Texas Property and Casualty License Practice Exam

Which act limits the aggregate payments for certified acts of terrorism?

1. Fair Credit Reporting Act

2. Terrorism Risk Insurance Act

3. Gramm Leach Bliley Act

4. National Flood Insurance Program

The correct answer is: Terrorism Risk Insurance Act

The Terrorism Risk Insurance Act (TRIA) is the legislation that specifically addresses the issue of terrorism risk in the insurance market. Enacted in 2002, TRIA was designed to provide a federal backstop for insurance claims related to acts of terrorism. This act plays a crucial role in stabilizing the insurance market by limiting the aggregate payments that insurers are required to make for certified acts of terrorism. Under TRIA, the government essentially steps in to share the financial burden of catastrophic losses incurred from such events, with specific aggregate payment limits placed on insurers for the claims they handle. This arrangement allows insurers to manage their exposure to losses that could arise from major terrorist attacks, ensuring that they can continue to provide coverage without facing overwhelming financial challenges. Other acts listed, such as the Fair Credit Reporting Act, Gramm Leach Bliley Act, and the National Flood Insurance Program, pertain to different areas of regulation and do not specifically address the financial implications of terrorism risk on insurers in the same manner as TRIA. Consequently, understanding TRIA's purpose and implications is essential for those involved in the property and casualty insurance fields, especially concerning coverage availability and insurer obligations in the event of terrorist acts.