22 Resources


News bits and observations about the impact of terrorism on the insurance industry.

This document contains the following sections:

  • Rules from the U.S. Department of Treasury
  • NAIC and Indiana DOI Bulletins
  •  "A Review of TRIA and Its Effect On The Economy; Helping America Move Forward"
  • Terrorism Reinsurance Pool Feasibility Study - 04/15/2004
  • Other Reference Sources
  • Definition
  • New York Approves Cat Loading
  • Going Without Insurance
  • Concentration of Workforce
  • Exclusion of 9/11 Losses from Experience Rating
  • NCCI Terrorism Rate Loading - Proposed Filing
  • No Exclusion for Terrorism
  • Reporting 9/11 Claims
  • $3 - 5 Billion in WC losses from 9/11
  • Buffet Excerpts on Terrorism
  • Stress Claims from 9/11
  • Pricing Terrorism Coverage
  • Catastrophe Models 
  • CIAT


Recent Briefs


12/19/14: NCCI webpage titled "Terrorism Risk Insurance" provides information on TRIA's expiration on 12/31/14.


12/17/14: Insurance Information Insititue (III) issued a media release titled Congressional Inaction on Renewal of Terrorism Risk Insurance Act Renewal May Cause U.S. Businesses to Lose Their Terrorism Coverage In 2015


NCCI webpage on "Frequently Asked Questions for the Terrorism Risk Insurance Act (TRIA)" posted 05/28/14.


Key findings of the policy brief are:
·        Compared with other insurance lines covered by the Terrorism Risk Insurance Act (TRIA), workers' compensation (WC) offers insurers less flexibility to control terrorism exposure through modifications in coverage: WC policies cannot exclude terrorism, impose policy limits, or exclude losses from nuclear, biological, chemical, or radiological (NBCR) attacks.
·        If reinsurers are unwilling to provide much more coverage for both conventional and NBCR attacks, insurers might respond to TRIA's expiration in December 2014 by declining to provide WC coverage to employers who present a high geographic concentration of potential losses.
·        Without TRIA in place, employers perceived to be at high risk for terrorism might have to obtain coverage in markers of last resort known as residual markets, which could charge higher premiums.
·        The higher cost of coverage would tend to reduce labor incomes and economic growth even if there is never another attack, though these effects are likely to be small.
·        Expiration of TRIA and growth in the residual market might also mean that WC losses from a catastrophic terror attack would largely be financed by businesses and taxpayers throughout the state in which the attack occurs, adding to the challenge of rebuilding in that state. TRIA, in contrast, spreads such risk across the country.



Filings (most recent on top)


This filing is effective 1/1/2015. It revises & withdraws endorsements in the Forms Manual as a result of the recent enactment of the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA of 2015).


Item B-1407 – “Catastrophe Provisions Miscellaneous Values, Rules and Statistical Codes”

This filing is effective 09/01/2008. It revises values and wording as result of Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA). In conjunction with Item P-1406. Establishes two categories of miscellaneous values to address losses resulting from "Terrorism" and "Catastrophe (other than Certified Acts of Terrorism)"



Item P-1406 – “Withdrawal of Endorsement WC 00 01 13 A and Revisions to Endorsements WC 00 04 21 B and WC 00 04 22”

This filing is effective 09/01/2008. It updates three endorsements in the Forms Manual so that both foreign and domestic terrorism are included in the same endorsement, consistent with TRIPRA.  In conjunction with Item B-1407.


Item B-1405 – “Terrorism Risk Insurance Program Reauthorization Act of 2007”

This filing is effective 01/01/2008. It revises Rule 3-A-24-a of the Basic Manual to remove the December 31, 2005 expiration date and replace it with "and any amendments thereto enacted by Congress."



Item P-1405 – “Terrorism Risk Insurance Program Reauthorization Act of 2007 Endorsements”

This filing is effective 01/01/2008. It updates two endorsements in the Forms Manual:


  • Terrorism Risk Insurance Extension Act Endorsement
    (old number: WC 00 01 13; new number: WC 00 01 13 A)

a. Change the reference of TRIEA to TRIPRA

b. Revise the definition of “act of terrorism” to include domestic terrorism

c. Update the insurer deductible provisions

d. Define “program year”

e. Disclose the $100,000,000,000 cap as required by Section 4 of TRIPRA

f. Update the existing disclosures

  • Domestic Terrorism, Earthquakes, and Catastrophic Industrial Accidents Premium Endorsement
    (old number: WC 00 04 21 A; new number: WC 00 04 21 B)
    to reflect that the domestic terrorism premium applies to all acts of domestic terrorism.

