How does the Terrorism Risk Insurance Act (TRIA) apply to apartment buildings?
TRIA requires insurers to offer terrorism coverage on commercial property policies, and apartment owners must decide whether to accept or decline it based on their risk profile and lender requirements.
The Terrorism Risk Insurance Act (TRIA), originally enacted in 2002 and most recently reauthorized through the Terrorism Risk Insurance Program Reauthorization Act of 2019 (extended through December 31, 2027), created a federal backstop for insured losses from certified acts of terrorism. Under TRIA, commercial property insurers must make terrorism coverage available to policyholders, and the policyholder has the right to accept or reject it.
For apartment buildings, the terrorism coverage offer applies to the commercial property, general liability, and umbrella policies. The premium for terrorism coverage is disclosed separately on the policy declarations page and typically ranges from $2 to $10 per $1,000 of property coverage, though properties in major metropolitan areas or near high-profile targets may see significantly higher rates. TRIA only covers "certified" acts of terrorism as declared by the Secretary of the Treasury, the Secretary of State, and the Attorney General. The minimum threshold for certification is $200 million in aggregate insured losses (as of the current program).
Lender requirements often dictate the decision. Fannie Mae's Multifamily Selling and Servicing Guide (Part III, Chapter 6, Section 602.02) requires terrorism insurance for all DUS loans if the property is located in a high-risk area as determined by the servicer's risk assessment. Freddie Mac's Multifamily Seller/Servicer Guide (Chapter 58) similarly requires terrorism coverage where the lender determines the risk warrants it. CMBS loan documents almost universally mandate terrorism coverage.
Domestic terrorism and active assailant events are not covered under TRIA's federal backstop (which requires foreign-inspired certification) but may be covered under the policy's standard terms or through separate active assailant endorsements. Apartment owners in urban core locations should discuss standalone terrorism and active assailant policies with their broker to address gaps in TRIA coverage.
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Related Questions
What types of insurance does an apartment building owner need?
Apartment owners typically need commercial property, general liability, loss of rents, umbrella, and workers compensation coverage at minimum.
How much does apartment building insurance cost?
Apartment building insurance typically costs $500 to $3,000 per unit annually, depending on the property's size, location, age, and coverage needs.
What does general liability insurance cover for apartment buildings?
General liability covers bodily injury and property damage claims from third parties, such as a tenant or visitor injured in a common area.
Do I need flood insurance for my apartment building?
If your property is in a FEMA-designated flood zone, your lender almost certainly requires it. Even outside flood zones, flood coverage is worth considering.
What is loss of rents coverage and how does it work?
Loss of rents coverage replaces rental income lost when units become uninhabitable due to a covered property damage event, such as a fire or major storm.