Terrorism Risk Insurance Legislation:
Issue Summary and Side-by-Side Analysis

Baird Webel
Specialist in Financial Economics
June 24, 2014
Congressional Research Service
7-5700
www.crs.gov
R43619


Terrorism Risk Insurance Legislation: Issue Summary and Side-by-Side Analysis

Summary
Prior to the September 11, 2001, terrorist attacks, insurance covering terrorism losses was
normally included in general insurance policies without additional cost to the policyholders.
Following the attacks, this ceased to be the case as insurers and reinsurers pulled back from
offering terrorism coverage. It was feared that a lack of insurance against terrorism loss would
have a wider economic impact, because insurance is important particularly in lending decisions.
Congress responded to the disruption in the insurance market by passing the Terrorism Risk
Insurance Act of 2002 (TRIA; P.L. 107-297). TRIA created a temporary program, expiring at the
end of 2005, to calm the insurance markets through a government backstop sharing in terrorism
losses with the intent that this would give the industry time to gather the data and create the
structures and capacity necessary for private insurance to cover terrorism risk. TRIA did not
require premiums to be paid for the government coverage. Instead, TRIA required private insurers
to offer coverage for terrorism risk and would recoup some or all federal payments under the act
in the years following government coverage of insurer losses.
Under TRIA, terrorism insurance became widely available and largely affordable, and the
insurance industry greatly expanded its financial capacity. There has been, however, little
apparent success on developing a longer-term private solution, and fears have persisted about
wider economic consequences if insurance were not available. Congress passed two extensions to
the program, in 2005 (P.L. 109-144) and 2007 (P.L. 110-160). The 2005 extension was primarily
focused on reducing the government’s upfront financial exposure under the act, whereas the 2007
extension left most of the upfront aspect of the TRIA program unchanged, while accelerating the
post-event recoupment provisions. The 2007 legislation also included the only expansion of the
TRIA program since initial enactment, as it extended the program to cover any acts of terrorism,
as opposed to only foreign acts of terrorism.
The current TRIA program expires at the end of 2014. Although insurance industry capacity has
increased since 2002, terrorism is still seen by many as essentially uninsurable. Without TRIA,
the insurance industry has indicated that terrorism insurance will again become unavailable or
unaffordable and fears are again being expressed that lack of terrorism insurance may slow down
other sectors of the economy. Several bills (H.R. 508, H.R. 1945, H.R. 2146, S. 2244, and H.R.
4871) have been introduced to extend TRIA and change different aspects of the program.
This reports briefly outlines the issues involved with terrorism insurance, summarizes the
extension legislation, and includes a side-by-side of the current TRIA law and the bills that have
been ordered reported by the Senate Committee on Banking, Housing, and Urban Affairs (S.
2244) and the House Committee on Financial Services (H.R. 4871). For more a more in-depth
treatment of the issues surrounding TRIA, please see CRS Report R42716, Terrorism Risk
Insurance: Issue Analysis and Overview of Current Program
, by Baird Webel.

Congressional Research Service

Terrorism Risk Insurance Legislation: Issue Summary and Side-by-Side Analysis

Contents
Background ...................................................................................................................................... 1
Legislation in the 113th Congress ..................................................................................................... 2
The Terrorism Risk Insurance Act of 2002 Reauthorization Act of 2013 (H.R. 508) ............... 2
The Fostering Resilience to Terrorism Act of 2013 (H.R. 1945) .............................................. 2
Terrorism Risk Insurance Program Reauthorization Act of 2013 (H.R. 2146) ......................... 2
Terrorism Risk Insurance Program Reauthorization Act of 2014 (S. 2244) .............................. 3
TRIA Reform Act of 2014 (H.R. 4871) ..................................................................................... 3

Tables
Table 1. Terrorism Risk Insurance Side-by Side, Current Law and Committee Legislation ........... 5

Contacts
Author Contact Information........................................................................................................... 10

