Understanding the War Risk Endorsement vs. Terrorism Risk Insurance Act (TRIA) Coverage

Following the September 11, 2001 terrorist attacks, most insurers who had been offering coverage for War Risk exposures (which typically includes terrorism) quickly canceled those endorsements, per the coverage cancellation terms noted on the endorsements. The market for terrorism related coverage dried up almost overnight and lienholders stopped offering loans in cases where borrowers were unable to obtain terrorism insurance. After a brief respite, the aviation insurance market began offering terrorism coverage again, but at significantly increased premiums. Since the lienholders required the coverage, the aircraft owner was forced to pay the higher premiums.

In late November 2002, Congress passed the Terrorism Risk Insurance Act (TRIA) of 2002. The law was intended to provide a government reinsurance ‘backstop’ in case of another large-scale terrorist attack. The law required insurance companies to offer terrorism coverage, not only for aircraft but other lines of insurance as well – commercial property, general liability, etc. The law has since been reauthorized in 2005, 2007, 2015 and 2019.

The introduction of the TRIA coverage created a coverage dilemma for policyholders. Since most turbine aircraft owners already carried coverage for terrorism, which is an included peril under the War Risk endorsement, it seems to be an easy decision to decline the TRIA coverage to avoid a double coverage situation. However, there are some differences between the terrorism coverage offered via the War Risk endorsement and TRIA coverage.

1. Aggregate vs Occurrence – Terrorism coverage provided by the War Risk endorsement is written on an aggregate basis. That means the carrier offers a maximum limit of coverage per policy period. That limit can be exhausted early in the policy period, leaving the policyholder with no coverage for the balance of the policy. TRIA coverage is written on an occurrence basis, which means that each separate occurrence is provided the full policy limit. 

2. Coverage Trigger – The terrorism coverage provided by the War Risk endorsement is triggered by an ‘occurrence’ defined in the insurance policy. In order for coverage to be triggered under TRIA, the following must apply:

a. The loss must have resulted from an act of terrorism. 

b. The act of terrorism needs to be certified by the Secretary of Treasury, in consultation with the Attorney General and the Secretary of Homeland Security.

c. The terrorist act must have been a violent act or an act that is dangerous to human life, property, or infrastructure.

d. The loss must have resulted in damage within the U.S., to an air carrier, U.S.-flagged vessel, or the premises of a U.S. mission

e. The terrorist act must have been committed by an individual(s) as part of an effort to coerce the civilian population of the U.S. or to influence the policy or affect the conduct of the U.S. Government by coercion.

3. Cancellation – Terrorism coverage provided by the War Risk endorsement has multiple cancellation provisions. TRIA can only be cancelled by the U.S. Government.

The ultimate question is, should you buy the War Risk endorsement and TRIA? If you don’t already have the War Risk endorsement coverage, you should purchase it, especially if you operate your aircraft outside the United States. If the premium to also include TRIA is relatively inexpensive, it is worth a second look for the reasons discussed above.

The Terrorism Risk Insurance Act coverage can be confusing. We encourage you to reach out to your aviation broker to discuss the War Risk endorsement and TRIA coverage - preferably that discussion happens prior to a loss rather than after a loss. As aviation insurance brokers we have unmatched experience providing coverage for aircraft that need terrorism coverage. To learn more about the best way to protect yourself on the ground and in the air, contact our aerospace specialists.