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Bush signs terrorism insurance stopgap extension.

With just more than a week to spare, President Bush signed the compromise bill passed by Congress that will extend federal terrorism risk insurance protections for another two years, albeit with a few significant alterations.

The Terrorism Risk Insurance Extension Act of 2005 (TRIEA), P.L. 109-144, authorizes full, mandatory taxpayer reimbursement for federal assistance provided under the program, while significantly raising the deductibles and co-shares over current program levels. The legislation would also narrow the program in anticipation of its phase-out.

The Mortgage Bankers Association (MBA), which supports the crafting of a permanent solution for terrorism insurance coverage, lauded the signing of TRIEA.

"MBA believes that the two-year extension of this legislation will provide our industry with the stability and certainty necessary to allow the private markets to mature toward 2008," said Kurt Pfotenhauer, MBA's senior vice president of government affairs.

Just as with the original Terrorism Risk Insurance Act of 2002 (TRIA), which expired at the end of 2005, TRIEA is designed to keep the temporary Terrorism Risk Insurance Program (TRIP) in place through 2006 to the end of 2007 until a permanent solution is crafted.

Coverage under TRIEA, however, is somewhat scaled-back--commercial auto, burglary/theft, surety and professional liability are no longer covered, while nuclear, chemical, biological and radiological (NCBR) coverage will not be required in property and liability policies.

TRIEA also increases the deductibles on all lines of insurance, from 15 percent under TRIA to 17.5 percent in 2006 and to 20 percent in 2007. After the insurance deductible has been reached, the federal government has a 90 percent co-share of additional insurance losses in 2006 and an 85 percent co-share in 2007.

An increase in the amount of insured losses would trigger the federal backstop, from $5 million under TRIA to $50 million in 2006 and to $100 million in 2007 in order to shift insurance coverage for smaller terrorist incidents to the private sector.

The legislation also calls for the formation of a "Presidential Working Group on Financial Markets" to perform an analysis regarding the long-term availability and affordability of insurance for terrorism risk that includes nuclear, biological, chemical and radiation risks and life coverage.

Since TRIEA took effect on Jan. 1, the Treasury Department has issued interim guidance to assist the insurance industry in meeting the new requirements. The guidance, which can be found at, addresses issues including continuing compliance with TRIA's mandatory availability and policyholder disclosure requirements, and determination of the types of property and casualty insurance now included.
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Publication:Mortgage Banking
Geographic Code:1USA
Date:Feb 1, 2006
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