Congressional Research Service

Terrorism Risk Insurance Legislation: Issue Summary and Side-by-Side Analysis

Background
Prior to the September 11, 2001, terrorist attacks, insurance covering terrorism losses was
normally included in general insurance policies without additional cost to the policyholders.
Following the attacks, both primary insurers and reinsurers pulled back from offering terrorism
coverage. Because insurance is required for a variety of economic transactions, particularly
borrowing for commercial development, it was feared that a lack of insurance against terrorism
loss would have a wider economic impact.
Congress responded to the disruption in the insurance market by passing the Terrorism Risk
Insurance Act of 2002 (TRIA).1 TRIA created a temporary three-year Terrorism Insurance
Program to calm the insurance markets through a government reinsurance backstop sharing in
terrorism losses. The idea was to give the private industry time to gather the data and create the
structures and capacity necessary for private insurance to cover terrorism risk. TRIA requires
insurers to offer terrorism coverage, but does not require commercial policyholders to purchase
the coverage. This program was extended in 20052 and 2007.3 In 2005, the extension legislation
focused on reducing the government’s exposure from TRIA by increasing the minimum covered
event size, increasing the insurer deductible, reducing the government share of losses, and
increasing the post-event mandatory recoupment. In 2007, the primary change was to accelerate
the after-the-fact recoupment. While the prospective government share of losses has been reduced
over time, the 2007 reauthorization also expanded the program to cover losses from acts of
domestic terrorism. The TRIA program is currently set to expire at the end of 2014, as provided
for in the 2007 extension.
The initial thresholds of the current program are as follows:
1. A terrorist act must cause $5 million in insured losses to be certified for TRIA
coverage.
2. The aggregate insured losses from a certified act of terrorism must be $100
million in a year for the government coverage to begin.
3. An individual insurer must meet a deductible of 20% of its annual premiums for
the government coverage to begin.
Once these thresholds are passed, the government covers 85% of insured losses due to terrorism
with the private insurers retaining 15% of the losses. No premiums are charged by the
government for this coverage. Instead, if the insured losses are under $27.5 billion, the Secretary
of the Treasury is required to recoup 133% of government outlays through a surcharge on
commercial property/casualty insurance policies. As insured losses rise above $27.5 billion, the
Secretary is required to recoup a reduced amount of the outlays. At some high insured loss level,
which will depend on the exact distribution of losses, the Secretary would no longer be required
to recoup outlays, but would retain the discretionary authority to do so. Under current law, all
mandatory recoupment must be completed by the end of FY2017.

1 P.L. 107-297, codified at 15 U.S.C. §6701 note.
2 P.L. 109-144.
3 P.L. 110-160.
Congressional Research Service
1

Terrorism Risk Insurance Legislation: Issue Summary and Side-by-Side Analysis

Since TRIA’s passage, private industry’s willingness and ability to cover terrorism risk have
increased. According to industry surveys, prices for terrorism coverage have generally trended
downward, and approximately 60% of commercial policyholders have purchased coverage over
the past few years.4 This relative market calm has been under the umbrella of TRIA coverage, and
it is unclear how the insurance market would react to the expiration of the federal program.
Legislation in the 113th Congress
The Terrorism Risk Insurance Act of 2002 Reauthorization Act of
2013 (H.R. 508)

Representative Michael Grimm along with nine cosponsors introduced H.R. 508 on February 5,
2013. The bill is a reauthorization of the existing TRIA program that would extend the program
five years, until the end of 2019. It would also extend the deadline for mandatory recoupment
seven years, until September 30, 2024. The bill has been referred to the House Committee on
Financial Services.
The Fostering Resilience to Terrorism Act of 2013 (H.R. 1945)
Representative Bennie Thompson along with one cosponsor introduced H.R. 1945 on May 9,
2013. The bill would extend the expiration date of the program 10 years, until the end of 2024,
and would extend the deadline for mandatory recoupment seven years, until September 30, 2024.
It would also add the Secretary of Homeland Security as the lead authority responsible for
certifying an act of terrorism and require the Secretary to provide information and reports on
terrorism risks and best practices to foster resilience in the face of terrorism. The Secretary of the
Treasury would remain in the certification process but as a concurring party, not the lead
authority, and the program in general would remain under the authority of the Treasury. H.R.
1945 has been referred to the House Committee on Financial Services and the House Committee
on Homeland Security.
Terrorism Risk Insurance Program Reauthorization Act of 2013
(H.R. 2146)

Representative Michael Capuano along with 20 cosponsors introduced H.R. 2146 on May 23,
2013. The bill is a reauthorization of the existing TRIA program that would extend the program
10 years, until the end of 2024, as well as extend the deadline for mandatory recoupment by 10
years, until September 30, 2027. In addition, the President’s Working Group on Financial Markets
is to continue filing reports on market conditions for terrorism risk insurance, with reports
required in 2017, 2020, and 2023. The bill has been referred to the House Committee on
Financial Services.

