The United States started the new year with two potential terrorist attacks that have thrown insurance coverage for politically motivated violence and the federal terrorism insurance program back into the limelight.
On Jan. 1, a driver crashed a Ford pickup into a crowd of people on New Orleans’ Bourbon Street, killing at least 14 and injuring dozens of others before being shot by police, according to the Federal Bureau of Investigation.
The FBI said it found an ISIS flag, weapons and a potential improvised explosive device inside the vehicle. The FBI is still working to determine if the subject affiliation with the terrorist group.
Also on New Year’s Day, a Tesla Cybertruck burst into flames in front of Trump International Hotel Las Vegas, according to the Las Vegas Metropolitan Police Department. The sole occupant of the vehicle was the only fatality, while seven other people sustained minor injuries. Detectives later found gasoline canisters and large firework mortars in the truck’s bed, Las Vegas police said. The investigation is ongoing.
Authorities have confirmed that a pickup truck used to kill at least 14 people during New Year’s celebrations in New Orleans displayed an ISIS flag. However, the U.S. Terrorism Risk Insurance Act (TRIA) could take up to a year to classify the incident as a terrorist attack, creating uncertainty for insurers and policyholders.
Michael O’Connor, CUO at Crux Underwriting, pointed to the complexity of TRIA rules. He said the lack of clarity surrounding terrorism coverage can leave policyholders uncertain about claim payouts. Crux Underwriting, a London-based MGA, offers private-sector terrorism coverage in the U.S. and U.K.
People don’t know what they’re buying, and brokers don’t always understand what they’re selling. They know they have to provide a TRIA quote, but it’s up to the client whether to accept it.
Michael O’Connor, CUO at Crux Underwriting
O’Connor, who has worked in London’s terrorism insurance market since 2000, said MGAs play a growing role in this niche, though they remain a small part of the broader market. He highlighted that clients often don’t fully understand what TRIA requires or how it impacts coverage.
TRIA, enacted by Congress in 2002 after the 9/11 attacks, provides federal backing for terrorism-related business insurance. For an event to qualify under TRIA, damages must exceed $5 mn, and the U.S. Attorney General, along with the secretaries of state and treasury, must certify it as a terrorist attack.
O’Connor cited the 2013 Boston Marathon bombing as an example of TRIA’s shortcomings. Although the bombing was linked to Islamist terrorism, U.S. officials never designated it as a TRIA-qualifying event.
This left insurers and policyholders uncertain about payouts.
The New Orleans incident again raises questions about TRIA’s effectiveness. Shamsud-Din Jabber, a Texas-born Army veteran, reportedly planted explosives and opened fire on New Year’s revelers before crashing into a crowd. Police confirmed an ISIS flag was found in his vehicle, and at least 14 people died, with dozens more injured.
Although human casualties outweighed property damage, the attack’s total insured losses remain unclear. O’Connor stressed that TRIA thresholds could impact whether the event qualifies for terrorism coverage.
If damages total $4.9 mn, the government may never certify it as a terrorist attack. Crux Underwriting policies offer clarity that TRIA lacks.
O’Connor explained that Crux clients don’t rely on government certification to trigger claim payouts.
“Under our policies, it’s either terrorism or not,” O’Connor said. “We don’t wait for the government’s decision. This reduces uncertainty and increases trust in private-sector solutions” (see Terrorism & Political Violence Insurance Market – Risk Review).
Based on what is currently known, the incidents are unlikely to trigger coverage under the Terrorism Insurance Risk Act program, said Jimi Grande, senior vice president of federal and political affairs for the National Association of Mutual Insurance Companies.
Under the program, terrorist acts are covered by insurers under commercial policies and the federal government acts as a reinsurer, according to the Insurance Information Institute.
Insurers selling TRIA-eligible lines must make terrorism insurance available, but the program does not dictate pricing nor does it mandate policyholders purchase the coverage. Eligible lines range from aircraft (all perils) to workers’ compensation, according to the Treasury Department.
The TRIA program is fairly complex, but it was designed to help maintain a viable construction and commercial development market in the wake of the 9/11 terrorist attacks and serve as a public-private partnership between the federal government and insurers
Jimi Grande, senior vice president of federal and political affairs for the National Association of Mutual Insurance Companies
To trigger coverage, the secretary of the Treasury must certify the attack as a terrorist act, according to a U.S. Department of Treasury report. Additionally, property/casualty losses from the event must total more than $5 million and cannot be “part of the course” of a war declared by Congress.
The insurance industry must suffer, in aggregate, $200 million in losses from certified acts during the calendar year before TRIA payments will be triggered. Insurers individual must also meet a deductible equivalent to 20% of their annual premiums on TRIA-covered lines of insurance, according to Treasury.
