The U.S. Terrorism Risk Insurance Act

Overview: As a result of the tragic events of September 11, 2001, many insurers were reluctant to or would no longer cover terrorism risk under their policies. The US Congress, in an effort to prevent this widespread dislocation in the insurance market, and to make sure that businesses would have an opportunity to adequately insure their property enacted the Terrorism Risk Insurance Act, PL 107- 297 (HR 3210) (hereinafter “Act”). On November 26, 2002, President George W. Bush signed the Act into law. The purpose of the Act is to establish a temporary Federal program (ending 2005) providing for a system of shared public and private compensation for insured losses resulting from an act of terrorism. Not only did the Act terminate existing terrorism exclusions on current insurance policies, but the Act made it mandatory for commercial property and casualty insurance companies covered by the Act to make terrorism insurance coverage available to their policyholders. However, terrorism insurance coverage already in place was not affected if it complied with the Act. For business and individuals having property in the United States (and in limited cases outside the United States) the passage of this legislation will have important ramifications and, possibly, a significant fiscal impact. This article gives a brief overview of some of the key factors dealing with the application of the Act, in particular the scope of the coverage and also give a brief overview of the shared public and private compensation mechanism for insured losses under the Act.

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Format: PDF | Size: 391KB | Date: Jan 2003 | Pages: 4