WASHINGTON (CN) – Should a terrorist attack cause damage of more than $100 billion dollars in any one year, the Terrorism Risk Insurance Program (TRIP) will wait to reimburse insurers for their losses until the total estimated pay out for the attack is established and a pro rata loss determination is made for each claim, according to Treasury Department clarifications of the Terrorism Risk Insurance Act.
The statute allows the department to reimburse insurance companies when damage exceeds the maximum deductible payable by the insurer.
The clarifications mean that the department will reimburse insurers for claims only after insurers have paid out their maximum deductible on the loss, and the department has determined how to divide the statutory cap of $100 billion annually for all claimants, for all incidents.
When losses exceed the cap on annual liability for a specific year, the Treasury will determine an initial payment for each claimant and will take additional payments from the allotment for subsequent years if no additional acts of terrorism require payments up to the cap for that year.
The TRIP was created in the wake of the 9-11 attacks that destroyed the World Trade Center towers and required the closing of a large part of lower Manhattan, which produced insured losses of nearly $40 billion.
The program was supposed to be a temporary backstop for insurers wary of writing new policies after the attack, and was scheduled to end in 2005. The program’s life has been extended through 2014.