While working on commercial insurance packages we are often presented with the question, “What the heck is terrorism insurance?” Terrorism insurance is protection against damages by certified acts of terrorism as determined by the Secretary of the Treasury. In order to qualify as terrorism, the act typically must be a violent action, or threat to human life, property or infrastructure, that attempts to influence people, policy, or government conduct.

As a result of the attacks on September 11, insurance carriers suffered enormous losses. In the midst of an unstable insurance market, the government enacted the Terrorism Risk Insurance Act to serve as a backstop against catastrophic losses.

Who needs terrorism coverage?

Terrorism insurance is of particular importance to large properties, infrastructure, resorts, and energy plants. In fact, without terrorism insurance, most major projects would come to a screeching halt. It is important to note, however, that terrorism insurance is relevant to virtually all types of businesses.

What if the terrorism insurance program is terminated?

TRIA is set to expire in December of 2014. If congress chooses to discontinue the program, the insurance industry would be forced to alter their underwriting strategy to reduce their terrorism exposure. The new underwriting environment could result in nonrenewals or rate increases on commercial property and workers compensation.  

TRIA coverage can be a rather complex topic. With that, be sure to discuss the details with a qualified agent to determine how TRIA applies to you and your business.