HOUSING AND INSURANCE SUBCOMMITTEE EXAMINES THE FUNCTIONS OF THE TERRORISM RISK INSURANCE ACT

The following information was released by the U.S. House of Representatives Committee on Financial Services:

Today, the Subcommittee on Housing and Insurance, led by Subcommittee Chair Mike Flood (NE-01), held a hearing examining the functions of the Terrorism Risk Insurance Act of 2002 (TRIA) and how it interacts with both domestic and international terrorism insurance markets.

On the Need to Reauthorize TRIA:

"... TRIA's value is not just in direct responses to terrorism events. The program makes it easier to have an operating market where entities can purchase insurance that covers terrorism risk, and a well-functioning insurance market makes it possible for entities of all kinds to purchase insurance against terrorism risks," said Subcommittee Chair Flood.

"It's crucial we take the necessary steps to reauthorize TRIA in addition to enhancing the program's operations to better protect our economy and strengthen our national security," added Chairman French Hill (AR-02).

On the Role of Federal Insurance Office:

"The terrorism risk insurance program was essential to stabilizing insurance markets after the September 11th attacks, and I'm glad we're having this hearing to evaluate the effectiveness of the program and its future. As many of you know, I've long called for the elimination of the Federal Insurance Office, or FIO, under Dodd-Frank. You know, FIO was directed to assist the Treasury Secretary and administering the terrorism risk insurance program. However, this program existed nearly a decade prior to the creation of FIO, and as far as I know, without any issues," declared Rep. Troy Downing (MT-02).

On TRIA's role in our national energy security and economic resilience:

"As a nation, we are moving towards energy dominance, and TRIA is vital to both our national energy security and economic resilience. TRIA's role in stabilizing the insurance market gives energy companies the confidence to invest in long term infrastructure and workforce development," said Rep. Monica De la Cruz (TX-15).

Witnesses Echoed the Work of the Committee:

Mr. Baird Webel, Specialist in Financial Economics, Congressional Research Service (CRS),said, "In the aftermath of a terrorist attack, the first step would be for private insurers to pay claims under whatever terms are in place in the existing policies. Insurers would submit to the Treasury Department for partial reimbursement of these claims. For reimbursements under TRIA to occur, the Secretary of the Treasury must certify the attack, including that the single attack caused more than $5 million in losses. Next, the total aggregate annual terrorism losses must surpass the program trigger of $200 million. After these industry-wide thresholds are met, each individual insurer is responsible for a deductible equal to 20% of its premiums on TRIA-eligible lines of insurance. The Treasury would then reimburse the insurers 80% of their losses from terrorist attacks above this deductible. If total insured losses go above $100 billion, there is no further federal reimbursement, and insurers are not responsible to pay losses under the policies that are in place."

Mrs. Elizabeth Heck, Chairman, President, and Chief Executive Officer, Greater New York Insurance Companies, on behalf of National Association of Mutual Insurance Companies, said, "The insurance industry paid out approximately $60 billion, in 2025 dollars, following the September 11, 2001 terrorist attacks on New York City, Pennsylvania, and the Pentagon. This gave September 11th the distinction of being the most expensive terrorist-incident ever to occur in the U.S. and one of the largest single insured loss events in history. These losses were concentrated in business interruption: 34 percent, property: 30 percent, and liability: 23 percent coverages. Soon after the attack, insurers and reinsurers modified their commercial insurance coverage offerings to contain substantial surcharges for or specifically excluded terrorism risk. The lack of coverage between September 2001 and November 2002 caused fears of a larger economic impact. Real estate projects and commercial mortgage-backed security markets were especially negatively affected by the scarcity of terrorism insurance. In response to the shifting market dynamics, Congress passed the Terrorism Risk Insurance Act, or TRIA, in 2002, with a twofold stated goal to: (1) protect consumers by addressing market disruptions and ensure the continued widespread availability and affordability of property and casualty insurance for terrorism risk; and (2) allow for a transitional period for the private markets to stabilize, resume pricing of such insurance, and build capacity to absorb any future losses, while preserving state insurance regulation and consumer protections."

Ms. Michelle Sartain, President, Marsh U.S. and Canada,said, "TRIPRA provides a critical federal backstop that enables the continued availability and affordability of terrorism insurance. Its presence promotes insurance market stability and continuity, especially in the wake of evolving threats. The program thus supports business and economic confidence, reassuring businesses that they can secure coverage against terrorism-related losses, which is vital for economic stability and growth. Although the reauthorization deadline is some two years away, insurers and rating agencies closely monitor legislative activity related to TRIPRA. Any uncertainty regarding the future of the federal backstop as the deadline approaches will have an impact on the availability and nature of insurance coverage. That, in turn, could send ripple effects through the economy, and potentially affect companies' decision-making processes about hiring and investing. It's important to note that many investments span multiple years, thus requiring insurance availability that also spans multiple years. This is especially true for long-term construction projects."

Mr. Jason Schupp, Founder and Managing Member, Centers for Better Insurance, LLC,said, "At a high level, TRIA is the country's bargain with the insurance industry. Insurers are required to 'make available' coverage for loss caused by an act of terrorism on the same terms, amounts, and other coverage limitations as loss caused by a non-terrorism event (e.g., losses caused by an accident). As a practical matter, an insurance company must first offer a new or renewal policy without a terrorism exclusion. If the policyholder rejects that offer, the insurer may (but is not required) to offer a policy with a terrorism exclusion. In exchange for this 'make available' obligation, Treasury will reimburse insurers for 80% of their losses exceeding an individually calculated 'insurer deductible'. The insurer deductible is 20% of an insurance group's prior year direct earned premium."