Update on Terrorism Risk Insurance

"The Terror Risk Insurance Act ("TRIA") is scheduled to expire on December 30, 2005. Congress is considering extending TRIA, but a decision is unlikely until summer. Policyholders should beware that insurers are responding to the uncertainty surrounding the reauthorization of TRIA by attaching to policies nuclear, biological, chemical, radiological or other terrorism exclusions that will become effective if TRIA is not extended or extended in its current form...

The new terrorism exclusion some insurers are adding to policies is quite broad. It would preclude coverage not only for foreign acts of terror, but domestic acts as well. The exclusion is also very subjective, as it could apply even if it only "appears" that the intent of an act is to coerce the government or further a political or social objective.

Policyholders may want to negotiate for a narrower terrorism exclusion or for no exclusion at all. At the very least, policyholders should be aware that a new terrorism exclusion could be added to any new or renewal policy in 2005."

Read more in this article from Reed Smith via Mondaq.