Also read ICRB Circular 2008-02 for more information on this filing.



Item P-1404 - "Terrorism Risk Insurance Extension Act of 2005"

This filing is effective 01/01/2006. It creates, amends, and withdraws applicable endorsements contained in previous filings: B-1383, B-1393, and P-1392 as a result of Congress passing the extension which was signed by the President on 12/22/05. Please see section below for more information on the extension act.


Also read ICRB Circular 2006-04 for more information on this filing.



Item B-1398 - "Miscellaneous Values For Foreign Terrorism"

This filing is effective 01/01/2006. It continues and relabels catastrophe provisions to address the risk of foreign terrorism on workers compensation policies. References to TRIA in manuals, rules, and rate pages are relabeled "Foreign Terrorism".



Item B-1393 “Miscellaneous Values for Domestic Terrorism, Earthquakes, and Catastrophic Industrial Accidents”

The filing is effective 01/01/2005. It establishes a $0.01 domestic terrorism rate and loss cost to be reported under statistical code 9741.



Item P-1392 “Notification Endorsement of Pending Law Change to Terrorism Risk Insurance Act of 2002” (WC 00 01 12)

The filing is effective 01/01/2005.



Item B-1383 "Catastrophe Provision—Certified Terrorism Losses"

On Friday, December 20, 2002, the ICRB emailed to the Indiana DOI, Item Filing B-1383 "Catastrophe Provision-Certified Terrorism Losses (as defined in Terrorism Risk Insurance Act of 2002)."


This filing is effective for new and renewal business at 12:01 a.m. on

·          December 20, 2002 for voluntary policies, and

·          January 1, 2003 for assigned risk policies.


The filing includes these components:

·          loss cost ($0.01) and rate ($0.02) for a "certified" terrorism acts catastrophe loading

·          terrorism endorsement with premium disclosure statement

·          stat code 9740 for reporting losses

·          updated premium algorithm


Here's a summary of the filing:


Terrorism Rate

Voluntary loss cost = $0.01

Advisory rate and mandatory assigned risk rate = $0.02


Of the 36 states in which NCCI is proposing this catastrophe provision, the Indiana loss cost and rate are the lowest.


The rate applies to $100 of payroll just like other classification codes. A risk's total payroll in Indiana is divided by units of $100 and multiplied by the Terrorism Rate found in the state pages. The calculation is expressed as (Payroll / 100 x Terrorism Rate = Premium).

Note: For policies with no payroll (i.e. "if any" policy or domestic servant codes), no charge will apply (reference Item Filing B-1383, page 16).


The premium amount included in the filing is for foreign terrorism certified losses only (no domestic terrorism included), and is net of federal recoverables.


Endorsement (Exhibit 8, pages 20-21 in the filing)

The endorsement provides notice to the policyholder that a premium charge may be applied to the policy applicable to federally certified terrorism losses. The endorsement also limits an insurer's liability for federally certified terrorism losses when aggregate certified losses exceed $100 billion, as provided by the Act. (Refer to Act, Section 4, (e)(2)(ii) "no insurer that has met its insurer deductible shall be liable for the payment of any portion of that amount that exceeds $100,000,000,000.")


Stat code

A statistical code (number 9740) is created to report premium charged for exposure related to certified losses under the Act. The terrorism premium amount will not be subject to experience rating, retrospective rating, deductible credits, or premium discounts, and will be excluded from loss cost/rate calculations.


Updated Premium Algorithm (Exhibit 13, pages 55-56 in the filing)

The algorithm is updated to include the new line item named "Terrorism Risk Insurance Act of 2002 - Certified Losses." This premium charge line item is inserted just after the "Expense Constant" line and just before the "Estimated Annual Premium" line.


More filing information

As this filing was prepared by NCCI for multiple states, we omitted the other states' special pages, where practical, in the Indiana filing. Therefore, the page numbering will skip around in a few sections. (Note: This is a large file and may take a few moments to appear.)



