In some cases, such insurance is required to consummate various transactions, particularly in the real estate, transportation, construction, energy, and utility sectors. Although the evidence is largely anecdotal, some were concerned that the lack of coverage posed a threat of serious harm—such as job loss—to these industries, in turn threatening the broader economy. 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). TRIA created a three-year Terrorism Insurance Program to provide a government reinsurance backstop in the case of terrorist attacks. Following the 2015 amendments, the TRIA program is set to expire at the end of 2020. For example, although the April 2013 bombing in Boston was termed an "act of terror," by the President, the insured losses in TRIA-eligible insurance from that bombing did not cross the $5 million statutory threshold to be certified under TRIA. 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 domestic terrorism losses, 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. The federal government provides assistance up front but then recoups the payments it made through a broad levy on insurance policies afterwards. The precise dollar values where losses cross these small, medium, and large thresholds are uncertain and will depend on how the losses are distributed among insurers. For example, for loss sharing to occur, an attack must meet a certain aggregate dollar value and each insurer must pay out a certain amount in claims—known as its deductible. 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 $180 million (increasing to $200 million in 2020). 3. In the years following the federal sharing of insurer losses, but prior to September 30, 2024, the Secretary of the Treasury is required to establish surcharges on TRIA-eligible property and casualty insurance policies to recoup 140% of some or all of the outlays to insurers under the program. The exact amount of the 20% deductible at which TRIA coverage would begin depends on how the losses are distributed among insurance companies. TRIA coverage is likely, however, to begin well under this amount as the losses from an attack are unlikely to be equally distributed among insurance companies. The general result of the recoupment provisions is that, for attacks that result in under $37.5 billion in insured losses, the Treasury Secretary is required to recoup 140% of the government outlays through surcharges on property and casualty insurance policies. For events with insured losses over $37.5 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. If a policyholder declines to purchase terrorism coverage, the insurer may exclude terrorism losses. It has been extended since its inception, most recently until the end of 2019. 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. However, significant uncertainty existed 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. In general, the capacity of insurers to bear terrorism risk has increased over the life of the TRIA program. For insured losses over $37.5 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 additional cost to the policyholders. Following the attacks, such coverage became expensive, if offered at all. Moreover, some observers feared that the absence of insurance against terrorism loss would have a wider economic impact, because insurance is required to consummate a variety of transactions (e.g., real estate). For example, if real estate deals were not completed due to lack of insurance, this could have ripple effects—such as job loss—on related industries like the construction industry. Terrorism insurance was largely unavailable for most of 2002, and some have argued that this adversely affected parts of the economy, while others suggest the evidence is inconclusive.
Congress responded to the disruption in the insurance market by passing the Terrorism Risk Insurance Act of 2002 (TRIA; P.L. 107-297), which created a temporary three-year Terrorism Insurance Program. Under TRIA, the government would share the losses on commercial property and casualty insurance should a foreign terrorist attack occur, with potential recoupment of this loss sharing after the fact. In addition, TRIA requires insurers to make terrorism coverage available to commercial policyholders, but does not require policyholders to purchase the coverage. The program expiration date was extended in 2005 (P.L. 109-144), 2007 (P.L. 110-160), and 2015 (P.L. 114-1). Over the course of such reauthorizations, the prospective government share of losses has been reduced and the recoupment amount increased, although the 2007 reauthorization also expanded the program to cover losses from acts of domestic terrorism. The TRIA program is currently slated to expire at the end of 2020.
In general terms, if a terrorist attack occurs under TRIA, the insurance industry covers the entire amount for relatively small losses. For a medium-sized loss, the government assists insurers initially but is then required to recoup the payments it made to insurers through a broad levy on insurance policies afterwards—the federal role is to spread the losses over time and over the entire insurance industry and insurance policyholders. As the size of losses grows larger, the federal government covers more of the losses without this mandatory recoupment. Ultimately, for the largest losses, the government is not required to recoup the payments it has made, although discretionary recoupment remains possible. The precise dollar values where losses cross these small, medium, and large thresholds are uncertain and will depend on how the losses are distributed among insurers.
The specifics of the current program are as follows: (1) a terrorist act must cause $5 million in insured losses to be certified for TRIA coverage; (2) the aggregate insured losses from certified acts of terrorism must be $180 million in a year for the government coverage to begin (this amount increases to $200 million in 2020); 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 met, the government covers 81% of insured losses due to terrorism (this amount decreases to 80% in 2020). If the insured losses are less than $37.5 billion, the Secretary of the Treasury is required to recoup 140% of government outlays through surcharges on TRIA-eligible property and casualty insurance policies. As insured losses rise above $37.5 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.
Since TRIA's passage, the private industry's willingness and ability to cover terrorism risk have increased. According to data collected by the Treasury, in 2017, approximately 78% of insureds purchased the optional terrorism coverage, paying $3.65 billion in premiums. Over the life of the program, premiums earned by unrelated insurers have totaled $38 billion. This relative market calm has been under the umbrella of TRIA coverage and in a period in which no terrorist attacks have occurred that resulted in government payments under TRIA. It is unclear how the insurance market would react to the expiration of the federal program, although at least some instability might be expected were this to occur. With the upcoming 2020 expiration of the program, the 116th Congress may consider legislation to extend TRIA; to date, no such legislation has been introduced.