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Difficulty: MediumTerrorism Risk Insurance Act (TRIA)

A commercial insurance broker is preparing a comprehensive policy package for a technology manufacturing firm. The proposed package includes Commercial Property, Commercial Auto, and Group Life insurance policies. Under the provisions of the Terrorism Risk Insurance Act (TRIA), which of the following correctly describes the insurers' obligations regarding terrorism coverage for this specific client?

  1. The insurers must make a mandatory offer of terrorism coverage for the Commercial Property policy, which the client can voluntarily reject, but TRIA provisions do not apply to the Commercial Auto or Group Life policies.Answer
  2. B
    The insurers must offer terrorism coverage for all policies in the package, and the federal government will act as the primary insurer for any claims resulting from a certified act.
  3. C
    The insurers must include terrorism coverage on the Commercial Property policy, and the client is legally mandated to accept the coverage to ensure complete risk transfer.
  4. D
    The insurers are only required to offer terrorism coverage if the state's Commissioner of Insurance officially designates the manufacturing facility as a high-risk target.

Answer

Insurers must offer terrorism coverage for the Commercial Property policy (which the client can reject), but TRIA does not apply to the Commercial Auto or Group Life policies.
Under TRIA, insurers are legally required to 'make available' terrorism coverage for eligible commercial property and casualty lines, which includes Commercial Property. However, the insured retains the right to voluntarily reject this coverage. Furthermore, TRIA explicitly excludes certain lines of insurance from this mandate, including Commercial Auto, Group Life, and Health insurance.

Step-by-Step Solution

1
Analyze the lines of insurance in the proposed package against TRIA eligibility rules.
Commercial Property is a covered commercial property and casualty line. Commercial Auto and Group Life are explicitly excluded from TRIA.
TRIA only applies to specific commercial P&C lines of insurance.
2
Determine the insurer's statutory obligation for the eligible line.
For the Commercial Property policy, the insurer is subject to the 'make available' provision.
TRIA mandates that insurers must offer coverage for certified acts of terrorism on eligible commercial policies.
3
Evaluate the insured's options regarding the mandatory offer.
The client has the right to voluntarily accept or reject the terrorism coverage offer.
While insurers must offer the coverage, federal law does not force the commercial insured to purchase it.

Key Concept

TRIA Mandatory Offer and Excluded Lines
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Topics

Terrorism Risk Insurance Act (TRIA)

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