The U.S. Government has extended the Terrorism Risk Insurance Act (TRIA) to 2014. TRIA is intended to support insurance companies in case the claims from a terror incident go above a certain threshold.
What is interesting are the exclusions used by the government for this reinsurance.
Domestic vs. International Terrorism
Insured losses are covered under TRIA only if the event is certified by the Treasury Secretary is a foreign act of terrorism
Thus, TRIA-type policy would not cover an event like the 1995 Oklahoma City bombing since it would be considered domestic terrorism.
What if the terror incident was committed by a citizen acting on behalf of a foreign person? For example, the 2005 London bombing were attributed to UK citizens and Pakitan citizens. If this were to occur in the U.S., will it qualify for TRIA coverage?
Chemical, Biological, Radiological, and Nuclear (CBRN) Terrorist Attacks
Losses resulting from CBRN are covered by TRIA only if such perils are specifically covered in the original property and business interruption insurance policy. Typically, this is not the case.
The above exclusions represent significant uncertainties in terms of TRIA-coverage and can hurt the insurance agencies. Is the government being smart about the exclusions? What can I say…the house always wins!!!
