SUMMARY OF
THE TERRORISM RISK INSURANCE ACT OF 2002

The Terrorism Risk Insurance Act of 2002 was signed into law by President Bush on November 26, 2002.  The Act established a temporary federal program of shared public and private compensation for insured commercial property and casualty losses resulting from an "act of terrorism", as defined by the Act. 

The Act requires insurance companies to make available coverage for "acts of terrorism".  Any terrorism exclusions in effect on November 26th, 2002 and applicable to lines of insurance covered by the Act are voided to the extent they apply to a defined "act of terrorism".  Insurers have until February 24, 2003 to provide a notice allowing policyholders to reinstate the exclusion OR pay an additional premium within 30 days for the coverage. 

All applicable policies issued after November 26th, 2002 must include a similar notice stating the premium charged for terrorism with an offer for the policyholder to accept or decline.

WHAT ARE "ACTS OF TERRORISM" UNDER THE ACT?

• any act certified by the Secretary of the Treasury in concurrence with the Secretary of State and the U.S. Attorney General;

• a violent act or an act that is dangerous to human life, property or infrastructure;

• results in damage within the United States, or outside the U.S. in the case of certain air carriers, vessels or U.S. missions;

• is committed by someone acting on behalf of a foreign person or interest, as part of an effort to coerce the civilian population of the U.S. or to influence the policy or affect the conduct of the U.S. government by coercion.

WHAT LINES OF INSURANCE ARE COVERED BY THE ACT?

• commercial lines of property and casualty insurance;

• worker's compensation;

• surety bonds.

 HOW DOES LOSS SHARING WORK UNDER THE ACT?*

• does not apply to aggregate losses under $5 million;

• first $5 million paid by insurers;

• losses above $5 million and up to $100 billion - insurer pays deductible based on a formula established by the Act, and the excess is paid 10% by the insurer and 90% by the federal government;

• losses in excess of $100 billion are not covered by the Act.

*Loss payment is subject to all of the limits of insurance, deductibles, terms and conditions of your policy.