What Is TRIA? The Terrorism Risk Insurance Act Explained

The Terrorism Risk Insurance Act is a federal program that splits the cost of catastrophic terrorism-related insurance losses between private insurers and the U.S. government. Congress passed it in 2002, after the September 11 attacks left insurers facing roughly $40 billion in claims and many carriers stopped writing terrorism coverage at any price. The program has been reauthorized four times and is currently set to expire on December 31, 2027.¹

How the Federal Backstop Works

The Treasury Department, through its Federal Insurance Office, runs the program and acts as a specialized reinsurer for the commercial insurance market. When a qualifying attack produces massive insured losses, the government absorbs a share of those costs so no single carrier collapses under the weight of claims.¹

Without that backstop, the commercial market would face the same problem it had in late 2001: carriers either refusing to offer terrorism coverage or pricing it beyond what businesses can afford. Lenders and investors generally require commercial property insurance as a condition of financing, so an unavailable or unaffordable terrorism line would ripple through the broader economy. The program keeps that market functioning by capping insurer exposure and letting the federal government pick up the excess.

What Counts as a Certified Act of Terrorism

The protections only activate when the Secretary of the Treasury formally certifies an event as an act of terrorism. The Secretary must consult with both the Secretary of Homeland Security and the Attorney General before making that call, and the certification is final with no judicial review.²

Certification requires all four of the following:

The act was violent or dangerous to human life, property, or infrastructure.
The damage occurred within the United States, or to a U.S. air carrier, flagged vessel, or diplomatic mission abroad.
The people behind the act were trying to coerce the U.S. civilian population or influence government policy or conduct through coercion.
Aggregate insured losses from the act exceed $5 million.

No act of terrorism has ever been certified under the program since it began in 2002. Events like the 2013 Boston Marathon bombing and various mass shootings were not certified, either because they fell below loss thresholds or because the certification process was not initiated. The program functions primarily as a market stabilizer: its existence gives insurers enough confidence to write terrorism coverage, even though the backstop has never been triggered.³

How Losses Are Split Between Insurers and the Government

Money does not flow automatically after certification. Several financial hurdles must clear first, and the cost-sharing formula leaves insurers bearing a significant share before the government steps in.

Program trigger. Industry-wide insured losses from a certified act must exceed $200 million before any federal payments are made. This threshold was phased in over several years starting in 2006 and has been fixed at $200 million since 2020.⁴

Insurer deductible. Even after the trigger is met, each insurer must absorb its own deductible before receiving federal help. That deductible equals 20% of the insurer’s direct earned premiums from covered lines in the prior calendar year. For a large carrier writing billions in commercial premiums, the deductible alone could run into hundreds of millions of dollars.⁵

Federal share. Once an insurer clears its deductible, the federal government covers 80% of the remaining insured losses, and the insurer covers the other 20%.

Annual cap. Total program liability for both the government and insurers is capped at $100 billion per year. If insured losses exceed that amount, insurers have no obligation to pay the excess, and Congress must decide how to handle the remaining claims.⁶

Which Policies Are Covered

The program applies to commercial property and casualty insurance, not personal lines. Covered policies include:⁷

Fire and allied lines
Commercial multiple peril (liability and non-liability portions)
Ocean marine and inland marine
Workers’ compensation
Other liability and products liability
Aircraft (all perils)
Boiler and machinery
Excess insurance
Directors and officers liability

Several common insurance types fall outside the program entirely. Federal crop insurance, private mortgage insurance, financial guaranty insurance, title insurance, medical malpractice, earthquake, surety, commercial auto, and health or life insurance (including group life) are all excluded.⁷

The Mandatory Offer and Your Right to Decline

Every participating insurer must offer terrorism coverage to its commercial policyholders. The terms and pricing of that coverage cannot differ materially from the coverage the policy provides for other types of losses, and insurers must disclose the portion of the premium attributable to terrorism risk so you can see what you are paying for.

The offer is mandatory, but accepting it is not. You can decline terrorism coverage on most lines. The major exception is workers’ compensation, which must cover terrorism-related injuries by law. A business that turns down the terrorism rider on its property policy would still have terrorism coverage built into its workers’ comp policy.⁸

Nuclear, Biological, Chemical, and Radiological Attacks

NBCR scenarios carry the highest potential for catastrophic loss, and the coverage picture here is more complicated than it looks. The program itself does not exclude NBCR events. If the Secretary certifies an NBCR attack, the federal backstop applies to any insured losses that result.⁹

The gap sits at the policy level. Insurers are allowed to exclude NBCR perils from the terrorism coverage they offer, as long as they also exclude those perils from non-terrorism coverage in the same policy and their state allows the exclusion. Most standard commercial property policies do exclude nuclear and biological hazards. So while the backstop would reach NBCR losses in theory, many businesses would not have the underlying coverage to trigger it in the first place.⁹

Workers’ compensation is again the exception. Because workers’ comp must cover workplace injuries regardless of cause, it cannot exclude NBCR events. Employees injured in a biological or radiological attack would be covered, and the federal backstop would apply to those claims even if the employer’s property policy excluded the same hazard.

How the Government Gets Paid Back

The program was designed so the federal government can recover what it pays out, at least for smaller events. Recovery runs through surcharges added to commercial property and casualty insurance premiums nationwide.

The rules depend on the size of the attack. If total insured losses fall below a figure called the insurance marketplace aggregate retention amount (roughly $42.7 billion as of recent calculations), the Treasury Secretary is required to recoup 140% of the government’s outlays through policyholder surcharges. The extra 40% above the actual payout effectively charges interest on the federal backstop.⁶

For attacks producing losses above that retention amount, mandatory recoupment shrinks and eventually becomes discretionary, meaning the Secretary can choose whether and how much to recoup based on market conditions. Any required recoupment must be completed by the end of fiscal year 2029. Policyholder surcharges are capped at a percentage of premiums, spreading the cost across the commercial insurance market rather than concentrating it on the businesses directly affected by the attack.⁶

The 2027 Expiration

Congress originally designed the program as a temporary measure and has renewed it four times because the private market still cannot absorb catastrophic terrorism risk on its own. Each reauthorization has shifted more financial responsibility onto insurers and adjusted the dollar thresholds that trigger government payments.¹

The current authorization, enacted in 2019, runs through December 31, 2027, and keeps the $200 million trigger and other financial thresholds in place. If Congress does not reauthorize before that date, insurers would no longer have a federal backstop, and many would likely exclude or sharply restrict terrorism coverage. That is the scenario the program was built to prevent, and the approaching deadline will be a significant legislative question.

1
U.S. Department of the Treasury. Terrorism Risk Insurance Program
2
Office of the Law Revision Counsel. Terrorism Risk Insurance Act – Section 102 Definitions
3
Congress.gov. The Terrorism Risk Insurance Act (TRIA)
4
U.S. Department of the Treasury. Report on the Effectiveness of the Terrorism Risk Insurance Program
5
Office of the Law Revision Counsel. Terrorism Risk Insurance Act – Section 103
6
Congress.gov. Terrorism Risk Insurance: Overview and Issue Analysis
7
U.S. Department of the Treasury. Terrorism Risk Insurance Program Schedule A Instructions
8
National Association of Insurance Commissioners. Terrorism Risk Insurance Act
9
U.S. Department of the Treasury. Terrorism Insurance Coverage for Losses Resulting From an Act of Terrorism