The recent passage of the Terrorism Risk Insurance Extension Act of 2005 ensures a viable private terrorism insurance market for at least two more years. The new law extends the original 2002 legislation, with some modifications, through the end of 2007, providing high-level reinsurance for primary commercial insurers.
Similar to the first version of TRIA, the extension requires insurers to bear an increasing share of the risk in each successive year. Assessing how the increased risk burden impacts a company's portfolio is an indispensable component in an effective risk management strategy.
With TRIA's planned expiration at the end of 2007, it is imperative that insurers undertake a comprehensive terrorism risk assessment now, so they can mitigate their potential losses and move to a more optimal portfolio over the next two years.
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