In the aftermath of the 9/11 terrorist attacks, insured losses amounted to approximately $47 billion prompting the federal government to enact the Terrorism Risk Insurance Act (TRIA). This act allows the federal government and insurance industry to share losses arising from acts of terrorism.
How is terrorism defined under TRIA?
- Must first be certified by the Secretary of the Treasury in consultation with the Secretary of Homeland Security
- Must be an act that is dangerous to human life, property, or infrastructure and to have resulted in damage within the United States
- Must be committed as part of an effort to coerce U.S. civilians or to influence either policy or conduct of the U.S. Government through coercion
TRIA set to expire December 31, 2020
Thankfully there have been no certified terrorism losses in the country since TRIA was originally passed in November 2002; however, the Act remains crucial to the stability and health of the property terrorism insurance market. TRIA has been renewed three times since its inception: 2005, 2007 and most recently in 2015. Although the expiration date remains more than a year out, commercial insurers are preparing for a market without TRIA and working to warn officials about the consequences of a non-renewal.
Considerations for purchasing terrorism coverage
According to Marsh Placemap, 66% of public entities and nonprofit organizations bought terrorism insurance in 2018 with a premium allocation of 3%. In considering a purchase of this coverage, think about the location of your entity. Rural and residential areas are less likely to be targeted by a terrorist attack. Have you budgeted for the coverage? Policies can range from 3 to 5 percent of an organization’s property insurance costs.