Legislation was recently introduced in the House of Representatives to extend the federal Terrorism Risk Insurance Program through 2019.  The lead sponsors of the bill, the TRIA Reauthorization Act of 2013 (H.R. 508), are Rep. Michael Grimm (R-NY) and Carolyn Maloney (D-NY), both of whom sit on the House Financial Services Committee.

The Terrorism Risk Insurance Act was initially enacted in 2002, and amended by the Terrorism Risk Insurance Revision and Extension Act of 2005 (“TRIREA”), and the Terrorism Risk Insurance Program Reauthorization Act of 2007 (“TRIPRA”). It provides a federal backstop for terrorism-related insurance claims (collectively, including amendments, “TRIA”).  TRIA is now set to expire on December 31, 2014.

By way of background, property and casualty insurers under TRIA must make available to their insureds terrorism coverage, which the insureds have the option of purchasing or declining.  TRIA covers most commercial property and casualty lines, including excess insurance, workers’ compensation insurance, and D&O liability insurance, but does not include several types of insurance such as professional liability insurance, flood insurance, or reinsurance.
Even though the program is not set to expire this year, many in the industry are pushing for an extension before the end of this year so that there will be clarity before policies that will be in effect on December 31, 2014 are issued.

We anticipate that there will be significant debate regarding whether a federal backstop is necessary for the market to cover this risk.

Although the recently proposed bill is merely an extension of the program, it will be interesting to see if alternate extension proposals emerge.  Although a cyber-terrorist attack would arguably qualify for the federal backstop if the Secretary of the Treasury Department certified the attack as an act of “terrorism” (assuming other statutory requirements are met), alternate proposals may clarify the issue by explicitly including “cyber attacks” as acts of terrorism that would trigger the federal backstop.

We will continue to monitor developments related to TRIA and the possible extension of the Terrorism Risk Insurance Program.

If you have any questions, please email us at [email protected].  Click here to read a copy of The TRIA Reauthorization Act of 2013.