Reacting quickly to the concerns of the business community and insurance policyholders, the 114th Congress voted overwhelmingly to approve the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIA). On January 12, 2015, President Barack Obama signed the TRIA into law. An earlier version of the reauthorization bill was approved by the House of Representatives in December 2014, but the U.S. Senate narrowly failed to approve the bill before the end of 2014 because of objections raised by now retired Senator Tom Coburn.
The TRIA extends the Terrorism Risk Insurance Program (TRIP) for six years through December 31, 2020 and revises certain TRIP requirements, including increases in the following:
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The required co-insurance levels by one percent each year, until the total co-insurance level rises from the existing level of 15 percent to 20 percent;
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The industry event trigger for coverage by $20 million each year, until the industry event trigger for coverage rises from the existing level of $100 million to $200 million; and
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The insurance marketplace aggregate retention level by $2 billion each year, until the total retention level rises from the existing level of $27.5 billion to $37.5 billion.
As we noted in our December 23, 2014 Perkins Coie Update, the expiration of the TRIP on December 31st technically activated the terms of the Insurance Services Office, Inc.’s (ISO) conditional terrorism endorsements to insurance policies with respect to terrorism losses that may occur on or after January 1, 2015. Although termed “endorsements,” these policy provisions actually exclude or limit coverage for losses from terrorism. In anticipation of congressional action in January to extend the TRIP, however, many insurers provided a grace period through the end of January 2015 before excluding terrorism coverage. Certain policies also required a notification period of 30 or 60 days from the insurer to eliminate terrorism coverage. With Congress’ quick reauthorization of the TRIP so early in January 2015, policyholders should experience little or no coverage disruption.
Now that the TRIP has been reauthorized, policyholders should take the following steps:
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Confirm that your policies or your insurer provided a coverage grace period through January 2015. If your policy does not contain a grace period or was canceled by your insurer, contact your insurers to have your terrorism coverage reinstated.
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Consult with your insurance advisers regarding the impact, if any, the revisions to the TRIP are going to have on your terrorism coverage going forward.
