July 16, 2004—The U.S. Treasury Department has extended a key provision of the 2002 law that makes terrorism risk insurance more widely available. The “make available” provision, which requires insurers to make terrorism coverage available under the same terms and conditions as other forms of insurance, will now be in effect until the end of 2005, when the terrorism risk insurance program expires.
In making its decision, the Treasury Department said that the “make available” provision has “contributed to the affordability and availability of terrorism risk insurance” for construction projects and other real estate transactions, particularly those in high-risk areas.
Under the Terrorism Risk Insurance Act, enacted in the wake of the September 11, 2001 attacks, the federal government shares in 90 percent of “insured losses” above the insurer’s annual deductible, up to an aggregate limit of $100 billion. The law, including the “make available” provision, will expire on December 31, 2005, unless Congress acts to extend it. Currently, efforts to extend the law are stalled in both chambers of Congress.
Insurers and insurance policyholders have said that a vibrant private sector terrorism insurance market has yet to emerge since 9/11 and therefore the federal program will be needed beyond 2005. However, the Consumer Federation of America has released a report contending that the private insurance industry will be able to cover the cost of terrorism insurance by 2005 for the entire country except for certain high risk cities, including New York, Washington, Chicago, and San Francisco.
—From AIAs Angle.
