Terrorism Risk Insurance: Issue Analysis and Overview of Current Program [June 4, 2014]   [open pdf - 383KB]

"Prior to the September 11, 2001, terrorist attacks, coverage for losses from such attacks was normally included in general insurance policies without specific cost to the policyholders. Following the attacks, such coverage became very expensive if offered it at all. Because insurance is required for a variety of transactions, it was feared that the absence of insurance against terrorism loss would have a wider economic impact. Terrorism insurance was largely unavailable for most of 2002, and some have argued that this adversely affected parts of the economy. […] The specifics of the current program are as follows: (1) terrorist act must cause $5 million in insured losses to be certified for TRIA [Terrorism Risk Insurance Act] coverage; (2) the aggregate insured losses from a certified act of terrorism must be $100 million in a year for the government coverage to begin; and (3) an individual insurer must meet a deductible of 20% of its annual premiums for the government coverage to begin. Once these thresholds are passed, the government covers 85% of insured losses due to terrorism. If the insured losses are under $27.5 billion, the Secretary of the Treasury is required to recoup 133% of government outlays. As insured losses rise above $27.5 billion, the Secretary is required to recoup a progressively reduced amount of the outlays. At some high insured loss level, which will depend on the exact distribution of losses, the Secretary would no longer be required to recoup outlays, but would retain the discretionary authority to do so."

Report Number:
CRS Report for Congress, R42716
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