The Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) is set to go before the U.S. Senate after legislation extending the bill for seven years easily passed through the U.S. House of Representatives.
The bill, which was initially passed in 2002 in the aftermath of the September 11 attacks, received strong bipartisan support, passing through the House with a vote of 385-22.
TRIPRA serves as a federal backstop for terrorism insurance and without it, it would be extremely challenging for the private market to provide adequate protection for terror risks.
Previously, Congress has reauthorized TRIPRA in 2005, 2007, and 2015, with the Act currently set to expire on December 31st, 2020. But on November 19th, more than a year before its expiration date, the reauthorization has been sent to the Senate.
Furthermore, a companion measure, S.2877, is to be discussed this week by the Senate Banking Housing and Urban Affairs Committee.
A group of insurers and reinsurers recently called on members of the U.S. Congress to pass a long-term reauthorisation of the bill, describing it as a vital public-private risk sharing mechanism.
Individual terror events must be certified as acts of terror by the Secretary of State, the Treasury Secretary, and also the U.S. Attorney General in order for TRIPRA to come into play.
In order for any federal funding to start, the U.S. would have to exceed losses of $180 million in a given year rather than losses from an individual event.
Once the backstop comes into play, insurance companies have to pay 20% of all claims, while the remaining 80% is covered by the government and paid back over time.
Since the passing of TRIPRA through the House, a number of industry participants have expressed delight at the expectation that it will be approved by the Senate well in advance of its expiration date, providing welcomed certainty for the U.S. economy going into 2020.