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Senate Fails To Act on TRIA, Coverage To Expire December 31, 2014

US Senate
December 18, 2014

The U.S. Senate failed to pass legislation reauthorizing the Terrorism Risk Insurance Act (TRIA), leading to the expiration of this coverage December 31, 2014. While TRIA reauthorization had passed the House it stalled in the Senate, which adjourned without taking action. That means it will be up to the new incoming Congress in 2015 to determine whether the federal government will continue to provide an insurance backstop for terrorism.

Reaction was swift from numerous parties interested in having the legislation extended.

NAIC President and North Dakota Insurance Commissioner Adam Hamm issued the following statement via the National Association of Insurance Commissioners website:

We are surprised and deeply disappointed that Congress was unable to pass a reauthorization of the Terrorism Risk Insurance Act--a non-partisan issue with broad support in both parties and chambers--before they adjourned for the year. The NAIC will work with insurers, policyholders, and the business community during this time of uncertainty in the market, as American businesses will have to make tough decisions regarding coverage. We hope that this disruption will be short-lived and urge the new Congress to act quickly to reinstate this critical program.

ACE Group Chairman and CEO Evan Greenberg said:

Congressional failure to approve the renewal of TRIA legislation is deeply disappointing. It was simply irresponsible for our elected officials to adjourn without reauthorizing TRIA. By letting TRIA lapse, they have exposed our economy and our society to the threat of severe economic uncertainty in the event of a significant act of terrorism. I sincerely hope this is the first order of business for the new Congress.

The lapse in coverage also creates severe uncertainty for January renewals. Expectations had been high that Congress would act to extend TRIA even at the eleventh hour, and industry leaders were shocked that it didn’t happen. The immediate impact will be a tightening of the insurance markets, and terrorism coverage exclusions in commercial policies will be back in force. Many insurance policies were written in 2014 with provisional exclusions that will be automatically activated once TRIA expires. All risk managers and insurers, including the captive market, will need to reassess their terrorism exposure and determine how to handle it for 2015.

Captive.com will be speaking with various captive constituencies over the next several days to provide additional commentary on how this is likely to impact the alternative insurance markets.

Additionally, a conversation on this topic is taking place in the IRMI Group on LinkedIn. If you’d like to join in or simply read the conversation, you can join the IRMI Group here.

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