The 9/11 attacks chilled the Americans to the bone. The losses associated with the attacks awakened the country, and the insurance industry stepped up with the Terrorism Risk Insurance Act (TRIA) in 2002.

What is TRIA?

The Terrorism Risk Insurance Act was brought into force by the Congress in 2002, and acts as a federally backed reinsurance program. It originated as a short term solution that would help the insurance industry to recover after the September, 2011 attacks. It was intended to offer financial help when the losses after an act of terrorism go beyond 20 percent of an insurance company’s earned property and casualty premiums. In such cases, the federal government would pay around 85 percent of the losses, while the insurance companies would be held responsible for the rest 15 percent, next to their 20 percent retention.

For how long was the TRIA valid?

The Terrorism Risk Insurance Act came into force on November 26, 2002 and was set to expire on December 31, 2005. It was later extended till 2007. However, in 2007 it was renewed under the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA), and was further extended till December 31, 2014.

The reach for TRIA

The TRIA program offers insurance protection for property and workers, along with liability coverage. Thereby, it finds ample customers in the urban market. The significance of terrorism coverage has been recognized by the small and big businesses alike.

However, the TRIA has been rendered ineffective in the recent times since the large national and global companies are staying away from the federal backing. Thereby, in spite of all the good intentions, the TRIA fails to draw in the big players in the market. Certain reasons can be cited out for this kind of response like:

1. The nuclear, chemical and bio-chemical attacks are not covered by the TRIA. A global company might not feel threatened by the regular terrorism attacks and may regard them as low-risks.

2. The TRIA doesn’t offer insurance coverage for the professional liability and autos of a company. It also leaves out the international facilities of a company.

3. Large business organizations or companies usually don’t end up buying insurance coverage for terrorism through the TRIA. They opt for the private insurance options instead since those come with much extensive coverage.

4. The insurers are also not receiving enough consumers so that they can cover the losses and damages after major terrorism threats.

5. The ‘recoupment’ provision which has been put into action since 2007 requires the insurers to pay back the federal assistance that they receive at a rate of 133%. The insurers suffer from the lack of customers, as it is. Apparently, they are unwilling to pay the additional amount as well.

In case, another major terrorist attack takes place, the TRIA wouldn’t be able to offer a solution to the threat. On the contrary, it may drain the business companies and the insurance industry of its resources. Consequently, the insurance companies will be forced to raise the costs for coverage.

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