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Terrorism Risk Insurance Program Reauthorization Act Signed into Law

Finance Alert | February 10, 2015
By: Meredith A. Bieber

On January 12, 2015 President Barack Obama signed into law a renewal of the Terrorism Risk Insurance Act (TRIA) which expired on December 31, 2014. TRIA, enacted in the wake of the September 11, 2001 terrorist attacks, requires insurers to offer coverage for terrorism to policyholders in certain commercial lines and provides a federal backstop for insurers allowing them to underwrite terrorism coverage policies at reasonable prices.

The prospect of TRIA’s lapse caused serious concerns among the business community, insurance policyholders and insurance industry groups alike. Amongst their concerns were fears that terrorism coverage in existing policies would be canceled, that terrorism coverage would not be able to be obtained going forward, that the financing of projects would be stalled, and that existing loans would go into technical default as a result of borrowers’ inability to comply with loan covenants requiring terrorism coverage.

The reauthorization law extends TRIA through December 31, 2020 and attempts to “wean” the private markets from reliance on the federal government as a reinsurer. Beginning in 2016, the trigger for TRIA coverage will rise each year by $20 million from the existing level of $100 million to $200 million. The insurance marketplace aggregate retention amount will increase by $2 billion each year, from the existing level of $27.5 billion to $37.5 billion and co-insurance levels will increase by one percent each year from 15% until they reach 20%. The amount that must be collected by the industry through policyholder surcharges for repayment of Federal financial assistance provided in connection with acts of terrorism during the applicable period will increase from 133% to 140% of the mandatory recoupment amount provided under TRIA.

TRIA’s renewal prevented the predicted disruptions to the capital markets and economy in general; however, policy holders are advised to consult with their providers to confirm the impact, if any, of the expiration of TRIA on December 31, 2014 and its subsequent renewal and amendments. 

For more information, please contact Meredith Bieber (215.864.6292; bieberm@whiteandwilliams.com).

This correspondence should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult a lawyer concerning your own situation and legal questions.
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