4 See, for example, Marsh, Inc. 2014 Terrorism Risk Insurance Report, April 2014.
Congressional Research Service
2

Terrorism Risk Insurance Legislation: Issue Summary and Side-by-Side Analysis

Terrorism Risk Insurance Program Reauthorization Act of 2014
(S. 2244)

Senator Charles Schumer along with eight cosponsors introduced S. 2244 on April 10, 2014. The
bill would extend the current TRIA program seven years, until December 31, 2021, while also
decreasing the federal loss sharing amount and increasing the amount to be retained by the
industry and recouped by the government. Specifically, S. 2244 as introduced would
• decrease the federal loss sharing gradually from 85% to 80%, and
• increase the insurance marketplace aggregate retention amount by $2 billion per
year until it reaches $37.5 billion from the current $27.5 billion, and
• extend the various dates for mandatory recoupment by seven years.
Under these extended dates, if an act of terrorism occurs prior to 2018, all mandatory recoupment
premiums must be collected by September 30, 2019. If an act occurs in 2018, 35% of the
mandatory recoupment premiums would be collected by September 30, 2019, with the rest by
September 30, 2024. If the terrorist act occurs after 2018, all of the mandatory recoupment
premiums would be collected by September 30, 2024.
The Senate Committee on Banking, Housing, and Urban Affairs marked up S. 2244 on June 3,
2014. A number of amendments were adopted en bloc, including
• a change in the mandatory recoupment provisions to require that 135.5% of the
federal payments be recouped;
• a requirement for study of, and rulemaking on, the certification process; and
• a GAO study of the possible effects of instituting premiums to be paid by the
insurer to the government for the coverage provided under TRIA.
The bill as amended was ordered reported favorably on a vote of 22-0.
TRIA Reform Act of 2014 (H.R. 4871)
H.R. 4871 was introduced by Representative Randy Neugebauer and one cosponsor on June 17,
2014. The bill would extend the TRIA program five years while generally reducing the
government’s exposure to future TRIA losses, increasing post-event recoupment, and making
several other changes to the program. The provisions include
• gradual reduction of federal share of losses from 85% to 80%;
• gradual increase in program trigger from $100 million to $500 million and
removal of the $5 million minimum certification amount;
• separate treatment of Nuclear, Chemical, Biological, and Radiological (NCBR)
terrorist attacks with lower trigger ($100 million) and higher federal loss sharing
(85%);
• requirement that certification occur within 90 days of an attack;
• increase in the maximum of the mandatory recoupment amount to the total of
insurer deductibles under the program (currently approximately $36 billion) and
Congressional Research Service
3

Terrorism Risk Insurance Legislation: Issue Summary and Side-by-Side Analysis

removal of a provision that decreases mandatory recoupment in the case of very
large attacks;
• increase of the mandatory recoupment from 133% to 150% of the federal share
of losses;
• allow for small insurers to opt out of the TRIA requirement to make terrorism
coverage available if it would create financial hardship or be financially
infeasible;5
• requirement that additional data on the terrorism insurance market be collected
by Treasury and included in an annual report by Treasury; and
• requirement for a GAO study on the possible effects of instituting insurer
premiums for the TRIA coverage and requiring capital reserve funds for
terrorism, CBO and OMB studies regarding budgeting and costs of federal
insurance programs, and a Treasury study on small insurer market
competitiveness.
The House Committee on Financial Services marked up H.R. 4871 beginning June 19, 2014, and
ordered the bill favorably reported on June 20, 2014, by a vote of 32-27. During the markup, a
second title was added containing the text of the National Association of Registered Agents and
Brokers Reform Act of 2013 (H.R. 1155), which previously passed both the committee and the
full House of Representatives.6 The committee rejected a substitute amendment by Representative
Maxine Waters, which would have replaced the text with a straightforward 10-year
reauthorization of the current program, on a vote of 27-31.
Table 1 below presents a side-by-side comparison of the current law and the bills ordered
reported by the Senate and House committees.

