TREASURY UNDERSECRETARY EXPLAINS TERRORISM RISK INSURANCE ACT
Only acts of terrorism “related to foreign sources” are covered by the Terrorism Risk Insurance Act, Peter R. Fisher, Under Secretary of the Treasury for Domestic Finance, said in a Treasury Department 'white paper.'
The Terrorism Risk Insurance Act, signed by President Bush on Nov. 26, “effectively places the federal government temporarily in the terrorism risk reinsurance business,” Fisher said. The statute will “sunset” or terminate on Dec. 31, 2005.
“An insurance company must have suffered insured losses from acts of terrorism equal to the company’s deductible before a claim with the Treasury can be filed,” Fisher explained.
Once the deductible has been meet, the Treasury will cover 90 percent of the losses above an insurance company’s deductible.
Forcing insurance companies “to retain a portion of terrorism risk ' is important for maintaining underwriter discipline,” Fisher said.
The federal reinsurance program under the act is limited to commercial property and casualty insurance.