Prior to September 11, 2001, terrorism insurance was typically included in commercial property and casualty lines for little to no additional cost. However, after the catastrophic losses from the 9/11 attacks, insurers largely stopped offering the coverage, creating a crisis for businesses needing insurance.
To address this market failure, Congress enacted the Terrorism Risk Insurance Act, more commonly known by its acronym, TRIA, establishing a federal backstop for terrorism insurance with the Terrorism Risk Insurance Program (TRIP). TRIA has been reauthorized several times since its creation in November 2002, with more risk being shifted to the private sector over the course of its various renewals.
The program is currently authorized through December 2027. Recent congressional hearings and industry commentary show bipartisan and market support for a long-term extension and reauthorization of TRIA, with draft bills proposing renewal through 2035.
At this point, the conversation may be less a question of whether TRIA will renew or not, but what changes (if any) will be implemented. Previous reauthorizations have included program enhancements, and several features could be adjusted for the next iteration, which could impact policyholders and the broader ‘standalone’ terrorism insurance market.
The principal elements of TRIA that may face revision include:
01
The current program requires aggregate insured losses from a ‘certified’ terrorism event to exceed $200 million before federal sharing begins. There is debate about whether this threshold should be raised, lowered, or indexed to inflation, reflecting the evolving risk landscape and market capacity.
02
Insurers currently bear a deductible equal to 20% of their prior year’s direct earned premiums in covered lines before federal reimbursement. Adjusting this deductible would shift more or less risk to the private sector, impacting pricing and availability for policyholders.
03
The $100 billion cap on federal payments has remained unchanged, despite inflation and increased exposure. Some stakeholders advocate for revisiting this cap to ensure the program’s adequacy in a catastrophic event.
04
There is growing interest in expanding TRIA to explicitly cover non-traditional terrorism risks, such as large-scale cyber terrorism or nuclear, biological, chemical, or radiological terrorism incidents. This would modernize the program to reflect emerging threats and provide greater certainty for policyholders.
Most of these program features were discussed at the recent congressional hearing of the House Financial Services Subcommittee on Housing and Insurance on the Reauthorization of TRIA. As Congress and industry stakeholders continue to discuss TRIA’s reauthorization in 2026, several scenarios may unfold for policyholders that are important to keep in mind:
If Congress opts for a straightforward extension, policyholders will see continuity in coverage terms, pricing, and market stability. The familiar $200 million trigger, 20% deductible, and $100 billion cap would remain, and terrorism insurance would continue to be widely available and affordable but with the same limitations as the existing program.
Should Congress adjust thresholds or deductibles, policyholders may experience changes in premium costs and coverage terms. For example, a higher trigger or deductible shifts more risk to insurers, potentially resulting in increasing premiums and/or narrowing coverage for their policyholders. Conversely, lowering thresholds could make coverage more accessible, while increasing the federal government’s exposure.
Expanding TRIA to cover cyber or other non-traditional risks may carry significant benefits to policyholders, addressing coverage gaps in the current market. However, this could also lead to higher premiums or stricter underwriting as insurers adapt to new exposures.
While not currently anticipated, a failure to reauthorize or a radical overhaul of TRIA could lead to market disruption, with insurers withdrawing coverage and policyholders facing unaffordable or unavailable terrorism insurance.
Furthermore, depending on the political climate in the coming months, Congress may not prioritize the reauthorization of TRIA in the near term, which could delay debates and future legislation beyond the current expiration date. This would create uncertainty and potentially leave existing policyholders without coverage.
The potential lapse in coverage is already a looming possibility for multi-year insurance policies for long-term contracts, such as those required by construction projects. Policyholders should monitor congressional action for changes to triggers, deductibles, or covered risks, as these will directly affect coverage terms and costs.
For exposures not covered by TRIA (e.g., non-certified terrorism events, cyber risks, political violence, or active assailant), there are many options in the standalone market that remain valuable solutions.
Standalone terrorism insurance also offers certainty of coverage for acts of terrorism that are not reliant on government certification. To learn more about the limitations of the current structure of TRIA, watch this video.
WTW hopes you found the general information provided here informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
