In this Money Matters report, Time Warner Cable News’ Tara Lynn Wagner looks at the risk terrorism poses to businesses and how the insurance industry has changed since 9/11.

The economic damages resulting from the 9/11 terrorist attacks were unprecedented, with tens of billions of dollars in insured losses. 

"Life insurance, aviation, pet insurance, car insurance, every part of the insurance market was impacted and that created an uncertainty,” says Sean Kevelighan, CEO of Insurance Information Institute. “They simply didn't know how to underwrite the risk." 

Prior to 9/11, terrorism coverage was just part of a standard insurance policy, but after the attack, providers began crafting language to exclude acts of terrorism from their policies. 

"And the state insurance department said, ‘No, no, no, no,’” says Jennifer Rubin, head for terrorism at Hiscox. “We can't allow you to do that.  We need to have insurance in place."

In November of 2002, Congress passed the Terrorism Risk Insurance Act - or TRIA.  The law requires insurance companies to offer terrorism insurance with the understanding that if an attack were to take place that causes widespread losses, the government would help provide the immediate funds needed to get the recovery moving.

This would happen with little or no cost to taxpayers since insurance companies would ultimately pay back a bulk of the funds they receive. 

"So it's important to realize, it's not a bailout, it's a backstop,” Rubin says.

There are rules in place for when the government will step in. The Treasury Department needs to declare the event an act of terrorism. In order to do that, there needs to be a minimum of 5 million dollars in damages to the insured and total losses of at least $120 million from the attack.

"The most common question is whether or not the Boston bombing was covered by TRIA and it was not. It didn't meet the financial trigger,” Rubin says.

In fact, Jennifer Rubin of Hiscox says no incident since 9/11 has reached the financial threshold where TRIA would come into play. 

The law has been revised and reauthorized several times since 2002. The most recent version, approved in 2015, keeps the program in place through the end of 2020.

While insurance companies have to offer terrorism coverage, businesses are not required to buy it. Coming up in our next Money Matters Report, we will look at who is purchasing the extra policy and what it actually covers.