National Jan 13, 2015

TRIA extension signed into law

PIA is applauding the renewal of the Terrorism Risk Insurance Program Reauthorization Act of 2015, as President Barack Obama signed H.R.26 into law on Monday.

With the presidents signature, the Terrorism Risk Insurance Program has been reauthorized for six years. The reauthorization does include a few changes to previous versions of TRIP. Perhaps most important, the amount needed in total losses before TRIP kicks in has been raised to $200 million from $100 million. The trigger increase will take place gradually, increasing by a rate of $20 million per year beginning in 2016. In addition to the increase in the program trigger, the federal governments mandatory recoupment has been increased to $37.5 billion from $27.5 billion. As with the trigger, this increase will take place gradually, increasing by a rate of $2 billion each year beginning in 2016.

The reauthorization of TRIP provides a necessary level of stability to the private terrorism insurance marketplace; and ensures that producers will continue to have access to this coverage through the private marketplace for the foreseeable future.

 Summary of the law

Major provisions of the deal to reauthorize TRIA include the following:

• Six-year reauthorization through Dec. 31, 2020.
• The current $100 million trigger for federal involvement in handling claims for a terrorist attack would be gradually raised to $200 million.
  • There would be no change in 2015, but beginning in 2016 the trigger level will increase by $20 million a year for the next five years until it reaches $200 million by 2020.
• The government cap of $100 billion for losses would remain.
• Gradually raises the co-pay from 15 percent to 20 percent, beginning in 2016 through 2020.
• Includes the consultation of the Secretary of Homeland Security in the certification of an act of terrorism and removes the Secretary of State from the process.
• Increases the insurance industry repayment of funds to pay terrorism attack claims (or "recoupment") from $27.5 billion to $37.5 billion or the total amount for all insured losses during the calendar year.
• Maximum government recoupment paid by policyholders is 140 percent, up from 133 percent.
• Creates an Advisory Committee to encourage the creation and development of risk-sharing mechanisms for terrorism risk.
• Calls for an annual data collection of information from insurers on the lines of insurance covered under TRIA, premiums earned on terrorism coverage, geographical location of exposures, terrorism insurance pricing, take-up rates and the amount of private reinsurance purchased for terrorism risk.

Watch PIA publications for resources on the law, as well as future updates on its implementation.

1/15

Think PIA first