In November 2002, Congress responded to the fears of economic damage due to the absence of commercially available coverage for terrorism with passage of the Terrorism Risk Insurance Act (TRIA). The TRIA program was amended and extended in 2005 and 2007. Following the 2007 amendments, the TRIA program is set to expire at the end of 2014. TRIA in the 113th Congress

		The Terrorism Risk Insurance Act of 2002 Reauthorization Act of 2013 (H.R. H.R. The full Senate took up the bill on July 17, 2014, amending it and passing it on a vote of 93-4. TRIA Reform Act of 2014 (H.R. 4871)16

H.R. Among the provisions are
gradual reduction of federal share of losses from 85% to 80%; gradual increase in program trigger from $100 million to $500 million; increase in the maximum of the mandatory recoupment amount to the total of insurer deductibles under the program (currently approximately $36 billion) and removal of a provision that decreases mandatory recoupment in the case of very large attacks; increase to mandatory recoupment from 133% to 150% of the federal share of losses; separate treatment of Nuclear, Chemical, Biological, and Radiological (NCBR) terrorist attacks with lower trigger ($100 million) and higher federal loss sharing (85%). The House Committee on Financial Services marked up H.R. Goals and Specifics of the Current TRIA Program

The original TRIA legislation's stated goals were to (1) create a temporary federal program of shared public and private compensation for insured terrorism losses to allow the private market to stabilize; (2) protect consumers by ensuring the availability and affordability of insurance for terrorism risks; and (3) preserve state regulation of insurance. The changes to the program have largely reduced the government coverage for terrorism losses, except that the 2007 amendments expanded coverage to losses due to domestic terrorism, rather than limiting the program to foreign terrorism. For a relatively small loss, there is no federal sharing. For a medium-sized loss, the federal role is to spread the loss over time and over the entire insurance industry, providing assistance up front but then recouping the payments through a broad levy on insurance policies afterwards. For a large loss, the federal government is to pay most of the losses, although recoupment is possible in these circumstances as well. The federal government shares in an insurer's losses due to a certified act of terrorism only if "the aggregate industry insured losses resulting from such certified act of terrorism" exceed $100 million. 5. In the years following the federal sharing of insurer losses, but prior to September 30, 2017, the Secretary of the Treasury is required to establish surcharges on property/casualty insurance policies to recoup 133% of some or all of the outlays to insurers under the program. If losses are very high, the Secretary has the authority to assess surcharges, but is not required to do so. The exact amount of the 20% deductible at which TRIA coverage would begin depends on how the losses are distributed among insurance companies. For events with insured losses over $27.5 billion, the Secretary has discretionary authority to recoup all the government outlays and may be required to partially recoup the government outlays depending on the size of the attacks and the amount of uncompensated losses paid by the insurance industry. Policyholders are not, however, required to purchase coverage. Language that would have specifically extended TRIA coverage to NCBR events was offered in the past, but was not included in legislation as enacted. H.R. The Terrorism Insurance Market

		Post-9/11 and Pre-TRIA

The September 2001 terrorist attacks, and the resulting billions of dollars in insured losses, caused significant upheaval in the insurance market. There was significant uncertainty, however, as to how businesses would react, because there was no general requirement to purchase terrorism coverage and the pricing of terrorism coverage was initially high. For insured losses over $27.5 billion, the mandatory recoupment amount decreases, thus the Secretary would be required to recoup less than 133% of the outlays.
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 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.
Congress responded to the disruption in the insurance market by passing the Terrorism Risk Insurance Act of 2002 (TRIA; P.L. 107-297). TRIA created a temporary three-year Terrorism Insurance Program in which the government would share some of the losses with private insurers should a foreign terrorist attack occur. This program was extended in 2005 (P.L. 109-144) and 2007 (P.L. 110-160). The amount of government loss sharing depends on the size of the insured loss. In general terms, for a relatively small loss, private industry covers the entire loss. For a medium-sized loss, the federal role is to spread the loss over time and over the entire insurance industry; the government assists insurers initially but then recoups the payments through a broad levy on insurance policies afterwards. For a large loss, the federal government would cover most of the losses, although recoupment is possible in these circumstances as well. Insurers are required to make terrorism coverage available to commercial policyholders, but TRIA does not require policyholders to purchase the coverage. The prospective government share of losses has been reduced over time, but the 2007 reauthorization expanded the program to cover losses from acts of domestic terrorism. The TRIA program is currently slated to expire at the end of 2014.
The specifics of the current program are as follows: (1) terrorist act must cause $5 million in insured losses to be certified for TRIA 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 retains the discretionary authority to do so.
Since TRIA's passage, the private industry's willingness and ability to cover terrorism risk have increased. According to industry surveys, prices for terrorism coverage have generally trended downward, with approximately 60% of commercial policyholders purchasing coverage over the past few years. This relative market calm has been under the umbrella of TRIA coverage, and it is unclear how the insurance market would react to the expiration of the federal program.
In the 113th Congress, five bills (H.R. 508, H.R. 1945, H.R. 2146, S. 2244, and H.R. 4871) have been introduced to amend the TRIA statute. S. 2244 passed the Senate on a vote of 93-4 on July 17, 2014. H.R. 4871 was reported by the House Financial Services Committee on July 16, 2014. Both bills would extend the TRIA program, but have a number of differences, particularly the length (seven years for S. 2244 vs. five years for H.R. 4871) and the program trigger (remaining at $100 million in S. 2244 vs. increasing to $500 million for non-Nuclear, Chemical, Biological, or Radiological [NCBR] terrorist events in H.R. 4871).