Last week, the U.S. Congress adjourned for the year without making any provision for extending the federal Terrorism Risk Insurance Act (“TRIA”). Absent some sort of extension, TRIA thus will expire next week – on December 31, 2014. As a result, insurers will no longer be required to offer terrorism insurance, and even those insurers that do offer the coverage may well reassess their risk and price the coverage at substantially increased premium rates.
Terrorism insurance is an important protection which most policyholders reportedly opt to buy. Without being able to obtain and/or afford it, policyholders may be at significant risk – and not just in the event of a domestic terrorist attack. Many lenders require borrowers to have terrorism coverage in place as part of their loan policies. Real estate deals, equipment financing, and many other commercial transactions technically depend on the availability and procurement of terrorism coverage as part of the overall insurance requirements for the deal. Lack of terrorism insurance could put loans or deals at risk.
You can read more about TRIA and Congress’ failure to act in Reed Smith’s recent Client Alert, “Congress’ Failure to Extend Terrorism Risk Insurance Act Requires Policyholders to Act Diligently Before January 1.”
All policyholders should immediately review the terms of their insurance policies and assess whether they will or will not have terrorism coverage come January 1, 2015. Policyholders should also study the terms and conditions of financing documentation, leases, and other important transaction documents to confirm whether they require the purchase of terrorism coverage in order to be in compliance.
Reed Smith’s Global Insurance Recovery Group stands ready to assist policyholders with these analyses; with talking to their insurers, their lenders, or any other third parties; and with any other tasks related to terrorism insurance and Congress’ failure to extend TRIA.