Louisiana P&C Adjuster Practice Exam

Under TRIA, what is the federal assistance cap for terrorism insurance per year?

1. 50 billion

2. 100 billion

3. 75 billion

4. 150 billion

The correct answer is: 100 billion

The correct answer, which indicates that the federal assistance cap for terrorism insurance under the Terrorism Risk Insurance Act (TRIA) is set at $100 billion per year, is rooted in the legislation's design to provide a safety net for insurers and policyholders in the aftermath of terrorist attacks. TRIA was enacted in response to a significant gap in terrorist attack insurance availability following the September 11 attacks, and the $100 billion cap reflects a balance meant to encourage insurers to provide coverage while limiting the federal government's financial exposure. As part of TRIA, the federal government essentially acts as a backstop for a portion of losses resulting from terrorism. Once the aggregate losses from a terrorist event exceed this cap, the government's responsibility kicks in, ensuring that liquidity remains in the insurance market, thereby supporting stability and affordability for policyholders. The establishment of this cap serves to reassure both insurers and insured parties that there is a limit to potential losses, fostering a framework where terrorism insurance can be offered more reliably. Understanding the specified cap of $100 billion is crucial for stakeholders in the insurance industry as they navigate underwriting practices and risk assessment concerning potential terrorist activities.