Terrorism Risk Insurance Act

Terrorism Risk Insurance Act
Great Seal of the United States
Other short titles Terrorism Risk Insurance Act of 2002
Long title An Act to ensure the continued financial capacity of insurers to provide coverage for risks from terrorism.
Acronyms (colloquial) TRIA, TRPA
Nicknames Terrorism Risk Protection Act
Enacted by the 107th United States Congress
Effective November 26, 2002
Citations
Public law 107-297
Statutes at Large 116 Stat. 2322
Codification
Titles amended
U.S.C. sections amended
Legislative history

The Terrorism Risk Insurance Act (TRIA) (H.R. 3210, Pub.L. 107–297) is a United States federal law signed into law by President George W. Bush on November 26, 2002. The Act created a federal "backstop" for insurance claims related to acts of terrorism. The Act "provides for a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism."[1] The Act was originally set to expire December 31, 2005, was extended for two years in December 2005, and was extended again on December 26, 2007. The Terrorism Risk Insurance Program Reauthorization Act expired on December 31, 2014.[2]

On January 7, 2015 the House of Representatives voted 416-5 to approve the Terrorism Risk Insurance Program Reauthorization Act of 2015, (H.R. 26, Pub.L. 114–1) extending the TRIA through the year 2020. The Senate approved the extension the day after by a vote of 93-4.[3] On January 12, 2015, President Barack Obama signed the extension into law.

History

Before the September 11 attacks, business insurers generally neither charged for nor specifically excluded terrorism coverage. The scope of the 9/11 attacks and the resulting $40 billion estimated insured loss changed perceptions dramatically. It was the worst terrorist attack on record for both property and fatalities and the worst international attack on American soil since the Japanese surprise attack on Pearl Harbor, as nearly 3,000 people lost their lives in New York City, Washington, D.C., and Stonycreek Township near Shanksville, Pennsylvania.[4]

Much of the financial cost from the 9/11 attacks fell on reinsurers (that further spread the risk assumed by primary insurers). Unable to accurately model or price terrorism exposures, reinsurers largely withdrew from the market for terrorism coverage. Without reinsurance, primary insurers were then compelled to exclude terrorism. Most state insurance regulators approved terrorism exclusions for use by primary insurers.

Many businesses were not able to purchase insurance protection against future terrorist attacks. This situation was a serious threat to industries where lenders and investors required terrorism protection for their investments. Real estate, transportation, construction, energy, and utility sectors of the economy were vulnerable, creating broader threats to the national economy.

Congress responded by enacting TRIA in November 2002 to provide a government reinsurance backstop in case of large-scale terrorist attacks, requiring that business insurers offer terrorism coverage for the types of insurance included in the act. Congress extended and amended TRIA in December 2005 and December 2007.

Following enactment of the 2007 TRIA extension, the Congressional Budget Office forecast a net federal budget cost of $0 for TRIA through 2017. "Under TRIA, the federal government would help insurers cover losses in the event of a terrorist attack under certain conditions, and would also impose assessments on the insurance industry to recover all or a portion of the federal payments." [5]

The act expired on December 31, 2014, but was renewed at the start of the next congress, with Obama signing the extension on January 12, 2015.[6] Many experts warn that "construction projects could be stalled and commercial loans on shopping malls, utilities and skyscrapers could be in jeopardy." In addition, according to the Baltimore Sun, the National Football League denied rumors that it would cancel the Super Bowl over the issue.[7]

Governance

The Secretary of the Treasury oversees the Terrorism Insurance Program, with the assistance of the Federal Insurance Office.[8] The Secretary has authority to establish regulations and procedures to implement TRIA.[9]

Definition of terrorism

The term “act of terrorism” is defined in the act as: any act certified by the Secretary of the Treasury, in concurrence with the Secretary of State and Attorney General, to be an act that is dangerous to human life, property, or infrastructure and to have resulted in damage within the U.S. (or outside the U.S. in the case of a U.S.-flagged vessel, aircraft or premises of a U.S. mission). It must be committed as part of an effort to coerce U.S. civilians or to influence either policy or conduct of the U.S. Government through coercion. The definition includes both foreign and domestic terrorists. The Secretary may not delegate this certification authority and his or her decision to either certify or not certify an act of terrorism is not subject to judicial review.[10]

Function

TRIA created a U.S. government reinsurance facility to provide reinsurance coverage to insurance companies following a declared terrorism event. TRIA is a short-term measure designed to help the insurance market recover from 9/11 and develop solutions to insuring terrorism.

TRIA established the Federal Terrorism Insurance Program to administer a system of shared public/private compensation for insured losses resulting from acts of terrorism in order to protect consumers and create transitional period for private insurance markets to stabilize

Structure of assistance

-Is a recipient of direct earned premiums for any type of commercial property and casualty insurance coverage;
-Is licensed (or admitted) to provide insurance in any State, approved for the purpose of offering property and casualty insurance by a Federal agency in connection with maritime, energy, or aviation activity, or is a State residual market insurance entity or State workers’ compensation fund
-And meets any other criteria that the Secretary may reasonably prescribe.

See also

References

  1. "Terrorism Risk Insurance Program". U.S. Treasury Department Website. U.S. Treasury Department. Retrieved 20 March 2013.
  2. "The Terrorism Risk Insurance Act of 2002 (TRIA), as amended by the Terrorism Risk Insurance Extension Act of 2005 (TRIEA) and the Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA)" (PDF). Terrorism Risk Insurance Program Office, U.S. Treasury Department. Retrieved 20 March 2013.
  3. Dinan, Stephen (January 8, 2015). "Terrorism insurance bill passes two days after Coburn’s exit". The Washington Times. The Washington Times, LLC. Retrieved January 8, 2015.
  4. Hartwig, Robert; Wilkinson, Claire (April 2011). "Terrorism Risk: A Reemergent Threat" (PDF). Insurance Information Institute. Retrieved December 14, 2014.
  5. Willie, Susan. "Congressional Budget Office Cost Estimate: H.R. 2761: Terrorism Risk Insurance Program Reauthorization Act". Congressional Budget Office. Retrieved 25 March 2013.
  6. "Expiring terrorism insurance program alarms Md. industries". Baltimore Sun. Retrieved 28 December 2014.
  7. "Mission - Federal Insurance Office". Retrieved 25 March 2013.
  8. "TRIA Regulations". U.S. Department of the Treasury. Retrieved 25 March 2013.
  9. "Terrorism Risk Insurance Act of 2002, As Amended In 2005 and 2007" (PDF). U.S. Department of the Treasury Web site. Section 102 (1) Act of Terrorism: U.S. Department of the Treasury. Retrieved 25 March 2013.

External links

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