# Notification of Important Changes Relating to Terrorism Risk Insurance Act

**To Our Valued Customers:**

The Terrorism Risk Insurance Program Reauthorization Act of 2007 ("TRIPRA 2007") had been scheduled to expire on December 31, 2014. Congress enacted a six-year extension of TRIPRA entitled, Terrorism Risk Insurance Program Reauthorization Act of 2015 ("TRIPRA 2015"), which will expire on December 31, 2020. For purposes of simplicity we will simply reference the act as TRIA. There are several important changes to TRIA included within the extension of which you should be aware:

### A. Change in Definition of "Act of Terrorism"

Prior to the enactment of the extension legislation, TRIA had required that an "act of terrorism" meant any act that is certified by the Secretary of the Treasury in concurrence with the Secretary of State. However, this has been changed in that certification by the Secretary of the Treasury shall be in consultation with the Secretary of Homeland Security and the United States Attorney General.

### B. Reduction in the Federal Share of Terrorism Losses by Increasing the Insurer Co-Pay from 15% to 20% Over Five Years

The United States Government may pay a share of insured losses resulting from an act of terrorism. The federal share will decrease by 5% from 85% to 80% over a five-year period while the insurer share increases by the same amount during the same period. The schedule below illustrates the decrease in the federal share:

- January 1, 2015 – December 31, 2015 federal share: 85%
- January 1, 2016 – December 31, 2016 federal share: 84%
- January 1, 2017 – December 31, 2017 federal share: 83%
- January 1, 2018 – December 31, 2018 federal share: 82%
- January 1, 2019 – December 31, 2019 federal share: 81%
- January 1, 2020 – December 31, 2020 federal share: 80%

### C. The Current Program Trigger for Aggregate Industry Insured Losses Will Increase from $100 Million to $200 Million Over Five Years

The extension of TRIA increases the Program trigger from $100 million to $200 million over a five-year period. This means that the Program trigger will increase by $20 million with respect to any such insured losses occurring in calendar year 2016 and continue to increase by $20 million until calendar year 2020. At the end of this five-year period the Program trigger will be $200 million.

### D. Increases in the Recoupment of the Federal Share of Insured Losses

The extension of TRIA increases the amount used to calculate marketplace aggregate retention from $27.5 billion to $37.5 billion in $2 billion increments beginning in the calendar year 2015 and reaching $37.5 billion in calendar year 2019. Beginning in calendar year 2020 the TRIA extension revises the mandatory recoupment amount to be the amount equal to the annual average of the sum of insurer deductibles for all insurers participating in the Program for the prior three calendar years, with such amount to be determined annually by the Secretary of the Treasury. Under the TRIA extension, the recoupment of mandatory recoupment amounts has increased from 133% to 140%.

**Copyright © 2015 Zurich American Insurance Company**
**Includes copyrighted material of Insurance Services Office, Inc., with its permission.**
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