As we recently blogged, Rep. Michael Grimm (R-NY) and Rep. Carolyn Maloney (D-NY), both of whom sit on the House Financial Services Committee, have introduced a bill to extend the federal Terrorism Risk Insurance Program (the “Program”) through 2019. The Program, as enacted by the Terrorism Risk Insurance Act in 2002, amended by the Terrorism Risk Insurance Revision and Extension Act of 2005 and the Terrorism Risk Insurance Program Reauthorization Act of 2007 (“TRIPRA”) (collectively, including both amendments, “TRIA”), is currently set to expire on December 31, 2014. The Program requires that private insurers offer terrorism coverage to commercial customers and provides a federal backstop in the event of a large certified terrorist event that exceeds $100 million in aggregate insured losses.
While it remains to be seen what happens over the coming months regarding a possible extension, there are many issues that need to be addressed before any extension is finalized, including the following:
- Is an extension necessary? Is there enough capacity in the insurance marketplace that the federal backstop is no longer necessary? Has the rise of catastrophe bonds and collateralized-reinsurance markets provided sufficient capacity to the marketplace?
- Will an extension be passed before December 31, 2013? This is important because one-year policies that are issued in 2014 will be in effect on the current expiration date of December 31, 2014. (By way of historical background, President Bush signed into law TRIPRA on December 26, 2007, five days before it was due to expire.)
- For how many years should the Program be extended?
- Should the threshold for triggering aid under the program be changed? Before TRIPRA was passed, several proposals called for lowering the threshold from $100 million to $50 million.
- Should the Program require insurers to offer coverage for nuclear, biological, chemical and radiological attacks?
- Should the Program include group life coverage?
- Should the Program explicitly include cyber-terrorism? Although a cyber-terrorist attack could be covered by the Program if the Secretary of Treasury, Secretary of State and U.S. Attorney General all declare it an “act of terrorism,” there is no explicit language in the current statute that confirms that an act of cyber-terrorism would trigger the federal backstop.
We will continue to monitor developments related to the possible extension of TRIA. If you have any questions, please contact Jack Dearie or Brian Green.