In addition to extending the term of the program, the new legislation also seeks to expand the coverage it provides by requiring participating insurers to offer policyholders coverage for nuclear, biological, chemical and radiological (“NCBR”) terrorist attacks. While TRIA currently provides $100 billion in federal reinsurance coverage for certified acts of terrorism, including coverage for NCBR risks, coverage is only provided where those NCBR events are covered by the underlying insurance contract. Recent reports by the Government Accountability Office and the President’s Working Group on Financial Markets found that there was virtually no private market for NCBR risks, making coverage for those risks under the current Terrorism Risk Insurance Program unlikely. Other notable provisions of the proposed legislation include the reduction of the threshold requirement in aggregate industry insured losses resulting from an act of terrorism to trigger payment from $100 million to $50 million and the inclusion of “domestic events” under the Program. The latter provision would include coverage for attacks by “home-grown” terrorists such as the recently foiled plot on Fort Dix.
Reaction to the proposed legislation has been mixed. While large insurers and agents are expected to strongly support the proposed Act, small insurers have expressed concerns that the inclusion of NCBR-mandatory coverage will preclude them from participating in the Program. The Property Casualty Insurers Association of America, which counts a number of small insurers as members, stated that the NCBR issue should be addressed only after a full study of all its potential complications. While the bill is expected to receive widespread support in the House of Representatives, it is unclear whether that same level of support will be enjoyed in the Senate. We will monitor the bill’s progress through Congress and post updates on this Blog.
