After the general introduction to the topic of Terrorism Schemes, time to move on to particular ones – in this case TRIA.
In one of my previous roles I had a “pleasure” of preparing TRIA returns. If you ever had to do it, you know exactly what type of “fun” it is. Together with my colleagues at Acini, we found a way to automate the regulatory reporting and filing process for programs like TRIA. This breakthrough simplifies compliance and reduces operational burdens for insurers participating in terrorism risk schemes. I’d be happy to share more details on this innovative solution via private message at kuba@acini.pl.
But what is TRIA all about?
The 9/11 terrorist attacks delivered a shock to the U.S. insurance industry, resulting in insured losses over $40 billion. This exposed the lack of private market capacity to provide adequate terrorism risk coverage going forward. To restore stability, the U.S. government established TRIA – the Terrorism Risk Insurance Program in 2002. TRIA is a public-private risk-sharing mechanism that allows insurers to offer terrorism coverage with the federal government acting as a backstop for major losses from certified attacks. Key aspects include:
Risk Split:
• Insurers cover individual deductibles based on prior year premiums
• Industry-wide deductible of $200 million (adjusted yearly)
• Federal government shares 80% of losses above deductibles
Funding:
• Insurers collect premiums for terrorism coverage
• $100 billion annual cap on federal compensation
Impact:
• Paid over $5 billion in claims from 9/11 attacks
• No certified events have triggered federal share since inception
• Allowed continued availability of terrorism insurance at insurable rates
• Subject to periodic reauthorizations, currently effective until 2027
TRIA represents an innovative public-private partnership model. While no program can eliminate terrorism risk entirely, TRIA has successfully reinstated a functional terrorism insurance market. It promotes economic resilience by protecting assets and enabling insurance coverage for potential catastrophic terrorism losses in the future.
The federal backstop along with mandatory risk disclosures have restored insurer capacity and policyholder confidence. TRIA’s importance is evident through its continued reauthorisations as the nation’s key terrorism risk insurance stabilisation mechanism.
You can spend weeks to prepare and reconcile the return, or you can get in touch with us to find out how to do it in a day or two.