On January 8, the 114th Congress addressed the “unfinished business” of the preceding Congress, which adjourned in late December without renewing the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA)*, leaving the Federal backstop to expire on December 31, 2014. The House and Senate acted quickly in the first week of the new Session, and the six-year TRIA extension passed with an overwhelming majority. US President Barack Obama is expected to sign the bill (H.R. 26) into law.
What is TRIA?
Established following the events of September 11, 2001, TRIA provides a US government backstop for traditional insurers and US-based captive insurers for extreme, high-level terrorism losses. It has helped to create and maintain a stable market for terrorism coverage.
What Does This Mean for Your Insurance Program?
Lawmakers have suggested their intent is to have the effective date of the extension to be retroactive to January 1, 2015. This would alleviate the uncertainty surrounding conditional policy language that allowed for cancellation, exclusion, or re-rating in the event of a TRIA non-renewal on December 31.
What Does This Mean for the Insurance Industry?
While the law’s December 31 expiration was unexpected, the industry continued to express optimism that TRIA legislation would pass in early January. As such, most carriers avoided any knee-jerk reactions in favor of exhibiting patience and confidence that the new Congress would act. The industry had already spent months preparing for the changes contemplated in previously proposed TRIPRA legislation such as an increased financial trigger for government reimbursement and higher carrier retentions. The general sentiment is that capacity and pricing will remain stable following the Act’s passage.
How Lockton Can Help
Lockton has dedicated experts prepared to address any unique circumstances and coverage needs relating to this issue. The vote to reinstate and extend TRIA mitigates the financial burden borne by insurers and US-domiciled captives. However, it does not eliminate the risk of an event itself. Clients are encouraged to continue to be mindful of terrorism exposure and to consult with their Lockton team.
*TRIA was the original coverage in place. TRIPRA refers to the reauthorization of the program that has been passed by Congress.