Sunday, November 20, 2005

What is the Terrorism Risk Insurance Act?

The Federal Government adopted the Terrorism Risk Insurance Act (TRIA) two years ago in response to the decision of most insurers to refuse to provide terrorism insurance after the events of September 11, 2001. The law included a provision requiring insurers to make available terrorism insurance to their customers. The "make available" provisions of TRIA require that, from the date of enactment (November 26, 2002) through the last day of the second year of the Program (December 31, 2004), each insurer must make available, in all of its commercial property and casualty insurance policies, coverage for losses due to covered acts of terrorism that does not differ materially from the terms, amounts and other coverage limitations applicable to losses arising from events other than acts of terrorism. TRIA did not regulate the cost of the insurance, but it included provisions that limited the insurance industry's losses which indirectly lowered the cost of the insurance.

TRIA required that the Secretary of the Treasury determine whether the "make available" provision should be extended for an additional year. On June 18, 2004, the U.S. Treasury Department today announced its decision to extend the "make available" provisions of TRIA for a third year. Currently, the TRIA "make available" is scheduled to end on December 31, 2004.