Data Reporting

NCCI issued a its circular number DR-2006-02 on 3/1/06 (click on link below to open) that does a good job of explaining what endorsements to apply to each policy and how to report data for policies, unit statistical plan, and financial calls, based on policy effective date. It replaces NCCI circular DR-2006-01.


[NCCI Cir DR-2006-02 replaces 2006-01.pdf]


Summary of Acts 

The Terrorism Risk Insurance Act (TRIA) became effective November 26, 2002. It provided a temporary program under which the federal government would share in the payment of insured losses caused by certain acts of terrorism. It was renewed as the Terrorism Risk Insurance Extension Act (TRIEA) in 2005, and as the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) in 2007. As of June 2013, without US Congressional action, TRIPRA will expire on December 31, 2014.


Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA)

On December 26, 2007, the President signed into law the Terrorism Risk Insurance Program Reauthorization Act of 2007 ("Reauthorization Act"). The Reauthorization Act extends the Program through December 31, 2014 (with calendar years 2008-2014 being called the "Additional Program Years"). Other provisions of the Reauthorization Act:

Revise the definition of "Act of Terrorism" to remove the requirement that the act of terrorism be committed by an individual acting on behalf of any foreign person or foreign interest in order to be certified as an "act of terrorism" for purposes of the Act.

Define "Insurer Deductible" for all Additional Program Years as the value of an insurer’s direct earned premium for commercial property and casualty insurance for the immediately preceding calendar year multiplied by 20 percent.

Set the Federal share of compensation for insured losses (subject to a $100 million Program Trigger) for all Additional Program Years at 85 percent of that portion of the amount of insured losses that exceeds the applicable insurer deductible.

Require Treasury to submit a report to Congress and issue final regulations for determining the pro rata share of insured losses to be paid under the Program when aggregate insured losses exceed the annual liability cap of $100,000,000,000.

Require the Secretary of the Treasury to notify Congress not later than 15 days after the date of an act of terrorism as to whether aggregate insured losses are estimated to exceed $100,000,000,000.

Require for policies issued after the date of enactment, that insurers provide clear and conspicuous disclosure to the policyholder of the existence of the $100,000,000,000 cap at the time of offer, purchase, and renewal of a policy (in addition to current disclosure requirements).

Revise the recoupment provisions of the Act. For purposes of recouping the Federal share of compensation under the Act, the ‘‘insurance marketplace aggregate retention amount" for all Additional Program Years is the lesser of $27.5 billion and the aggregate amount, for all insurers, of insured losses during each Program Year. With regard to mandatory recoupment of the Federal share of compensation through policyholder surcharges, collection is required within a certain schedule specified in the Reauthorization Act. The limitation that surcharges not exceed 3 percent of the premium charged for property and casualty insurance coverage under the policy is eliminated (but remains in the case of discretionary recoupment).

Require Treasury to issue recoupment regulations within 180 days of enactment, and publish an estimate of aggregate insured losses within 90 days after an act of terrorism.

Require the President’s Working Group on Financial Markets to perform an ongoing analysis regarding the long-term availability and affordability of terrorism risk insurance and submit reports in 2010 and 2013.

Require the Comptroller General to examine and report on the availability and affordability of insurance coverage for nuclear, biological, chemical, and radiological terrorist events; the future outlook for such coverage; and the capacity of insurers and State workers compensation funds to manage the risk associated with nuclear, biological, chemical, and radiological terrorist events.

Require the Comptroller General to study and report on the question of whether there are specific markets in the United States where there are unique capacity constraints on the amount of terrorism risk insurance available.


