Following the traumatic events of the terrorist attacks on Sept. 11, 2001, Congress created a risk-sharing program known as the Terrorism Risk Insurance Act. This law will expire at the end of December 2014 and provides for federal backup for insurance coverage, eliminating the situation where many terrorism-related risks could not be insured because of their high premium price, causing insurers and reinsurers to decline to offer policies.
The law set up a federal reinsurance program intended to help the insurance industry cope with the huge losses of 9/11 and to work on creating solutions to providing coverage against the risks of further terrorist attacks. In the original legislation, the federal program was triggered when terrorism-related losses above $5 million occurred, but the current triggering amount has been increased to $100 million.
A House of Representatives subcommittee has begun hearings to discuss the possibility of reauthorizing the program to extend its coverage beyond the current expiration date. The program has already been extended twice before in the past, both in 2005 and 2007.
A dozen witnesses who testified before the subcommittee came from various segments of the insurance industry. They included representatives of insurance industry associations, insurance companies, and risk managers. Most of them strongly supported the proposed extension, viewing it as a success to date.
One of them underlined the urgency of reauthorizing by predicting that, without it, many insurers would opt not to offer insurance coverage in high risk areas where the exposure to massive liability was present.
If approved by the subcommittee, the reauthorization legislation must be passed by a majority vote in the full House of Representatives.
Source: Business Insurance, “House subcommittee hears testimony on TRIA reauthorization,” Mike Tsikoudakis, Sept. 11, 2012Share