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by : Alpha Insurance Analysts Limited

Unfortunately, whilst the House (House of Representatives) passed the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) on Wednesday 10th December 2014, Senator Tom Coburn blocked the Senate from holding a final vote on Tuesday 16th December to reauthorize the Terrorism Reinsurance Act (TRIA), ahead of Congress’ recess for the Christmas/Holiday period, effectively killing the Bill for the year.

Whilst a Special Session could be called, this is extremely unlikely, and therefore it is virtually certain that TRIA will be allowed to lapse on 31st December 2014.  Once TRIA has lapsed there will be no obligation for eligible insurers issuing commercial property and casually policies incepting or renewing on or after 1st January 2015 to ‘make available’ cover for insured losses from Acts of Terrorism.

On the reinsurance treaty business, there could be a potential reinstatement of coverage in the event of non renewal of TRIA.  Reinsurance policies with no ‘external’ determination of a terrorism loss should be unaffected by a lapse in TRIA.  Standalone contracts which specifically provide terrorism coverage or any extension to TRIA coverage rely on TRIA being in place and therefore would not be payable under TRIA.

If the Bill is picked up again by Congress in the New Year and subsequent legislation is passed during 2015, there will inevitably be an indefinite lapsed period, as it is extremely unlikely that the law/requirements would be applied retroactively once new legislation is passed.  No ‘make available’ provision could be applied to policies written during the lapsed period.

There is, however, a general consensus of opinion on Capitol Hill that TRIA will be passed and that the Bill is likely to be picked up again by Congress in the New Year. If a Bill is subsequently passed during 2015, there will inevitably be a lapsed period.