What is the Terrorism Risk Insurance Act (TRIA)?

Terrorism is often an excluded peril on property and casualty insurance policies because the losses could prove to be too catastrophic for private insurers to underwrite coverage or because the inclusion of terrorism coverage would make policy premiums unaffordable for consumers. This uninsurability makes government assistance necessary.

The Terrorism Risk Insurance Act (TRIA) was enacted in direct response to the terrorist attacks on September 11, 2001. The act created a reinsurance facility allowing the federal government to share in losses with private insurers in the event a certified act of terrorism took place.

TRIA protects consumers by addressing market disruptions and ensuring continued widespread availability and affordability of commercial property and casualty insurance for terrorism risk.

TRIA is a temporary program that has been extended by a number of reauthorization acts. The program is set to expire December 31, 2027.

Authority

The act allowed the Department of the Treasury to establish the Terrorism Risk Insurance Program, administered by the Secretary of the Treasury. The legislation defined an act of terrorism as any act certified by the Secretary of Treasury, in cooperation with the Secretary of Homeland Security and Attorney General, to be an act of terrorism that endangered human life, property, or infrastructure and that was committed by an individual or group of people acting on behalf of any foreign person or interest.

The 2007 reauthorization act amended this definition to include acts committed by persons with no foreign affiliation to also be treated as acts of terrorism.

An act must result in at least $5 million in property and casualty insurance losses to be certified as an act of terrorism.

Insurance Limits

The program has a trigger applying to certified acts of terrorism.

In 2015, this trigger was insurance losses exceeding $100 million, and this amount increases incrementally by $20 million per year until reaching $200 million in 2020 (meaning the trigger amount for any year after 2020 is also $200 million). Private insurers and the government will share losses greater than the coverage trigger and less than the program cap, which is $100 billion.

The insurer deductible is 20% of all covered losses. Once the deductible is met, the insurance companies have a coshare, or share of the loss. This coshare amount started at 15% in 2015, meaning the government paid for 85% of covered losses, and incrementally increased until reaching 20% in 2020 (and thereafter), meaning the government pays for 80% of covered losses.