December 5, 2001—The US House of Representatives passed legislation in late November 2001 that provides up to $100 billion in financial assistance to commercial property and casualty insurers for losses from terrorist acts committed after enactment of the bill and prior to January 1, 2003. It is estimated that the insurance industry paid out $40 billion in claims stemming from the September 11 terrorist attacks.
Key elements of the “Terrorism Risk Protection Act” include:
- Requiring all federal taxpayer costs/assistance to be paid back.
- Including limited liability reforms to protect taxpayer funds.
- Modeling risk-sharing plan on existing state insurance programs.
- Allowing insurers to keep long-term terrorism loss reserves without tax penalties.
- Assessing first $20 billion in losses back to commercial insurers over time.
- Setting trigger level at $100 million, with lower threshold for smaller insurance companies.
- Providing 90 percent federal share with 10 percent individual company retention.
- Basing repayment timing flexibility on economic conditions.
- Establishing uniform definition of terrorism.
- Authorizing one-year program with optional extension for up to two additional years.
- Recouping subsequent losses through commercial policyholder surcharges.
Based on a report from AIA’s Angle .
