One in four survey respondents concerned terrorism would no longer be covered by insurers after TRIA expiry

Risk and Insurance Management Society Inc. (RIMS) announced Tuesday some results of an opinion poll on the impact of the expiry of an American law that aims to ensure the widespread availability and affordability of property and casualty coverage for acts of terrorism.

The Terrorism Risk and Insurance Act, which was passed in 2002 in the aftermath of the Sept. 11, 2001 attacks, expires Dec. 31, 2014. TRIA, in essence, requires insurers to offer terrorism coverage to commercial clients and for the U.S. government to share in losses under certain circumstances.

RIMS surveyed a group of risk professionals on TRIA, and 45% of respondents “expect a decrease in terrorism coverage limits” if TRIA expires, while 24% “believe coverage would no longer be offered by insurers upon TRIA’s expiration.”

RIMS last August issued a report titled Terrorism Risk Insurance Act: The Commercial Consumer’s Perspective, in which RIMS states the TRIA should be continued in some form.

The results of the RIMS poll have now been added as an appendix to that report.

In order to trigger the U.S. government backstop, a terrorist act would have to result in losses exceeding $5 million in the U.S. and be certified as a terrorist act by the U.S. Secretary of State, Attorney General and Secretary of the Treasury.

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The attack would also have to result in aggregate losses to the insurance industry of more than $100 million. There is a deductible, to the private insurers, of 20% of their annual direct earned premiums from commercial P&C lines. Once that deductible is exceeded, the federal government covers 85% of the insurer’s loss above the deductible, until the total losses are $100 billion. 

Several bills have been introduced in Congress proposing to extend TRIA. For example, last February, the TRIA Reauthorization Act of 2013 was introduced into the U.S. House of Representatives by Michael Grimm, a Democrat who represents the 11th District of New York.

If passed into law, it would extend TRIA until December 31, 2019 and would require the Secretary of the Treasury to collect all required terrorism loss risk-spreading premiums for any act of terrorism that occurs on or after January 1, 2012, by September 30, 2024. 

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