Terrorism Risk

The Terrorism Risk Insurance Act was signed into law by President George W. Bush on November 26, 2002, as a result of the September 11 attacks (Martinez, Leo, 67). This program acts like reinsurance for private insurers concerning coverage of losses attributable to acts of terrorism. Technically, this is not traditional reinsurance because no premium is paid to the government, and they do not bear the risk of the loss (Peters, 2019). It is considered a "federal backstop," as it intends to pool the risk and redistribute the costs of a loss (Peters, 2019). These acts of terrorism must be certified by the Secretary of Treasury along with the Secretary of State and the Attorney General as qualifying events under the act. Once the insurer's exposure is in excess of 20% of its annual direct earned premiums and the aggregate insured losses crosses the threshold 200 millions dollars, TRIA will then pay 80% of the losses (Peters, 2019). It's also important to note that the program cap is $100 billion, once the insurer pays their deductible and the cap is met, the program will not make any additional payments and the insurers are relieved of any liability that exceeds the cap.