US Treasury Clarifies Its Process, Timing of Certifying Acts as Terrorism
Nearly two years after passage of the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA), the US Department of the Treasury last week updated the process and timeframe it will follow when determining if it will certify an attack as an act of terrorism, which is necessary for those eligible to recoup losses under TRIPRA. Clarification of the timeframe is particularly important for businesses and insurers that depend on the federal terrorism insurance backstop.
Treasury’s New Timeframe for Certifying Acts of Terrorism
Although the property damage or loss of life from a violent event is often easily determined, it’s not always clear whether such an act meets the criteria for certification under TRIPRA. The recent updates to the Treasury’s certification process are intended to remove some of the uncertainty around whether an act will qualify for the federal terrorism insurance backstop. Under the new process:
- The Treasury department will notify the public within 30 days of an event happening if it is evaluating whether it is under consideration for certification; additional updates will be made every 60 days.
- The Treasury department will notify the public, federal agencies, and Congress within five days of its final decision.
- The Treasury department’s decision is final; there is no dispute process.
The Certification Process
In order for an act of terrorism to qualify under TRIPRA, the act must be certified by the Secretary of the Treasury in consultation with the Attorney General and the Secretary of Homeland Security. Certified acts of terrorism must:
- Be a violent act or an act that is dangerous to human life, property, or infrastructure.
- Have resulted in damage within the US or to an aircraft carrier, US flagged vessel, or the premises of a US mission.
- Have been committed by an individual or individuals as part of an effort to coerce the civilian population of the US or to influence the policy or affect the conduct of the US government by coercion.
- Result in aggregate losses of $5 million or more.
Managing Terrorism Risk
Although TRIPRA has never been triggered, its existence has helped to keep terrorism insurance affordable and accessible for many companies. In addition to embedded property coverage reinsured through TRIPRA, businesses can also access the standalone terrorism insurance market, which often offers more competitive terms and pricing.
Talk to your insurance advisors about the type of terrorism coverage you should purchase and how much to buy. You should also understand the policy terms, conditions, and limitations of terrorism insurance coverage and understand your specific risks, including the location of key assets and people. Along with greater certainty about the government’s certification process, this should help you better protect your organization in the event of a terrorist act.