Terrorism Risk Insurance Program News

The Treasury Department reminded all participants and observers of the Terrorism Risk Insurance Program that there will be two important changes in the program’s administration in 2004. As mandated by Congress, beginning on January 1, 2004 and throughout the remainder of 2004, an insurer’s deductible will increase from 7 percent to 10 percent of the insurer’s direct earned premium over the previous calendar year. Second, the “mandatory availability” provisions of the Act will require insurers to continue to make available coverage for certified acts of terrorism for the full annual policy periods of all commercial property and casualty insurance policies that are issued or renewed in 2004.

The U.S. Treasury Department issued a notice of proposed rulemaking (NPRM) relating to litigation management regarding insured losses under the terrorism risk insurance program. The regulation, if adopted, would clarify that the exclusive remedy is through a federal cause of action and that state claims would be preempted. Civil actions would also be consolidated. Comments on the proposal should be submitted by July 6. 69 Fed. Reg. 25341 (HK Law).

The Senate Committee on Banking, Housing, and Urban Affairs conducted an oversight hearing on the terrorism risk insurance program. The Honorable Brian Roseboro, Under Secretary for Domestic Finance of the Treasury Department, testified about implementation of the program. He acknowledged that there has been little “up take” of terrorism insurance, but declined to speculate on the reason. Mr. Richard Hillman, General Accounting Office (GAO), testified that significant progress has been made in the implementation of the Terrorism Risk Insurance Act (TRIA), but that Treasury still has numerous tasks unfinished. Mr. John Degnan, The Chubb Corporation, recommended that the TRIA be extended for two additional years. Mr.