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On December 31st of 2014, the federal Terrorism Risk Insurance Act (TRIA) expired. This is protection purchased by property owners to cover their potential losses and liabilities that might occur due to terrorists. This Act created in 2002, as a consequence of the 9/11/ 2001 attack and destruction, protected property owners from exorbitant pricing of property insurance that would result from the need to insure property that might be destroyed or damaged as a result of these Acts. Insurance companies normally create pricing for their insurance products based on the probability of a loss and to the extent they believe the loss might be. Because acts of terrorism can normally be considered infrequent, but potentially devastating, and following the enormous loss of property on September 11th, Congress worried insurance prices for property would go through the roof. Therefore, Congress created an Act that would provide protection for the insurance companies that were providing such coverage, resulting in pricing that was considered reasonable. On December 26, 2007, the President of the United States signed into law the Terrorism Risk Insurance Program Reauthorization Act of 2007 which extended the Act through December 31, 2014. The law extended the temporary federal Program that provides for a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism.

So, it was a great shock to the insurance industry when congress was not able to agree on it's renewal at the end of last year. The insurance companies began the arduous task of developing pricing for such coverage. Early signs were not promising. Some said it was impossible to price and others suggested that huge increases were coming. One might ask, why wouldn't property owners just pass on that coverage knowing that the probability of a loss due to terrorism at their particular property was quite small. Mortgage companies simply would say that this coverage is necessary for the proper protection of their investment, and that would not represent a solution to the issue.

On January 7th of this year, the House voted and finally passed the extension of TRIA. That Senate acted a few days later, and President Obama signed the extension into law on January 12th of this year. Without this action property owners would have been in dire straits. The very best outcome would have been large increases in property insurance at renewal. The best part is that the extension is retroactive to 12/31/2014 so that there are no gaps in this coverage for any insured.

Most feel that government doesn't belong in the insurance business, unless the risk is so great that the insurance companies cannot develop a product and pricing that can serve the insurance buyer. This is one of those rare cases and if you look at your property insurance policy and see what the current charge is for terrorism, you can feel grateful that this matter was resolved in this New Year...

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