Terrorism Risk Insurance Extension Act of 2005 (TRIEA)

Pub. L. 109-144, 119 Stat. 2660

On December 22, 2005, the President signed into law the Terrorism Risk Insurance Extension Act of 2005 (Extension Act), which extends TRIA through December 31, 2007. In doing so, the Extension Act adds Program Year 4 (January 1–December 31, 2006) and Program Year 5 (January 1–December 31, 2007) to the Program. In addition, the Extension Act made other significant changes to TRIA that include:

  • A revised definition of ‘‘Insurer Deductible’’ that adds new Program Years 4 and 5 to the definition. The insurer deductible is set as the value of an insurer’s direct earned premium for commercial property and casualty insurance (as now defined in the Act) over the immediately preceding calendar year multiplied by 17.5 percent Program Year 5.
  • A revised definition of ‘‘Property and Casualty Insurance’’ that now excludes commercial automobile insurance; burglary and theft insurance; surety insurance; professional liability insurance; and farm owners multi-peril insurance. Though the definition excludes professional liability insurance, it explicitly retains directors and officers liability insurance.
  • Creation of a new ‘‘Program Trigger’’ for any certified act of terrorism occurring after March 31, 2006, that prohibits payment of Federal compensation by Treasury unless the aggregate industry insured losses resulting from that act of terrorism exceed $50 million for Program Year 4 and $100 million for Program Year 5.
  • A change to the Federal share of compensation for insured losses. Subject to the Program Trigger, the Federal Share is 90 percent of that portion of the amount of insured losses that exceeds the applicable insurer deductible in Program Year 4 and decreases to 85 percent of such amount in Program Year 5.
  • Revisions to the recoupment provisions. For purposes of recouping the Federal share of compensation under the Act, the ‘‘insurance marketplace aggregate retention amount’’ for the two additional years of the Program is increased from the level in Program Year 3. For Program Year 4 the ‘‘insurance marketplace aggregate retention amount’’ is established as the lesser of $25 billion and the aggregate amount, for all insurers, of insured losses during Program Year 4. The ‘‘insurance marketplace aggregate retention amount’’ for Program Year 5 is the lesser of $27.5 billion and the aggregate amount, for all insurers, of insured losses during Program Year 5.
  • A statutory codification of Treasury’s litigation management regulatory requirements in section 50.82 of title 31 of the Code of Federal Regulations (as in effect on July 28, 2004), which requires advanced approval by Treasury of proposed settlements of certain causes of action involving insured losses under the Program.


Terrorism Risk Insurance Act of 2002 (TRIA) 

The Act became law on November 26, 2002. Below, click on the links for a PDF file of the Act and a Word document summarizing it.


[Terror Insurance Bill.pdf] [PMConfCommDraftTerrorism Summary.doc]


President’s Working Group On Financial Markets
President’s Working Group On Financial Markets, Terrorism Risk Insurance Report, released 4/17/2014; The President’s Working Group on Financial Markets (PWG) released its report and analysis to Congress on terrorism risk insurance. The report, mandated by the Terrorism Risk Insurance Act (TRIA), requires the PWG to conduct, on an ongoing basis, an analysis of the long-term availability and affordability of insurance for terrorism risk.


Workers Compensation Terrorism Impact & Education Study (TIES) Group Issues Paper

The Workers Compensation Terrorism Impact & Education Study (TIES) Group released an issues paper in December 2006 regarding workers compensation insurance and terrorism. The mission of the WC TIES Group is to educate non-industry stakeholders as to the uniqueness of terrorism-related issues for the workers' compensation line of business. Faced with the reality that TRIA – and its successor, TRIEA – were intended to be temporary solutions, the insurance industry has considered various private market solutions. It is the intent of the WC TIES Group to be a resource to enable continued and meaningful dialogue on the issue.

[WC TIES Issues Paper 22 Dec 06.doc]


"Terrorism Insurance Measuring and Predicting Losses from Unconventional Weapons Is Difficult, but Some Industry Exposure Exists"

GAO Report dated September 25, 2006 to Rep. Michael G. Oxley, Chairman, Committee on Financial Services, House of Representatives


"Assessment The Terrorism Risk Insurance Act of 2002"

Treasury Department Report to Congress dated June 30, 2005


Treasury is required to assess:

A. The effectiveness of the Program;

B. The likely capacity of the property and casualty insurance industry to offer insurance for terrorism risk after termination of the Program; and,

C. The availability and affordability of such insurance for various policyholders, including railroads, trucking, and public transit.


