Many in the insurance industry breathed a heavy sigh of relief recently as President George W. Bush signed Dec. 26 legislation that extends the federal Terrorism Risk Insurance Act (TRIA).
President Bush initially signed TRIA into law the in 2002, and subsequently in 2005. The current bill was set to sunset at the end of 2007.
The intent of both acts was to provide a federal “backstop” for insurance claims related to acts of terrorism.
TRIA created a federal reinsurance facility to provide coverage to insurance companies following a declared terrorism event.
Business or individuals can purchase a terrorism insurance “rider” with another policy, such as their fire, automobile, or workers”™ comp insurance plan.
Provisions of the bill include modifying the definition of terrorism to include domestic acts of terror, which were not covered under the original act.
Many insurance lobby groups also advocated for the inclusion of group life coverage and coverage to include nuclear, biological, chemical and radiological events, which were not included in this bill.
The Independent Insurance Agents and Brokers of New York (IIABNY) praised the bill”™s passage, the previous TRIA bill was set to sunset Dec 31.
Stephen R. Zogby, chairman of the IIABNY board of directors, said TRIA is a very important piece of legislation for New York state, which has known too well terror attacks
IIABNY and other insurance organizations still vigorously support a permanent federal backstop, he said.
Without TRIA, the private reinsurance capacity for terrorism payouts is between $6 billion and $8 billion, according to the IIABNY.
The 9/11 attacks of, for example, caused about $35.9 billion in losses.
The initial extension bill drafted by the House of Representatives earlier in the year would have included group life coverage and nuclear, biological, chemical and radiological attacks. That bill would also have extended the act another fifteen years, rather than seven.
However, President Bush had said he would veto such a bill because it would expand the government”™s role too broadly.
Jill Dalton, managing director and leader of Marsh Inc.”™s specialty terrorism practice, said the limited version of the bill that was signed into law is still an important piece of legislation.
“In our opinion, without the bill the availability and affordability of terrorism insurance would be a problem,” she said. “We”™re pleased with the result.”
The amount of loss under the current program to trigger a claim is $100 million.