5 Small insurers could request to opt out from their domiciliary state regulator using criteria set by the Secretary of the
Treasury.
6 For more information, see CRS Report R43095, Insurance Agent Licensing: Overview and Background on Federal
“NARAB” Legislation
, by Baird Webel.
Congressional Research Service
4

Terrorism Risk Insurance Legislation: Issue Summary and Side-by-Side Analysis

Table 1. Terrorism Risk Insurance Side-by Side, Current Law and
Committee Legislation
15 U.S.C. §6701 note
S. 2244 with Committee
H.R. 4871 (Title I as
Provision
(as applicable in 2014)
Amendments
ordered reported)
Title Terrorism
Insurance
Terrorism Risk Insurance
TRIA Reform Act of 2014
Program
Program Reauthorization
Act of 2014
Termination Date
December 31, 2014
December 31, 2021 (§2)
December 31, 2019 (§3)
(§108(a))
Certification of an
Terrorist act is to be
Requires the Secretary to
Beginning in 2015, removes the
Act of Terrorism
certified by the Secretary of
study and report on the
Secretary of State from
the Treasury (hereafter “the certification process. After
certification process. Adds
Secretary”) in concurrence
the study is completed, the
"consultation" with the
with the Attorney General
Secretary is to issue rules
Secretary of Homeland
and Secretary of State.
governing the process,
Security. Removes the $5
Terrorist act must cause $5
including a timeline as to
mil ion minimum size for
million in insured losses to
whether an act is considered certification.
be certified.
an act of terrorism.
(§102(1)(A))
(Amendment 16)
Beginning in 2015, adds a
deadline of 15 days for
"preliminary certification" and
90 days for "final certification."
If no certification is made
within 90 days, no certification
is possible. (§4)
Beginning in 2016, certification
is to include whether or not
terrorist act is an act of
Nuclear, Chemical, Biological,
or Radiological (NCBR)
terrorism according to the
definition added by the
legislation. (§5(a))
Insured Loss
Federal share of losses will
Starting in 2016, the federal
Federal share of losses will be
Shared
be 85% for insured losses
share of losses will decrease
85% in 2015, 84% in 2016, 83%
Compensation
that exceed the applicable
one percentage point per
in 2017, 82% in 2018, and 80%
insurer deductible. (§103(e))
calendar year until equal to
in 2019 except in the case of
80 percent. (§3 and
an NCBR terrorist event. For
Amendments No. 11 and
an NCBR attack, the federal
No. 12)
share of losses will remain at
85%. (§5(b))
Program Trigger
No compensation shall be
No Change
Increases program trigger to
paid unless the aggregate
$200 million in 2016, $300
industry insured losses
million in 2017, $400 million in
resulting from such certified
2018, and $500 million in
act of terrorism exceed
2019. Applies program trigger
$100 million. (§103(e)(1)(B))
to the aggregate losses from
multiple acts of terrorism in a
calendar year if the insured
losses from each act exceed
$50 million. Program trigger
for NCBR attacks remains at
$100 million. (§5(c))
Congressional Research Service
5

