What is the purpose of the Terrorism Risk Insurance Act (TRIA)?

The purpose of the Terrorism Risk Insurance Act (TRIA) is to share the risk of loss from future terrorist attacks with insurers. This legislation was enacted in response to the heightened concerns about terrorism following the September 11 attacks, which highlighted the potential for devastating financial impacts on the insurance industry from such events.

TRIA works by creating a federal backstop for insurance claims related to acts of terrorism. Under this act, the federal government provides financial assistance to insurers for claims arising out of certified acts of terrorism, thus incentivizing insurers to offer coverage for terrorism risk that they might otherwise be hesitant to underwrite. This risk-sharing mechanism aims to stabilize the insurance market and ensure that businesses can obtain coverage for potential terrorism-related losses.

By addressing the financial vulnerabilities faced by the insurance industry and providing a framework for coverage, TRIA encourages the availability of affordable terrorism insurance, which is crucial for the stability of the economy and the safety of businesses and individuals.