Excerpt from report, Chapter 1 Introduction and Executive Summary, Assessment, page 11:

TRIA’s expiration will conclude the transitional assistance first provided to the insurance markets in the uncertain economic environment of 2002. Overall, our assessment is that the immediate effect of the removal of the TRIA subsidy is likely to be less terrorism insurance written by insurers, higher prices and lower policyholder take-up. While TRIA is in effect, however, it crowds out development of some reinsurance markets, and delays the development of private capacity to provide terrorism risk insurance. Over time, we expect that the private market will develop additional terrorism insurance capacity. We anticipate that the initial response of premiums in the market will spur the buildup of surplus as insurers tap into capital markets and the development of additional private reinsurance and other risk shifting



Below, click on the link to open a PDF file containing the full report.

[Assessment TRIA Report by US Treas 6-30-05.pdf]


Interim Guidance from the U.S. Department of Treasury

To assist the insurance industry in complying with TRIA, the Department of the Treasury (Treasury) has issued several Interim Guidance notices. Interim Guidance provides the Treasury the ability to respond promptly to implementation difficulties and to prevent confusion prior to the issuance of formal regulations. Interim Guidance issued by the Treasury can be used by insurers in complying with the requirements of TRIA prior to the issuance of regulations, and such guidance remains in effect until superceded by regulations or subsequent notice.


    Rules from the U.S. Department of Treasury

    The Department of the Treasury (Treasury) has issued several rulings as part of its implementation of Title I of the Terrorism Risk Insurance Act of 2002. Links to these Final Rules are shown below and can also be found at Treasury’s Regulations page.



    NAIC and Indiana DOI Bulletins

    On December 3, 2002, the Treasury Dept. (Peter Fisher, undersecretary) and the NAIC (Terri Vaughn, president) held a media conference to issue interim guidance. Insurers will be deemed in compliance with the Act if it uses the NAIC model disclosure forms (please see NAIC Final "Model" Bulletin document attached below).

    [NAIC Final Bulletin.doc]


    On December 4, 2002, the Indiana Department of Insurance issued its Bulletin 114 which closely follows the NAIC Model Bulletin (please see IDOI Bulletin 114 document attached below).

    [Bulletin 114 IN DOI.pdf]


    "A Review of TRIA and Its Effect On The Economy; Helping America Move Forward"

    On April 28, 2004, the House Financial Services Subcommittee will conduct a hearing on TRIA entitled "A Review of TRIA and Its Effect On The Economy; Helping America Move Forward." The panel of speakers at the hearing are: Wayne Abernathy, Treasury Department Assistant Secretary, two representatives from the NAIC (one of whom will be New York Insurance Superintendent, Greg Serio) and New York City Mayor, Michael Bloomberg. Attached below is a Word document containing an All-Industry statement on the matter.


    [HFSC - TRIA Hearing Statement 0404.doc]


    Terrorism Reinsurance Pool Feasibility Study - 04/15/2004

    Excerpts of press release by Towers Perrin:

    Without Federal Backstop, Insurance Industry Lacks Capacity for Workers' Compensation Losses from Major Terrorism Event


    The private insurance industry for workers' compensation (WC) would not have enough capital to withstand potential losses on its own should a catastrophic terrorism event, or multiple events, occur, according to the Workers' Compensation Terrorism Reinsurance Pool Feasibility Study conducted by the Tillinghast and Reinsurance businesses of Towers Perrin.


    The study represents the first serious effort the industry has taken toward exploring the viability of private market solutions to help manage the threat of terrorism for WC insurance. The Terrorism Risk Insurance Act (TRIA), which expires on December 31, 2005, was enacted in 2002 in part to provide a temporary window of relief so insurers could develop private market solutions to manage the ongoing risk of terrorism. Terrorism and insurance experts have conceived of plausible catastrophic terrorism events that generate workers' compensation losses of $90 billion or more, roughly three times the $30 billion in capital backing the workers' compensation line of business.


    The study acknowledges the potential value of a voluntary reinsurance pool to some individual insurers, but points to its limitations as a meaningful industry solution, particularly absent some form of ongoing federal backstop protection. A voluntary WC industry reinsurance pool would not create 'new' capital in and of itself to support catastrophic terrorism losses, though it would diversify risk and thereby increase the efficiency with which existing capital is deployed.


