What you need to know: Failure of congress to reenact TRIA, the political mechanics of reinstating the Act, and the implications for policy holders.
- There will be a lapse in the Terrorism Risk Insurance Act (TRIA)
- Leaders of house and senate have pledged to bring this up immediately upon returning from the holiday break. Likely January 6 or 7. They will pre-conference the legislation in an effort to expedite the process.
- The act will likely be back dated to 1/1/2015.
- Mechanics of the Cover
- TRIA obligates carriers of offer cover and provides reinsurance for "Certified Acts of Terror" in excess of $200M
- ISO Conditional TRIA Exclusion (U885-1013) states that TRIA is canceled if the ACT is not in place. The exception is all W.C. policies and all admitted policies in NY and FL. NY and FL obligate all admitted carriers to offer Terrorism Coverage TRIA or not. In other words, all policies with TRIA AND the Conditional Exclusion will stop covering Terrorism on 1/1/2015.
- Implications for Clients
- Not all policies contain the Conditional Exclusion. Policy holders must read their policies. Look for form: U885-1013
- If a policy holder has this exclusion, they may be in breach of covenants/contracts they are a party to.
- Cover for "Certified Acts of Terrorism" is more or less meaningless. The Treasury department had the authority to "Certify" an act of terrorism. As of 1/1/2015 there will be no governing body to "Certify" an act.
- Berkshire Hathaway has already developed a product to cover the gap.
- Carrier Ratings
- Now that carriers will no longer have the reinsurance afforded by the Act, their reserves may be seen as inadequate. AM Best has stated that they will not be taking any action at this time but they are assessing carriers and closely monitoring the situation.
For more information on TRIA contact us today.