This post is part of a series sponsored by TSIB.
You’ve worked hard to get a satisfactory outcome on your insurance renewal, answered countless underwriting questions, and finally filed a restraining order against your broker, but there’s one more question left to be answered.
Do you accept or reject TRIA?
TRIA or Terrorism Risk Insurance Act is a government-sponsored terrorism insurance offered under liability and property insurance. It was created as a three-year program to bring stability to the insurance market by covering losses caused by terrorist acts after the 9/11 attacks.
Terrorism Risk Insurance Program Reauthorization Act (TRIPRA)
After the insurance industry determined that terrorism was not insurable, the federal government was called upon to step in and provide a backstop, similar to what it had done with the National Flood Insurance Program. At the time, President George W. Bush signed the Terrorism Risk Insurance Act of 2002 on November 26, 2002.
Congress approved extensions of the act in 2005, 2007, 2015, and 2017. The most recent version, in 2017, was renamed the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) and provides coverage through 2027.
but, Property InsuranceRelying on government-backed TRIPRA programs may not be the best way to insure this risk. Since 9/11, markets have stabilized and alternative markets have emerged.
Requirements
For TRIPRA to be invoked, the Secretary of the Treasury, in consultation with the Secretary of Homeland Security and the Attorney General, must certify an attack as a terrorist act. Under TRIPRA, a terrorist act must result in damages in excess of $5 million. U.S. government involvement is initiated only when aggregate losses from such acts reach $200 million.
No terrorist acts have been declared by these groups since 9/11, including the Boston Marathon bombing in 2013. Although the Boston Marathon bombing was a terrorist act, the damages did not exceed the $5 million threshold for TRIPRA coverage. Because TRIPRA is untested, it is difficult to know exactly how TRIPRA would respond in the event of a certified terrorist act.
Looking back at the Mandalay Bay shooting in 2017, it was ruled not to have been terrorism, but many claims are still pending. From an insurance perspective, terrorism claims issues related to these types of incidents can take years to resolve.
Standalone terrorism insurance and property insurance
in contrast, Independent terrorism insurance property A policy may cover both of the following:
- Property damage
- Loss of income/loss of use
These policies cover a single insured rather than an entire population area and are designed to address terrorist acts committed for political, religious, ideological or similar reasons. This level of coverage is broader and more specific, providing greater certainty of compensation in the event of a loss. Essentially, stand-alone anti-terrorism policies do not require an act to be certified as terrorist by a government official or to reach a specific loss threshold.
The price of this insurance may be a little higher than what you would expect to pay for TRIPRA insurance, but when you consider the claims scenarios, additional coverage, and not having to rely on TRIPRA rules, a standalone policy is worth the extra premium.
Because the insured does not pay a TRIPRA premium, the cost is offset and the additional premium is not high.
In most cases, the stand-alone terrorism insurance is designed to follow the terms and conditions of the property insurance policy, so it effectively extends the coverage of the master property insurance policy to include terrorism as a covered peril, with deductibles likely to apply as well.
Returning to the original question, given the enhanced features that stand-alone anti-terrorism asset insurance offers, it may be worth considering. Contact the TSIB Explore your options and keep your company safe.
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