Background:
The attacks of September 11, 2001 resulted in a widespread withdrawal of coverage for terrorism-related losses from the insurance marketplace. In response, Congress adopted the Terrorism Risk Insurance Act of 2002 (TRIA), requiring insurers to make terrorism coverage available with their property and casualty products. Insureds have had the option of accepting or rejecting terrorism coverage subject to an additional premium. In December of 2007, the TRIA program was extended through the end of 2014. However, Congress did not renew TRIA prior to the end of its most recent term. As such, TRIA is set to expire on December 31, 2014. While we believe that TRIA will again be extended by Congress when it convenes on January 8, 2015, here is some initial information you need to know:
Assessment:
TRIA’s expiration on December 31, 2014 could impact your Terrorism Insurance Coverage. While each policy contains unique provisions concerning terrorism coverage (and what will, if anything, happen if TRIA expires tomorrow), you can generally expect that your coverage is subject to one of the following:
- Your policy contains a TRIA “sunset” provision and will no longer cover any terrorism-related losses. A “sunset” clause means coverage is only applicable as long as TRIA is in force, and coverage ends when TRIA is not extended.
- Your policy contains a sunset provision and your terrorism coverage will end, but your insurer has agreed to short-term extensions of coverage in anticipation that Congress will soon renew the TRIA program. These extensions can range in duration from several weeks to several months depending on the carrier. However, even though your carrier may be extending your terrorism coverage, this will no longer cover terrorism-related attacks that involve: (1) nuclear/radioactive agents or materials; (2) pathogenic/poisonous biological agents or materials; or (3) chemical agents or materials (collectively referred to as NCBR). Terrorism-related losses that do not in any way involve NCBR may still be covered.
- Your policy does not contain a sunset provision and will continue to afford coverage for claims that would have qualified as “certified” terrorism losses under TRIA until your policy expires.
Please contact your SterlingRisk Account Executive with any questions. We are here to help you interpret your policy language as well as purchase replacement coverage, if necessary.