Terrorism Risk Insurance Legislation: Issue Summary and Side-by-Side Analysis

15 U.S.C. §6701 note
S. 2244 with Committee
H.R. 4871 (Title I as
Provision
(as applicable in 2014)
Amendments
ordered reported)
Treatment of
No Similar Provisions
No Similar Provisions
Beginning in 2016, certification
NCBR Terrorism
is to include whether or not
terrorist act is an act of NCBR
terrorism according to the
definition added by the
legislation. (§5(a))
Federal share of losses will be
85% in 2015, 84% in 2016, 83%
in 2017, 82% in 2018, and 80%
in 2019 except in the case of
an NCBR terrorist event. For
an NCBR attack, the federal
share of losses will remain at
85%. (§5(b))
Program trigger for NCBR
attacks remains at $100
million. (§5(c))
Mandatory
Insurers are required to
No Change
Small insurers, as defined by
Availability
make terrorism coverage
the Secretary, may be
available to insureds.
exempted from mandatory
(§103(c))
availability upon request. This
exemption applies if meeting
the make available
requirement is determined by
the insurer’s domiciliary state
insurance to cause financial
hardship or be financial y
infeasible. This determination
would be based on criteria set
by the Secretary. (§6)
Aggregate
The aggregate retention
Beginning in the calendar
Beginning in 2016, the
Retention Amount amount is the lesser of (1)
year after enactment, the
retention amount would be
the total of all insured losses retention amount would be
the lesser of (1) the total of all
or (2) $27.5 billion.
the lesser of (1) the total of
insurer deductibles in the
(§103(e)(6))
all insured losses or (2)
previous year or (2) the total
$29.5 billion with this
of all insured losses. (§8)
amount further increased by
$2 billion per year until
reaching $37.5 billion. (§4(1)
and Amendment No. 11)
Congressional Research Service
6

Terrorism Risk Insurance Legislation: Issue Summary and Side-by-Side Analysis

15 U.S.C. §6701 note
S. 2244 with Committee
H.R. 4871 (Title I as
Provision
(as applicable in 2014)
Amendments
ordered reported)
Mandatory
If aggregate insured losses
The gradual increase in the
Mandatory recoupment
Recoupment of
are under the aggregate
aggregate retention amount
increases to 150% of the
Federal Share
retention amount, a
to $37.5 billion (§4(1))
federal share of losses
mandatory recoupment of
effectively increases the level beginning in 2016 and al years
133% of the federal share of
of mandatory recoupment.
thereafter. (§7)
the loss will be imposed.
Increases the mandatory
Beginning in 2016, mandatory
If aggregate insured losses
recoupment to 135.5% of
recoupment amount is equal
are over the aggregate
the federal share of losses.
to the lesser of (1) the
retention amount, but
(Amendment No. 13)
aggregate amount of federal
uncompensated insurer

compensation received by
losses do not exceed the
insurers or (2) the aggregate
aggregate retention amount,
retention amount. (§8)
the mandatory recoupment
amount is reduced by this
amount.
If uncompensated insurer
losses are over the
aggregate retention amount,
there is no mandatory
recoupment, but Secretary
of the Treasury retains
discretionary recoupment
authority.
(§103(e)(7))
Timing of
Requires expedited
Requires expedited
Beginning in 2016, requires
Mandatory
col ection of recoupment
col ection of recoupment
that recoupment commence
Recoupment
amounts:
amounts:
within 18 months of an attack.
(§9)
(1) for a terrorist attack
(1) for a terrorist attack
before 2011, all required
before 2018, all required

recoupment amounts must
recoupment amounts must
be col ected by September
be col ected by September
30, 2012;
30, 2019;
(2) for a terrorist attack in
(2) for a terrorist attack in
2011, 35% of required
2018, 35% of required
recoupment amounts must
recoupment amounts must
be col ected by September
be col ected by September
30, 2012, and the balance
30, 2019, and the balance
must be col ected by
must be col ected by
September 30, 2017; and
September 30, 2024; and
(3) for a terrorist attack
(3) for a terrorist attack
after 2011, all required
after 2018, all required
recoupment amounts must
recoupment amounts must
be col ected by September
be col ected by September
30, 2017.
30, 2024.
(§103(e)(7)(E)(i))
(§4(2))
Risk Sharing
No Similar Provisions
No Similar Provisions
Establishes an advisory
Mechanisms
committee to encourage the
creation and development of
private risk-sharing
mechanisms. (§10)
Congressional Research Service
7

