Glossary

Terrorism Risk Insurance Act (TRIA)

Also known as: Terrorism Insurance, TRIA

Federal legislation, periodically reauthorized, establishing a government backstop that shares insured losses from a certified act of terrorism with private insurers, making terrorism coverage commercially available and, on most institutional CRE loans, mandatory.

Enacted after the September 11 attacks disrupted the private terrorism insurance market, TRIA requires insurers to make terrorism coverage available (though the insured can decline it, subject to lender requirements) and provides federal reimbursement once industry-wide certified losses exceed a statutory threshold, which restored capacity and pricing stability to a market that had effectively frozen. Most CMBS and institutional balance-sheet loan documents require the borrower to maintain terrorism coverage for the life of the loan, particularly on trophy urban assets, landmark buildings, or properties in gateway markets viewed as higher-profile targets, and failure to maintain it (or a decision by the borrower to decline TRIA coverage without lender consent) is typically an event of default. A recurring nuance is that TRIA coverage only responds to a "certified" act of terrorism as determined by the U.S. Treasury Secretary, meaning politically or ideologically motivated violence that does not meet the certification criteria may not be covered even though it resembles terrorism in common usage.