    "Although the idea of an industry risk-sharing pool has been considered one of the most promising private market solutions for managing terrorism risk to date, the study concluded that this alone falls well short of addressing industry needs," says Charles Wolstein, who led the Workers' Compensation Terrorism Study on behalf of the firm. "The study serves as a starting point for further discussion; its analysis should help those evaluating the need for a federal backstop to understand the magnitude of the problem and the limitations of the private market's capacity to manage this risk. It also will be an excellent resource for those looking to structure any new federal backstop program."


    "Terrorism is still very much a concern for U.S. business, and the recent bombings in Madrid further underscore the possibility of future attacks. A public/private partnership is critical to managing future terrorism risk for WC insurance post-TRIA," says Stephen Lowe, Global P/C Insurance Practice Leader. "The industry needs to begin working with Congress now on developing such a partnership to avoid the potential for significant marketplace disruption in the event of major losses from future terrorist attacks."


    Why Workers' Compensation?

    The statutory nature of workers' compensation insurance makes it fundamentally different from other lines of insurance, creating a unique situation for the WC market. Unlike property insurance, WC providers cannot introduce terrorism coverage exclusions, nor can they limit their potential losses on any policy. WC insurers are obligated to pay wage loss and medical benefits to workers injured on the job — without regard to cause and without limit.


    "The complexities and magnitude of terrorism risk are extraordinary and there would be vast implications for the WC insurance market and U.S. businesses should a major terrorism event occur without a federal reinsurance mechanism in place. A major event could be greater than the entire base of capital that is supporting the WC insurance market, tearing away a structurally critical piece of the economy," says Mr. Lowe. "Since WC insurance is required in virtually all states, the absence of a functional WC insurance market would interfere with the conduct of business throughout the economy."


    "Post-TRIA, insurers will be left with two options to manage the risk of catastrophic losses from terrorism — curtail workers' compensation policies or obtain catastrophic protection from a third party," says Bruce Hockman, Principal and Workers' Compensation Practice Leader for the firm's Reinsurance business. "However, without a federal backstop in place, it is unlikely that commercial reinsurance — the industry's traditional source of catastrophe protection — would be available in sufficient quantities, or at affordable prices, to meet marketplace demand."


    What's Next?

    "We're now midway through TRIA and are starting to see the industry thinking about how their businesses will work without it, as the very real prospect of TRIA's expiration looms." says Mr. Wolstein. "Although TRIA remains in effect until December 31, 2005, policies written as early as January 1, 2005 will extend beyond TRIA's coverage, presenting a significant dilemma for insurers."


    "The study laid the foundation for future work on an industry pool," says Mr. Wolstein. "It's a reasonable possibility that a pool could be created someday; however, the sponsors concluded that it would only make sense to pursue further dialogue ‘if and when' the form of ongoing federal backstop protection becomes clearer." He noted, "Hypothetically, a pool can only address 10% of the problem. Until the other 90% is addressed, it wouldn't make sense to undertake the considerable effort necessary to develop the pool. Currently, a federal mechanism appears to be the only viable means of addressing the lion's share of terrorism risk for workers' compensation."


    The industry sponsors of the study decided against pursuing the development of an industry pool at this time because participants:

    • Discovered that an industry reinsurance pool lacks meaningful capacity. The pool would fail to offer enough capacity to meaningfully help the industry absorb losses from major terrorism events — the primary reason for its formation — without some form of a more permanent federal backstop.
    • Agreed on the proper measure of terrorism risk exposure; but did not agree on final pricing formula. The sponsors agreed that the best way to measure terrorism risk exposure is via a census of employee headcount by geographic location (rather than by WC premium or payroll). Developing a final pricing formula for pool members' premium contributions would require further work, if a pool were to be formed.
    • Concluded that further development of design specifics needed to wait. Sponsors concluded that, since the pool could not provide sufficient capacity on its own, further investment in its development should be deferred until an ongoing federal backstop was in place. In addition, some elements of the pool design could not be finalized without knowing how ongoing federal backstop protection would work to enable the pool to integrate sensibly with a federal program.

    The Workers' Compensation Terrorism Reinsurance Pool Feasibility Study was commissioned by 14 workers' compensation insurers that comprise about 40% of the market. Representatives of several insurance industry trade associations also dedicated their time, insights and expertise to the report. The Tillinghast and Reinsurance businesses of Towers Perrin conducted the study, which took place between April and September of 2003. For a copy of the report, please visit www.towersperrin.com/tillinghast.


