Proposed changes to the federal terrorism insurance backstop could raise the program trigger to $10 million from $5 million and require insurers to absorb more terrorism-related losses, according to new commentary from AM Best.
The proposed Terrorism Risk Insurance Program (TRIA) Program Reauthorization Act of 2026 would extend the current Terrorism Risk Insurance Program Reauthorization Act (TRIPRA), now set to expire at the end of 2027, through Dec. 31, 2034.
Both chambers of Congress have reportedly approved legislation to extend the program, although differences between the House and Senate bills still must be resolved.
In its commentary, AM Best said the House legislation’s higher trigger would place greater responsibility on insurers and could affect underwriting, pricing and capital allocation.
The proposed $10 million threshold remains low relative to modelled terrorism scenarios involving dense commercial property concentrations, according to the commentary.
However, AM Best said the financial impact would vary across the insurance industry.
Steven DeLosa, senior financial analyst at AM Best, noted, “National insurers with diversified exposures and substantial capital resources may be better positioned to retain the additional risk, but smaller and regional insurers may be disproportionately affected, as they may have fewer opportunities to diversify terrorism exposure and limited access to alternative risk transfer solutions.”
The House bill also would require the Treasury secretary to certify an act of terrorism within 90 days of publishing an initial notice that an event is under review for certification.
AM Best said the 90-day requirement could give insurers greater certainty by establishing a defined timeline for determining whether the federal backstop would apply after a potential terrorist event. A potential downside, however, would be an increased risk of a premature or inaccurate determination.
AM Best concluded that the TRIPRA is an effective federal backstop against terrorism-related losses, while stressing that it is not a substitute for strong risk management practices.
Tracey Laws, President and CEO of the Reinsurance Association of America (RAA), also provided a statement on the development, adding, “RAA commends the U.S. Senate and the U.S. House of Representatives for passing bipartisan legislation to reauthorise the TRIP for seven years.
We applaud the bills’ sponsors, congressional leaders, and Senators and Representatives for coming together to recognise the program’s essential role in supporting America’s economic growth, security, and resilience.
“TRIP is a proven public-private partnership that supports the availability of terrorism insurance, helping businesses manage risk, investors commit capital, employers create and sustain jobs, and Americans maintain their security.
“Congress has demonstrated broad agreement on the program’s importance to America. RAA urges the House and Senate to quickly work together on a final bill and send it to the President for his signature. It is critical to enact a seven-year reauthorization this year to provide the certainty needed to plan, invest, create jobs, and protect businesses and communities.”
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