What does the government do under the Terrorism Risk Insurance Act with respect to paid losses?

Under the Terrorism Risk Insurance Act (TRIA), the government does not completely cover all paid losses but instead provides a portion of the loss reimbursement to insurers for covered terrorism events. This program is designed to encourage the availability of insurance for acts of terrorism by sharing the risk with the government.

In practical terms, when an insurer experiences losses from a declared act of terrorism and the losses exceed a certain threshold, the government steps in to cover a percentage of those claims after the insurer has paid out an initial amount. This means that while insurers remain responsible for a significant portion of the losses, the government plays a critical role in alleviating some of the financial burden, thus stabilizing the insurance market.

This approach supports the idea that insurers should remain active participants in the coverage of terrorism risk, while also ensuring that they are not overwhelmed by those losses. The focus on a shared responsibility is key to understanding how TRIA aims to maintain the availability of terrorism insurance.