What does the Terrorism Risk Insurance Act (TRIA) establish as a response to terrorism incidents?

The Terrorism Risk Insurance Act (TRIA) was enacted in response to the significant impact that terrorism incidents can have on the insurance market. It establishes a temporary shared loss program between the insurance industry and the federal government. Under this program, the government agrees to cover a portion of the losses that exceed a certain threshold during a declared terrorist event. This arrangement is designed to stabilize the insurance market in the wake of such catastrophic events, ensuring that insurers can continue to provide coverage for terrorism-related losses without facing overwhelming financial burdens.

By implementing this shared loss program, the Act helps to restore confidence in the insurance market, encouraging insurers to offer terrorism coverage which they might otherwise avoid due to the high risks associated with such events. The program is not intended to be permanent; rather, it provides a necessary safety net for a limited time, aimed at promoting the availability and affordability of terrorism insurance in the aftermath of unexpected strikes.