRIA and will continue to follow new developments in the regulatory guidance process.

powered by Google

Legislative Action Network

As a "minuteman," you will be in the know at the critical moment when a call to action is necessary or when decisions are being made on issues like federal regulation of insurance, legal reform, terrorism insurance, asbestos reform and small property/casualty company taxation.

Benjamin Franklin Public Policy Award

Every two years, NAMIC presents their coveted Benjamin Franklin Public Policy Award© to lawmakers who have supported a stronger insurance market at least 75 percent of the time. This is demonstrated based on their support of NAMIC's position on certain roll call votes taken, or being a principal player/sponsor on legislation affected the property/casualty insurance industry, during the previous Congress.