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TRIA set to expire at end of 2007

As you know, the Terrorism Risk Insurance Extension Act of 2005 (TRIA) will come up for renewal at the end of 2007. Washington observers cannot predict at this time whether TRIA will be renewed, modified or allowed to expire. The uncertainty over TRIA and the state of the reinsurance market for terrorism make it difficult for us to know how these prospects will affect our AEGIS coverages.

In a worst case scenario, we may need to revert to the shared aggregate programs we offered between 9/11 and the passage of TRIA. Accordingly, all policies renewing after January 1st that provide coverage for events that may occur in 2008 and beyond, will carry an endorsement that reactivates this approach in the event that TRIA is not renewed. The approach provides the following terrorism coverage by policy type:

  • General liability, fiduciary, E&O and workers’ comp: shared $35 million limit among these policies per member company on an annual aggregate basis.
  • D&O: separate, stand-alone policy with a $35 million annual aggregate per member company.
  • Property: shared limit of $100 million per occurrence among all member companies.

In addition, there is an AEGIS-wide annual aggregate of $250 million across all policies for all members for terrorist acts.

Although the shared aggregate approach was well received in the past, we are open to the possibility that there may be better ways to offer terrorism coverage to our members should the act not be renewed. It’s also possible that some degree of commercial reinsurance may become available to support our capacity. We have asked members of the RMAC to help study the question with us to evaluate all the possibilities. If through this joint effort we can envision a better approach to supersede the one described in the current endorsements, we will present it to the entire membership for comment prior to its implementation – as we did with the recent changes to the basic D&O form.

We sincerely hope that TRIA will be renewed and that there will be no need to limit our terrorism coverage in the future. Nevertheless, we believe it is prudent to take this precautionary action now to protect AEGIS’s capacity to serve you. If you have any questions about terrorism coverage or the endorsements, please contact your underwriter.