    Other Reference Sources

    To read more on terrorism and insurance, also visit these websites:



    From the "Terrorism Risk Insurance Act of 2002" Section 3, Definitions


    (A) CERTIFICATION.—The term ‘‘act of terrorism’’ means any act that is certified by the Secretary, in concurrence with the Secretary of State, and the Attorney General of the United States—

    (i) to be an act of terrorism;

    (ii) to be a violent act or an act that is dangerous to—

    (I) human life;

    (II) property; or

    (III) infrastructure;

    (iii) to have resulted in damage within the United States, or outside of the United States in the case of—

    (I) an air carrier or vessel described in paragraph (4)(A)(ii); or

    (II) the premises of a United States mission; and

    (iv) to have been committed by an individual or individuals acting on behalf of any foreign person or foreign interest, as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States Government by coercion.


    (B) LIMITATION.—No act shall be certified by the Secretary as an act of terrorism if—

    (i) the act is committed in the course of a war declared by the Congress; or

    (ii) losses resulting from the act, in the aggregate, do not exceed $5,000,000.


    (C) DETERMINATIONS FINAL.—Any certification of, or determination not to certify, an act as an act of terrorism under this paragraph

    shall be final, and shall not be subject to judicial review.


    Going Without Insurance

    1.       A Real Estate Roundtable media release dated September 4, 2002, titled "Survey Confirms Economic Toll of Terrorism Insurance Gap" indicates that real estate transactions worth nearly $10.5 billion have been delayed or cancelled due to the ongoing lack of terrorism insurance coverage.

    2.       A Mortgage Bankers Association of America (MBA) media release dated July 15, 2002, titled "More Than $8 Billion In Commercial Property Deals Killed, Delayed Or Changed Due To Terrorism Insurance Issues" shows that $3.7 billion in deals have died and $4.5 billion deals are delayed due to a lack terrorism insurance for commercial properties so far this year.

    3.       A survey of 45 of the Fortune 500 companies showed 22% had no terrorism insurance. Survey was done by RM Access and presented at the Risk and Insurance Management Society (RIMS) annual conference in April 2002.

    4.       A RIMS media release dated September 10, 2002 titled "SURVEY SHOWS OBTAINING TERRORISM INSURANCE IS DIFFICULT AND COVERAGE IS INADEQUATE" found that from 450 members surveyed, 71% said finding adequate terrorism insurance coverage very difficult or impossible. Also, 84% do not feel confident that their companies would be sufficiently covered in the event of another attack. And of the 80% surveyed who have renewed their company’s coverage, over half do not have terrorism coverage included in their policy. Of all the companies surveyed, 65% currently have no terrorism insurance coverage at all.

    RIMS represents 84% of Fortune 500 companies and 950 small business employers totaling over 4,000 commercial policyholders.


    Concentration of Workforce

    Underwriters are now looking at the concentration of an employer's workers in one location and the number of employers insured in a geographical area (like a skyscraper). Before 9/11, an employer with just office workers in a large city was a low premium, low exposure risk. Now underwriters are taking a closer look at pricing and insuring such exposures.


    Exclusion of 9/11 Losses from Experience Rating

    Item Filing E-1376 excludes claims directly attributable to the terrorist attacks and reported under Catastrophe number 48 from experience rating calculations. The rule was filed (approved) for use in Indiana on 2/26/2002.


    Experience rating measures an employer's success in maintaining a safe workplace. It does this by looking at an employer's payroll and loss history as an indicator future losses. Due to the unique and unprecedented nature of the claims directly attributable to these terrorist acts, they should not be used in an employer's experience modification calculation. Including these claims would not be indicative of an employer's true loss potential.


    NCCI Terrorism Rate Loading - Proposed Filing

    As of March 25, 2002, no state had approved the 4% loss loading provision for terrorism in their WC rates. NCCI filed requests in 38 states (Item Filing B-1377), with 20 rejecting the filings. Those states are Arkansas, Alabama, Arizona, Colorado, Connecticut, Iowa, Illinois, Kansas, Kentucky, Maine, Missouri, Montana, Nebraska, New Hampshire, New Mexico, Nevada, Rhode Island, South Dakota Virginia and Vermont. For Indiana, the ICRB never filed the rate request with the DOI.


