Article November 24, 2020

What is TRIA terrorism insurance?

The Terrorism Risk Insurance Act (TRIA) was first passed in the United States in 2002 as a response to the terrorist attacks of September 11, 2001.

The program is essentially a federal backstop for insurers that offer terrorism insurance cover in the event there is a large-scale terrorist attack. Similar programs exist in other countries, for instance Pool Re in the United Kingdom.

However, over the past two decades, private market terrorism insurance policies have emerged as an alternative to these government-backed programs. This means that nowadays businesses can choose between a terrorism policy that is backed by TRIA or one that isn’t. Its important for businesses to understand the difference between the government-backed option and a private-market option.

Here are the three key areas where these policies diverge:

The triggers are different

For TRIA to trigger, the attack needs to be certified as an act of terror, and this has to be done by the federal government. For the purposes of TRIA, an act of terror must also have generated at least $200 million in losses for the program to trigger. No event since 9/11 has been declared an act of terrorism with regards to TRIA.

A private-market terrorism insurance policy - like the one that CFC offers – will respond to any act of terrorism committed for political, religious, ideological or similar reasons. These could be lone-wolf style attacks as well as those committed by groups. Standalone terrorism policies don’t require the event to be certified as an act of terror by the government.

The coverage is different

TRIA-backed policies are most often attached to a company’s property policy, so the cover offered is similar to traditional property damage and business interruption. Also, as a government-backed reinsurance program, TRIA is subject to renewal through acts of Congress every 5 years, making it by its very nature slower to change with new developments in the market and always at risk for not being continued.

Standalone terrorism policies, on the other hand, tend to provide broader coverage and are often quicker to evolve with the changing nature of terrorist attacks.

Today, we tend to see attacks that are more focused on causing death rather than destruction – think of the London Bridge attacks in the UK or the 2013 Boston Marathon bombings. As such, policies have evolved to include cover for ‘soft’ losses and the broader or longer lasting impact of these events.

Policies like CFC’s have evolved to not only cover property damage and business interruption, but also non-damage business interruption (also known as restriction of access), loss of income and even terrorism liability for any claims against the company by third parties. Businesses can also provide flexible options like first-loss limits, as well as the option to insure select locations or entire portfolios.

Pricing is different

The TRIA program does not mandate that participating insurers provide a pricing matrix to be passed on and recouped from policyholders. Instead, it uses a post-event recoupment mechanism, which can cause pricing to be erratic. Pricing for TRIA-backed policies is also often linked to the underlying property premium, which means in times of a hard property market, terrorism prices will also increase even though this doesn’t reflect the actual change in exposure.

By comparison, standalone policies like CFC’s will have a pricing rationale that is consistent, competitive and in correlation with the true exposure.


How we can help

CFC writes a global took of terrorism business and has experience in paying claims and paying them quickly. For a decade CFC has supplied small and medium sized businesses with comprehensive terrorism insurance cover, and with a $200 million line, CFC has significant capacity to protect clients from catastrophe.

To learn more, get in touch with our terrorism team.