Approval of the legislation, the Terrorism Risk Insurance Act, increases the exposure of the insurance industry to a terrorist attack, partly to encourage the development of a fully private market to cover such risks. The original law was passed in November 2002 after private insurers and reinsurers refused to cover terrorism-related losses in the wake of the Sept. 11, 2001 attacks.
The deductibles and co-payments that insurers must contribute to the program have climbed. In addition, the criteria for when payment from the program is triggered has changed. Under the old version of TRIA, the federal government paid out when losses exceeded $5 million. That rises to $50 million in 2006 and $100 million in 2007.
In addition, the leuislation’s “make available” provision, which requires insurers to offer terror coverage under the same terms and conditions as other lines of coverage, will apply to amounts below the event triggers. The National Association of Real Estate Investment Trusts and others supported the provision.
The insurance industry, which had been pushing Congress to extend the program before it was due to run out at the end of 2005, welcomed the new legislation, which still needs to be signed by President George W. Bush.
"This timely, decisive action taken by Congress should bring comfort to businesses all over the country that rely on insurance to protect them from the potential financial devastation that could result if they become victims of a terrorist attack," Marc Racicot, governor of the American Insurance Association, said in a statement.
