Terrorism Risk Insurance Act Extended
On Wednesday, President Bush signed into law a bill that would extend the Terrorism Risk Insurance Act for another seven years. The House and Senate had been debating for months over conflicting bills before reaching a compromise last week.
With terrorism being such a difficult event to insure for, it as is the case with flood insurance is backed by government programs. Many industry insiders were concerned that an extension wouldn’t be passed in time as the old program was set to expire at the end of this year.
While for the most part similar to the old program it will replace, there are a few key differences. The distinction between foreign and domestic terrorism has been removed. It also orders study to address the issue of coverage for nuclear, biological, chemical or radiological (NBCR) events.
While most property and casualty insurers don’t cover acts of terrorism at this point, it is hoped that this program will foster the growth of a private market in a few years. The program effectively limits the potential losses an insurer would face in the event of an act of terrorism and helps share some of the financial burdens.
