During the Emmett J. Vaughan Agribusiness Conference in Sacramento this week, attendees were informed that the Terrorism Risk Insurance Act (TRIA) is expiring at the end of 2014. Many at the conference were not aware that TRIA was set to expire this year. If not renewed by Congress, TRIA’s absence could create higher costs for policyholders and leave many without coverage for terrorist acts.
After 9/11, most insurance companies excluded acts of terrorism from their insurance policies. TRIA was created to provide coverage for terrorist acts above and beyond that provided by private insurance companies-- specifically providing coverage for acts exceeding $27.5 billion in damage. With this backstop, private industry agreed to provide coverage for all losses below this amount of damage. As an example, the World Trade Center insurance companies paid over $50 billion in damages for 9/11. In order to continue to pay future losses of that magnitude without the backing of the federal government, the insurance industry would have had to substantially increase rates or discontinue offering the coverage.
Most policies for business operations currently include coverage for terrorism. However, if the federal government does not renew this act, private industry may again exclude these events from policies. It will be critical for business policies to have this coverage as terrorism continues to be a very real and significant exposure for American business operations. Companies should take a close look at all of their policies to ensure they have all of their critical operations properly insured. Western Growers Insurance Services is a full lines brokerage and can secure insurance coverage or services for any of your business needs. For more information, contact Greg Nelson, Assistant Vice President of Commercial Lines.
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