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Terrorism Insurance
Pres. Bush Signs Terrorism Risk Insurance Program Reauthorization Act of 2007
President Bush has signed into law the Terrorism Risk Insurance Program (TRIA) Reauthorization and Extension Act of 2007 (H.R. 2761), which reauthorizes the Terrorism Risk Insurance Program for seven years, through December 31, 2014. This seven-year extension brings unprecedented certainty and stability to the terrorism insurance market and keeps in place an extremely successful and important public/private partnership that helps commercial insurance buyers and the entire economy protect themselves from the financial devastation of a future terrorist attack. PCI is proud to have worked with commercial consumers and others in the industry to keep this critical financial backstop in place.
In addition to extending the federal terrorism insurance backstop for seven years, it ends the existing TRIA distinction between foreign and domestic acts of terrorism. It does so without increasing the level of loss necessary to trigger the program ($100 million) or adding an onerous mandatory “make-available” requirement for attacks involving nuclear, biological, chemical or radiological (NBCR) weapons of mass destruction. The law reflects PCI’s priorities for the extension of this vital program. The seven-year period will provide the market with much-needed stability necessary to provide insurance for long-term commercial development projects that otherwise might not get off the ground.
Following is a summary of HR 2761:
- Removes the distinction between domestic and foreign-inspired acts of terrorism under the program. Losses from domestic acts would become eligible for reimbursement.
- Extends the program for an additional seven years, until December 31, 2014.
- Provides finite limits and some degree of legal certainty that insurer liability is limited by the existing $100 billion program cap.
- Clarifies that insurer exposure is limited to its deductible plus co-payment.
- Preempts other state and federal laws.
- Deletes existing language in TRIA that directs Congress to determine procedures and sources of payments for handling excess insured losses over the program cap.
- Requires that insurers disclose the cap to policyholders.
- Provides for prorated payments by insurers when insured losses approach or exceed the cap. The Treasury Department is to report to Congress within 120 days and issue final regulations within 240 days.
- In order to address “PAYGO” concerns, the recoupment provisions have been changed as follows:
- Requires that post-event policyholder surcharges imposed as part of the “mandatory” recoupment under TRIA (for up to $27.5 billion) be at 133 percent of the actual payout by the federal Treasury. This is designed to account for revenue lost when the policyholders ultimately deduct the surcharges on their corporate taxes.
- Requires accelerated recoupment surcharging, payable in three phases, should attacks occur during those same periods.
- Removes the 3 percent annual cap on post-event policyholder surcharges. This would apply to both accelerated recoupment and efforts to collect “discretionary” recoupment (over $27.5 billion).
- Requires periodic reports to Congress by the President’s Working Group on Financial Markets.
- Requires the Comptroller General to study and report to Congress regarding the following:
- Availability and affordability of terrorism insurance in specific markets (potentially including a possible “reset” provision) within 180 days; and
- NBCR insurance capacity, including legislative/regulatory recommendations, within one year.
- The existing program trigger, deductible, co-payment, aggregate industry retention and program cap remain unchanged.
Links to Additional Information:
Full Text of H.R. 2761
PCI Discusses TRIA on News Talk Radio
PCI Terrorism Media Kit
PCI’s Congressional Testimony...
GAO Report...
President’s Working Group Analysis Delivered to Congress
Terrorism: An Unpredictable and Uninsurable Risk
Consumers Benefit from a Market-Based Approach to Terrorism Insurance
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