How TRIA Affects Consumers

TRIA (the Terrorism Risk Insurance Act) was signed into law in 2002, after several extensions it appears set to expire at the end of 2014 unless the government takes quick action. The renewal bill appeared to have strong support. However, after additional legislation was added in at the last minute it met unexpected opposition. Lawmakers will likely try to re-implement the bill in 2015 but we are likely facing a period of volatility due to a lapse in coverage.

Before the events of 9/11 most insurers were silent on terrorism coverage – it was explicitly included in policies but was not excluded either. After 9/11 it became, not surprising, for insurers to exclude claims related to a terrorism event. The federal government stepped in and agreed to backstop insurers if they offered the coverage. How it works is quite complicated (give us a call if you want to talk about insurance details) but the government agreed to pay claims in excess of a large deductible of $100M per company (originally $50M). Insurers began to offer terrorism coverage when they took the government incentives and collected unlimited premiums with extremely limited risk. For a large global insurer with billions in paid claims a year a $100M limit on terrorism losses was appealing.

The headlines discussing this issue in recent days claim the business world with stop and the Super Bowl will be canceled, should consumers worry about their personal insurance? The short answer is no. Federal terrorism coverage is extremely limited and the claims must be verified by the Secretary of State. The Boston Marathon bombings, for instance, were not declared a terrorist event and were not subject to TRIA. Unless your insured house or car is near a terrorist target in a major metropolitan area there is likely nothing to worry about.

Castlewood Insurance Services works to educate and inform around insurance issues facing consumers in North Chicago and Lake County Illinois. To make auto insurance, renters and homeowners policies easy to understand give the expert insurance agents a call or stop in.