    No Exclusion for Terrorism

    The standard workers compensation and employers liability policy does not exclude acts of war or terrorism committed in the United States.



    Reporting 9/11 Claims

    Rating bureaus have assigned Catastrophe Number 48 for claims arising from the September 11, 2001 terrorist attacks.


    Specifically, New York Compensation Insurance Rating Board Bulletin R.C. 1989 reads “All claims directly arising from the commercial airline hijackings of September 11, 2001 and the resulting subsequent events with accident dates of September 11, 2001 through September 14, 2001”.


    "This definition encompasses the deaths and injuries directly attributable to the September 11, 2001 attacks. A three-day window for claim occurrence is included within this definition which is the accident date extension being used by all rating organizations. It is anticipated that stress claims and potential respiratory cases, as long as their accident dates are considered to be within the specified time period, will also be reported under Catastrophe Number 48. Claims emanating from recovery and clean-up efforts are not to be included under this code if injuries occur after September 14, 2001. In addition, the recent anthrax biochemical incidents are not to be included within the definition of Catastrophe Number 48."


    $3 - 5 Billion in WC losses from 9/11

    In March 2002, third party estimates of workers compensation losses directly attributed to the 9/11 attacks range from $3 billion to $5 billion. Per the NY WC Board, there are about 5,800 New York WC claims related to the Sept. 11 terrorist attacks on the WTC (2,200 death claims and 3,600 injury claims). Injured workers or the families of those who died have two years to file WC claims. The claim count excludes employees with the New York Police & Fire Departments which are self-insured.


    Buffet Excerpts on Terrorism

    Excerpts from annual letter to shareholders by Warren Buffett, CEO, Berkshire Hathaway Inc. on March 11, 2002.

    "In setting prices and also in evaluating aggregation risk, we had either overlooked or dismissed the possibility of large-scale terrorism losses. That was a relevant underwriting factor, and we ignored it."

    He said the Sept. 11 events showed that the property/casualty industry as a whole "made a fundamental underwriting mistake by focusing on experience, rather than exposure," which led insurers to assume a huge terrorism risk "for which we received no premium." Since it hadn't happened before, it hadn't been priced.


    Stress Claims from 9/11

    According to an AMCOMP report released a study in late July 2002 that out of 3,438 cases that were reviewed by the Workers' Compensation Mental Stress Council, 1,594 involved evidence of stress. Of the 1,594 stress cases, 665 also had evidence of a physical injury, leaving 929 stress-only cases, AMCOMP said. About 25% of WC injury cases arising from the 9/11 terrorist attack on WTC are being contested by insurers, according to an industry study.


    New York Workers' Compensation Board said that so far there have been 6,503 claims submitted, including death claims.


    He said that looking at the overall claims picture, the top five insurers with the most claims were Pacific Indemnity Company (13 percent), State Insurance Fund (10 percent), Travelers (8 percent), Electrical Employers, a self-insured entity (7 percent), and New York City (6 percent).


    Without death claims, the top five insurers with the most claims were the State Insurance Fund, Transcontinental Insurance Company, Travelers Group, American Casualty Company, and Marriott Educational Service.


    Pricing Terrorism Coverage

    Pricing is problematic. Natural catastrophes like hurricanes, earthquakes and typhoons, are somewhat predictable through meteorological and actuarial science. Right now, we have no way of knowing how to anticipate future terrorist attacks. That's why natural catastrophe coverage is priced lower than terrorism coverage.


    Catastrophe Models

    Companies are now including human behavior as a factor in their models. The models contemplate damage caused by intentional, human acts, including possible terrorist targets and weapons. AIR Worldwide Corp., Risk Management Solutions Inc. and Eqecat are three companies that have developed terrorism catastrophe models for use by insurance companies.



    The Coalition to Insure Against Terrorism (CIAT) represents a wide range of businesses and organizations throughout the transportation, real estate, manufacturing, construction, entertainment and retail sectors. These groups have banded together to speak for business insurance policyholders as part of a continuing effort to win passage of a terrorism insurance plan on Capitol Hill.


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