Terrorism Backstop Renewed, but Coverage Not Retroactive

TRIA (green)

2015_3President Barack Obama signed into law Monday the extension of the Terrorism Risk Insurance Program Reauthorization Act of 2015 which extends the program until December 31, 2020. The law H.R. 26, also gradually increases the trigger required to activate the program to $200 million from the previous $100 million and gradually increases the industrywide retention to $37.5 billion from the previous $27.5 billion.  See our comparison chart of program changes below.

With the enactment of this legislation, TRIPRA is renewed for a further six-year term, providing clarity and stability to policyholders and the insurance marketplace.

Coverage Gap?

However, the program will not be retroactive to expiry, rather it is effective January 12th,  resulting in a potential coverage gap of 12 days for insureds. While Rep. Randy Neugebauer, the most recent chairman of the Insurance Subcommittee of the House Financial Services Committee, tried to assure industry that there would be no coverage gap, we await further guidance from Treasury.  As a result of this uncertainty, premiums for coverage bound during that period will be due and payable, and potentially subject to minimum earned premium requirements.   For organizations, taking steps now to ensure coverage continuity is key.

The mandatory offer of terrorism coverage under eligible property and casualty coverage will  now be enforced. It will be important to review any coverage bound after January 1, 2015 which may have excluded terrorism coverage as a result of this program gap, to ensure that current “mandatory, make-available requirements” are met with this reenactment of the legislation.

Effective Dates Jan 1, 2008 – Dec. 31, 2014 Jan 12, 2015 – Dec 31, 2020
Definition of Covered Acts Violent Acts perpetrated by or on behalf of a foreign or domestic person or interest to coerce or influence U.S. policy No Change
Make Available Provision Must make coverage available for certified acts of terrorism on the same basis as other covered risks No Change, but requirement of Treasury Secretary to complete annual study of small insurers engaging in the program
Certification Level USD 5,000,000 Treasury Secretary to provide analysis on certification process, and decree a formal timeline for certifying events.
Must be certified by the U.S. Treasury Secretary, Secretary of State and Attorney General Replace Secretary of State with Secretary of Homeland Security; requires consultation only by Treasury Secretary
Program Trigger USD 100,000,000 USD 120,000,000 in 2016

USD 140,000,000 in 2017

USD 160,000,000 in 2018

USD 180,000,000 in 2019

USD 200,000,000 in 2020

Insurer Deductible: (% of Prior Yr. Direct Earned Premiums) 2008 – 2014: 20% No Change
Federal Share of Insured Losses Exceeding Deductible 2008 – 2014: 85% From January 1, 2016: 84%

From January 1, 2017: 83%

From January 1, 2018: 82%

From January 1, 2019: 81%

From January 1, 2020: 80%

Insurance Industry Retention for Mandatory Recoupment USD 27,500,000,000Treasury recoupment raised to 133% Set to increase incrementally through 2019 by USD 2 BN to USD 37.5BN; in 2020 to be avg. of the aggregate insurer deductibles from 3 prior yearsTreasury recoupment raised to 140%
Other Changes
  • Requires GAO study on the effect of collecting upfront premiums from insurers
  • Create advisory committee to encourage private market participation
  • Treasury to collect TRIA data regarding: Lines with terrorism exposure, premiums earned, geographical location of exposures, pricing of coverage, take-up rate, amount of private reinsurance purchased for terrorism, and other “appropriate matters”
  • Adds broker licensing NARAB II
  • Amends Dodd-Frank to exempt certain derivative swaps from margin requirements
Annual Cap on Liability USD 100,000,000,000 No Change


This post was originally published January 13, 2015

About Wendy Peters

Wendy is a Executive Vice President of Willis’ North American Terrorism Practice. Based in Radnor, Pennsylvania, …
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One Response to Terrorism Backstop Renewed, but Coverage Not Retroactive

  1. michael leschack says:

    Do we know if the NAIC will be revising their disclosure notices. Also, if coverage is not retro back to January 1, 2015 for policies which are issued before January 12 would a make available provision be required.

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