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1 1 (February 1, 2019)

handle is hein.crs/govyds0001 and id is 1 raw text is: The Terrorism Risk Insurance Act (TRIA) 0 February 1, 2019 Prior to the September 11, 2001, terrorist attacks, insurance covering terrorism losses was normally included in commercial insurance policies without additional cost to the policyholders. The insured losses on all insurance lines from the September 11 attacks exceeded $45 billion in current dollars, an amount well above other insurance industry experiences with terrorism losses. For example, Figure 1 compares the losses in property insurance lines from the September 11 attacks to the total of the rest of the 20 largest terrorist attacks worldwide both before and since 2001. Figure I. Insured Property Losses from Terrorism Source: Insurance Information Institute. Note: Amounts are adjusted for inflation to 2017 and may not sum due to rounding. Following September 2001, insurers and reinsurers pulled back from offering terrorism coverage. Some observers feared that a lack of insurance against terrorism loss would have a wide economic impact, particularly because insurance coverage can be a significant factor in lending decisions. Congress responded to the disruption in the insurance market by passing the Terrorism Risk Insurance Act of 2002 (TRIA; P.L. 107-297). TRIA created a temporary program, expiring at the end of 2005, to calm markets through a government reinsurance program sharing in terrorism losses. This program was intended to give the insurance industry time to gather the data and create the structures and capacity necessary for private insurance to cover terrorism risk. TRIA did (and does) not cover terrorism losses directly but instead reimburses private insurers for a portion of their losses. The act does not require premiums to be paid by private insurers for the government coverage. However, it does require private insurers to offer commercial insurance for terrorism risk, which private insurers were not willingly offering prior to TRIA's enactment. In addition, TRIA provides that the government recoups some or all federal payments under the act from insurers in the years following government coverage of insurer losses. TRIA is limited to commercial property and casualty insurance. It does not cover losses in health or life insurance, nor does it is cover losses in personal property lines, such as homeowners insurance. In the years following 2002, terrorism insurance became widely available and largely affordable, and the insurance industry greatly expanded its financial capacity. There has been, however, little apparent success in developing a longer-term private solution, and fears have persisted about the economic consequences if terrorism insurance were not available. Thus, although explicitly designed as a three-year program, TRIA has been extended several times since 2002; it is currently set to expire at the end of 2020. The precise program details under TRIA have been adjusted by Congress over time, particularly (1) the program trigger, an aggregate annual minimum loss threshold below which no government loss-sharing occurs; (2) the federal share of insured losses; (3) the insurer deductible, an amount based on each insurer's premium volume; and (4) the insurer aggregate retention amount, the losses retained by the insurers if post-attack recoupment occurs. In addition to these thresholds, a single attack must cause a minimum of $5 million in insured damages to be certified under TRIA. No attack has been certified under the act and no federal payments have been made. TRIA Extension Congress has passed three extensions to the TRIA program, in 2005 (P.L. 109-144), in 2007 (P.L. 110-160), and in 2015 (P.L. 114-1). The 2005 extension primarily focused on reducing the government's upfront financial exposure under the act, whereas the 2007 extension left most of the upfront aspect of the TRIA program unchanged but accelerated the post-event recoupment provisions. The 2007 legislation also included the only expansion of the TRIA program since initial enactment: it extended the program to cover any acts of terrorism, as opposed to only foreign acts of terrorism. P.L. 110-160 extended TRIA to the end of 2014, but no extension legislation was enacted in this timeframe. Thus, the program expired for 12 days until P.L. 114-1 was signed by the President in January 2015. This law extended the program nearly six years, until the end of 2020, while reducing the government's share of the losses compared with the program as it was in 2014. Specifically, P.L. 114-1 gradually (1) increases the program trigger from $100 million to $200 million, (2) reduces the government share of the losses from 85% to 80%, and (3) increases the insurer aggregate retention amount from $27.5 billion to $37.5 Total losses on property insurance lines from 20 largest attacks: $32.76 billion

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