What is the Terrorism Risk Insurance Act?

On September 11, 2001, the world changed for businesses in the United States – especially where insurance was concerned. The $40 billion economic toll of the 9/11 attacks, resulting from nearly 3,000 lost lives combined with an unprecedented amount of property damage on U.S. soil caused by acts of terror, fell largely on reinsurers who were completely unprepared for the scale and scope of the financial fallout of these terrorist attacks.

As a result of this financial calamity, many reinsurers withdrew from the market altogether or specifically excluded acts of terrorism for their coverage offerings. Many businesses were completely unable to purchase any kind of protection against future acts of terror.

Unfortunately, this happened at the same time lenders and investors began requiring terrorism insurance coverage in order to protect their investments — creating even greater threats to national security as utility interests, energy, construction, transportation, and real estate were all industries particularly hard hit by these changes. The risk was great and the government decided it must intervene in order to reduce the risks of additional security threats.

The Terrorism Risk Insurance Act, or TRIA, of November 26, 2002, was the solution to the problem. The act creates a system of shared compensation between the insurance company and the public for the insured losses resulting from terrorist acts. Originally set to expire on December 31, 2005 it has been extended twice and is currently, under the name of the Terrorism Risk Insurance Program Reauthorization Act, slated to expire on December 31, 2014.

TRIA is overseen by the Secretary of the Treasury along with the Federal Insurance Office. It is the Secretary, however, who has the authority to implement TRIA and establish regulations or procedures regarding the act.

Of course, the burning question on everyone’s mind, is what exactly qualifies as an act of terrorism? For the purpose of the Terrorism Risk Insurance Act, a terrorist act is one that the Secretary of the Treasury in combination with the Attorney General of the United States and the Secretary of State designate as one. In order for them to do so, the act must be violent in nature and harmful to life, property, and infrastructure. There are other qualifiers regarding intent that must be in place as well for an act to qualify as terrorist in nature.

On September 11, of all days, it’s important for businesses to celebrate the economic and other freedoms terrorists tried to thwart. One way to protect that very liberty is by purchasing adequate business insurance coverage to help your business stay afloat during many different challenging times — whether they are created at the hands of angry men or by Mother Nature herself.

Keep in mind, that terrorism coverage is available as an add-on casualty insurance coverage.