Terrorism Risk Insurance Act (TRIA)

Terrorism Insurance Implementation Working Group 2009 Charge:
The Terrorism Insurance Implementation Working Group is appointed to coordinate the NAIC efforts to address insurance coverage for acts of terrorism and to work with the U.S. Department of Treasury Terrorism Risk Insurance Program Office on matters of mutual concern. The group will discuss long-term solutions to address the risk of loss from acts of terrorism.

The NAIC is committed to working with Congress, the Administration, state officials, and the industry to develop a long-term plan to make terrorism insurance available and affordable. President George W. Bush signed the Terrorism Risk Insurance Program Reauthorization Act of 2007 (the Act) December 26, 2007.

Several provisions of the initial Act have changed in the 2007 extension. Some of the more significant changes include:

• Revising the definition of a certified act of terrorism to eliminate the requirement that the individual(s) are acting on behalf of any foreign person or foreign interest.
• Extending the program by seven years through December 31, 2014.
• Requiring clear and conspicuous notice to policyholders of the existence of the $100 billion cap.
• Fixing the Insurer Deductible at 20% of an insurer’s direct earned premium, and the federal share of compensation at 85% of insured losses that exceed insurer deductibles.
• Fixing the program trigger at $100 million for all additional program years.
• Requiring the U.S. Treasury to promulgate regulations for determining pro-rata shares of insured losses under the program when insured losses exceed $100 billion.
• Requiring the Comptroller General to study the availability and affordability of insurance coverage for losses caused by terrorist attacks involving nuclear, biological, chemical, or radiological materials and issue a report not later than one year after the enactment of the Terrorism Risk Insurance Program Reauthorization Act of 2007.
• Requiring the Comptroller General to determine whether there are specific markets in the United States where there are unique capacity constraints on the amount of terrorism insurance available and issue a report not later than 180 days after the enactment of the Terrorism Risk Insurance Program Reauthorization Act of 2007.
• Requiring the President’s Working Group on Financial Markets to continue an ongoing study of the long-term availability and affordability of terrorism risk insurance.
• Accelerating the timing of the mandatory recoupment of the federal share through policyholders surcharges.

In the absence of private market innovations and solutions, sustaining a viable private market for terrorism insurance depends on a federal backstop. The NAIC and state insurance commissioners play an essential role administering the terrorism risk insurance program—issuing timely guidance to insurers and consulting with the U.S. Department of the Treasury and its Terrorism Risk Insurance Program Office.

The NAIC has played an active role in fostering the program and providing assistance to insurers and the federal government as the program is implemented. The NAIC and its members have also testified before both houses of Congress on the need to extend the program.

• Terrorism Insurance Implementation Working Group

The NAIC’s Property and Casualty Insurance Committee and its Terrorism Insurance Implementation Working Group (TIIWG) recently adopted a model bulletin, including an expedited filing form intended to help state insurance regulators advise insurers about regulatory requirements related to providing terrorism insurance under the revised program. The model bulletin provides guidance to insurers related to rate filings and policy language that state regulators would find acceptable to protect U.S. businesses from acts of terrorism. The model bulletin describes important changes that are contained in the Act and informs insurers regarding whether rate and policy form filings might be needed.

On December 19, 2007, the Property and Casualty Insurance Committee and the Terrorism Insurance Implementation Working Group adopted the Model Disclosure Forms [Form 1] [Form 2]. Insurers use the forms as drafted, they may modify the forms to meet individual circumstances or use forms that are substantially similar. The U.S. Department of the Treasury worked with the Committee and the Working Group to assure that the disclosures satisfy the revised disclosure requirements in the Act.

The U.S. Department of the Treasury also implements the Terrorism Risk Insurance Program. Their website provides updated information on the Program, including announcements of all rulemakings, interpretive guidance, and requests for public comments. A link to these can be found at http://www.treas.gov/offices/domestic-finance/financial-institution/terrorism-insurance/.