Terrorism coverage and understanding TRIPRA
Two weeks after the Boston Marathon bombings, questions surrounding terrorism coverage have become a cause for concern for many businesses impacted by the tragedy. Some are confused over whether or not their policies offer protection from business interruption and property losses related to terrorist attacks. Although the event has yet to be determined as an official act of terror, it’s important for businesses to become familiar with the current version of the Terrorism Risk Insurance Act (TRIA) (now known as the Terrorism Risk Insurance Program Reauthorization Act, or TRIPRA, of 2007) as well as to review the specific language of their policies.
Following September 11, 2001, terrorism losses were widely excluded from business interruption policies in order to protect insurers from exorbitant costs in the event of future terrorist attacks. In response, U.S. Federal lawmakers passed the Terrorism Risk Insurance Act (TRIA) of 2002 in order to establish a system of shared public and private compensation for insurance losses stemming from terrorist attacks.
TRIA deals exclusively with losses arising from acts of terrorism that are within the parameters of specifications defined in the Act. In order for coverage to trigger, a terrorism act must result in more than $5 million in loss within certain specified lines of insurance to all injured parties as a group (“aggregate industry loss”).
TRIA was extended in 2005 and again in 2007, as the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) in order to expand terrorism coverage and help create stability in the country’s insurance and reinsurance markets. TRIPRA of 2007 included several key changes, most notably the parties responsible for declaring a terrorism event as a “certified” act, (the U.S. Secretary of Treasury, the Secretary of State and the U.S. Attorney General) are no longer required to certify if an act was that of a foreign or domestic entity, as both are now included. This is especially important to note, since TRIA only mandates that admitted insurers must offer terrorism coverage to property policyholders for certified acts of terrorism, and may exclude coverage for acts that are noncertified. It’s critical then, that insureds review their individual policies to gain an understanding of how their coverage would apply.
If an event does not get “certified” and there is no Terrorism exclusion (or the event does not meet the definition of Terrorism in the policy form), there is a chance that coverage could be provided via Civil Authority, Ingress / Egress or other areas of coverage in the policy. There are many restrictions that can apply to Civil Authority coverage so the wording should be reviewed carefully. It is worthy to note that some insurance carriers offer standalone Terrorism coverage that is broader in scope that would typically respond to the Boston event.
WGA will be closely monitoring coverage decisions related to the events in Boston, as well as the future of TRIPRA, which is set to expire December 31, 2014. Stay tuned for future blog updates and additional material regarding the future of terrorism insurance market.
About the Author
Mary Broderick is a Senior Vice President and Leader of WGA’s Property Practice. Ms. Broderick is responsible for the design and implementation of complex property insurance programs for WGA’s corporate clients’ and has many years of experience working with complicated Business Interruption (BI) and Contingent Business Interruption (CBI) issues.