TRIA Update

Immediately following September 11, 2001 and up until November 26, 2002, policyholders paid excessive premiums to purchase stand-alone Terrorism coverage, written only by a small number of insurance companies willing to offer such a policy. In a few instances, coverage was unattainable at any price.

The Terrorism Risk Insurance Act (TRIA) was signed into law on November 26^th, 2002 and provided U.S. Government backing to the insurance industry for “certified” acts of terrorism for a period of 3 years, ending 12/31/05.

With the Act terminating on 12/31, and with just one week before it's expiration, President Bush signed the Terrorism Risk Insurance Extension Act, which will extend the TRIA for two years. The House and Senate resolved differences between the competing TRIA-extension bills. Under the compromise, which more closely follows the Senate version (favored by the Bush Administration), the insurance industry’s retentions (deductibles) will increase considerably, along with the event trigger (threshold) that increased from $5 Million in 2005 to $50 Million in 2006 and $100 Million in 2007. In addition, the TRIA extension is somewhat narrower in scope than the original act. Among the insurance lines that will be excluded from coverage are group life, commercial auto, surety and professional liability.

What this means in terms of capacity and pricing remains uncertain. We will have a better idea of the impact on the changes following the new year.