Terrorism risk insurance 'backstop' to run until 2020 following US Senate reauthorisation

Both the House of Representatives and US Senate approved the extension to a revised version of the Terrorism Risk Insurance Act (TRIA) after debate last week. The Terrorism Risk Insurance Reauthorisation Act will take effect once signed by the US president, Barack Obama.

David Gittings, chief executive of the Lloyd's Market Association (LMA), which represents the interests of the underwriters that make up the Lloyd's of London insurance market, said that TRIA's reauthorisation ended the "period of considerable uncertainty" that had affected the industry over the winter break.

"Anticipating that the bill will quickly be signed into law by the US President, it now enables us to focus on the immediate job in hand, which is to finalise our model LMA policy language, to ensure it is compliant with the requirements of the reauthorised TRIA programme, and to produce practical guidance for our membership, working in close conjunction with Lloyd's and their legal counsel," he said.

Originally introduced in 2002 following the terrorist attacks of 11 September 2001, TRIA is designed to keep terrorism risk insurance available and affordable for businesses by providing insurers with an assurance of government support in the event of a catastrophic attack. In order to trigger coverage under TRIA, an event must be certified as a terrorist act by the US government and result in aggregate losses to the industry of more than $200 million.

Under the original programme, insurers would have been entitled to government support once aggregate losses exceeded $100m; a figure which will now increase by $20m each year from 2016 until the new $200m threshold has been reached. The revised programme also gradually reduces the percentage of insurers' losses that the US government would cover above the threshold from 85% to 80%.