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
10.8 – Special Cases
10.10 – Policies, Processes and Controls