Extreme events—such as a nuclear or biological attack or multiple large conventional attacks within a single year—could produce insured losses many times the scale of the September 11 attack. In the absence of some limit on liability under the backstop, the US government would face the potential of runaway liabilities.

In preparation for such a possibility, Congress has prudently put in place a “trip wire” of $100 billion of total industry insured loss for all acts of terrorism incurred during a single calendar year. Once that threshold has been breached, Congress either steps in with another plan to fund additional insured losses or interactions among insurers, policyholders, and claimants become very, very complicated.

10.1 – Notice to Congress

10.2 – Limitation of Liability

10.3 – Pro Rata Loss Percentage

10.4 – Calculating the PRLP

10.5 – Application of the PRLP

10.6 – Reporting

10.7 – Insurers That Have Not Met Their Deductibles

10.8 – Special Cases

10.9 – Impact to Policyholders and Claimants

10.10 – Policies, Processes and Controls