Terrorism Risk Insurance Legislation: Issue Summary and Side-by-Side Analysis

15 U.S.C. §6701 note
S. 2244 with Committee
H.R. 4871 (Title I as
Provision
(as applicable in 2014)
Amendments
ordered reported)
Reporting of
Requires Secretary to
No Change
Beginning in 2016, requires
Terrorism
annual y compile information
Secretary to col ect data from
Insurance Data
on terrorism insurance
insurers on terrorism
premiums. To the extent
insurance coverage, including:
that such data are not
lines of insurance with
otherwise available, the
terrorism exposure, premiums
Secretary may require
earned from terrorism
insurers to submit the
coverage, location of
information to the NAIC,
exposure, pricing of coverage,
which shall make it available
take-up rates, and amount of
to the Secretary. (§108(e))
private reinsurance purchased.
If such data are available from
the states or another source,
the Secretary shall collect the
data from this source. The
Secretary shall issue a report
to Congress based on these
data. (§11)
Definition of
An entity is considered to
Adds the proviso that an
Identical provision to S. 2244
Control
have control over another
entity is not considered to
as amended. (§13)
entity if the entity has the
have control if, on the date
power to vote 25% of the
of enactment, the entity is
voting securities; controls
“acting as an attorney-in-fact
the election of the majority
... for the other entity and
of the directors; or the
such other entity is a
Secretary determines that
reciprocal insurer.” This,
the entity exercises control
however, does not apply if
after notice and hearing.
the entity is defined as having
(§102(3))
control for reasons other
than the attorney-in-fact
relationship. (Amendment
No. 15)
Congressional Research Service
8

Terrorism Risk Insurance Legislation: Issue Summary and Side-by-Side Analysis

15 U.S.C. §6701 note
S. 2244 with Committee
H.R. 4871 (Title I as
Provision
(as applicable in 2014)
Amendments
ordered reported)
Studies and
The Secretary shall conduct
GAO shal conduct a study
The Secretary shall issue a
Reports
an expedited study of the
and issue a report on the
report to Congress based on
availability and affordability
viability of the government
the terrorism insurance data
of group life insurance
col ecting upfront terrorism
col ected under Section 11 to
coverage. (§103(h))
insurance premiums on
be completed by June 30, 2017
insurers within two years
and annually thereafter. (§11)
The Secretary shall conduct
from the date of enactment.
study and issue a report on
(Amendment 17)
The Secretary shall conduct an
the potential effect of
annual study of smal insurer
terrorism on life insurance
competitiveness and issue an
and other personal lines by
annual report on this study
October 2003. (§103(i))
with the first report not later
than June 30, 2016. (§14)
The Secretary shall conduct
a study and issue a report
CBO and OMB shall each
no later than June 30, 2005
conduct a study and issue a
on the effectiveness of the
report regarding the
program and the capacity of
application of accrual
private insurers to offer
accounting concepts to TRIA
terrorism coverage after the
and other federal insurance
expiration of the program.
programs not later than 12
(§104(d))
months after the date of
enactment. (§15)
President’s Working Group
on Financial Markets is to
GAO shal conduct a study and
report on the market
issue a report on the viability
conditions for terrorism risk
of (1) the government
insurance in 2006, 2010, and
col ecting upfront terrorism
2013. (§104(e))
insurance premiums on
insurers and (2) the creation of
GAO shal conduct a study
a mandatory capital reserve
and issue a report on the
fund to dedicate capital for
availability and affordability
terrorism losses before such
of NCBR coverage and the
losses occur within two years
outlook for future coverage
from the date of enactment.
by December 2008.
(§16)
(§104(f))
GAO shal conduct a study
and issue a report on the
availability and affordability
of terrorism insurance in
specific markets by June
2008. (§104(g))
Source: CRS; using material from the U.S. Treasury, Senate Committee on Banking, Housing and Urban Affairs,
and the House Committee on Financial Services.
Notes: Section numbers for the initial TRIA law are as codified in 15 U.S.C. §6701 note. Section numbers for
current legislation are from the legislation as introduced or the number of the amendment in committee. S. 2244
also includes a technical corrections section that deletes outdated language from several sections of the TRIA
statute. These corrections are not included in the chart.


Congressional Research Service
9

Terrorism Risk Insurance Legislation: Issue Summary and Side-by-Side Analysis

Author Contact Information
Baird Webel
Specialist in Financial Economics
bwebel@crs.loc.gov, 7-0652

Congressional Research Service
10