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Major Components of the New TRIA Law

On Monday, January 12, President Obama signed a six-year reauthorization of the Terrorism Risk Insurance Act...
January 23, 2015

On Monday, January 12, President Obama signed a six-year reauthorization of the Terrorism Risk Insurance Act (TRIA). The enactment of the TRIA extension capped more than a year of lobbying by a broad coalition of business interests, including PIA.

PIA National has prepared a one-page summary of major changes between the just-expired TRIA law and the newly-enacted TRIA law. You can view this comparison here.

Here is a quick snapshot of the major components of the new TRIA law:

The program is reauthorized for six years, through Dec. 31, 2020. The current $100 million trigger for federal involvement in handling claims for a terrorist attack will be gradually raised to $200 million over five years. The government cap of $100 billion for losses will remain. The co-pay gradually increases from 15 percent to 20 percent, beginning in 2016 through 2020. The insurance industry's repayment of funds to pay terrorism attack claims (or "recoupment") is increased from $27.5 billion to $37.5 billion or the total amount for all insured losses during the calendar year. The maximum government recoupment paid by policyholders is 140 percent, up from 133 percent.

The Secretary of the Department of Homeland Security (DHS) is now included in the certification of an act of terrorism, and the Secretary of State and Attorney General are removed from the process. An Advisory Committee is formed to encourage the creation and development of risk sharing mechanisms for terrorism risk.

The law 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.

In addition, the bill creates several studies: A study on the process for the certification of a terror attack; an annual study of small insurer market competitiveness to examine challenges smaller insurers face; a study of the possibility of collecting upfront premiums on insurers that participate in TRIA; and an examination of creating a capital reserve fund, which would require insurers to dedicate capital specifically for terrorism losses before an attack.

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