Congress enacted and the President signed TRIA in 2002 to help restore confidence and stability in commercial property insurance markets after private insurers withdrew terrorism coverage in the wake of the September 11 attacks. TRIA requires that commercial property/casualty insurers, including (among others) workers’ compensation insurers, “make available” coverage for certified terrorist events under the same terms and conditions as other, nonterrorism coverage. Following a terrorist attack, the federal government would reimburse insurers for 85 percent of their losses after insurers pay a deductible of 20 percent of the value of each company’s prior year’s direct earned premiums. Federal reimbursement is activated when aggregated industry losses exceed $100 million and is capped at an annual amount of $100 billion. TRIA also would cover losses caused by NBCR terrorist attacks if the insurer had included this coverage in the insurance policy. Originally enacted as a 3-year program, TRIA was reauthorized in 2005; in 2007, Congress extended the program until 2014. In the deliberations over the 2005 and 2007 Reauthorization Acts, Congress considered mandating that commercial property/casualty insurers offer coverage for NBCR risks, with significantly lower deductibles and copayments. Congress also considered adding group life insurance to the TRIA program, so that group life insurers could receive reimbursements for the majority of their claims from terrorist events, including NBCR attacks. Members of Congress supporting this provision argued that group life insurers were vulnerable to the same extraordinary losses from a terrorist attack as other insurance lines and could become insolvent after a catastrophic event. However, Treasury testified that the Administration did not want to expand TRIA to cover group life insurers, citing some reports that the group life insurance market has remained competitive after September 11. The NBCR requirement and the group life provisions were not included in the final TRIA reauthorizing legislation. Government and other experts have stated that terrorist attacks involving NBCR weapons could affect people and property in a variety of ways, depending on the weapon used as well as the location of the attack. Table 1 provides examples of attacks using NBCR weapons as well as some of their potential effects. Previous attacks involving NBCR materials in United States and Japan also illustrate a range of consequences. In September and October 2001, contaminated letters laced with anthrax were sent through the mail to two U.S. senators and members of the media. As a result, 22 individuals contracted anthrax disease, and 5 of these individuals died. In 1984, the Rajneeshee religious cult in Oregon contaminated salad bars in local restaurants with salmonella bacteria to prevent people from voting in a local election. Although no one died, 751 people were diagnosed with the food-borne illness. In 1995, 12 people were killed and many more were injured after Aum Shinrikyo, a State Department-designated terrorist organization, released the chemical nerve agent Sarin in the Tokyo subway. States have the primary responsibility for regulating the insurance industry in the United States, and the degree of oversight varies by insurance line and state. In some lines of insurance, state regulators guide the extent of coverage by approving the wording of policies, including the explicit exclusion of some perils. Regulators coordinate their activities, in part, through NAIC. According to an NAIC representative, while practices vary by state, state regulators generally review prices for personal lines of insurance and workers’ compensation policies but not for commercial property/casualty policies. In most cases, state insurance regulators perform neither rate nor form review for large commercial property/casualty insurance contracts because it is presumed that businesses have a better understanding of insurance contracts and pricing than the average personal-lines consumer. Reinsurers generally are not required to obtain state regulatory approval for the terms of coverage or the prices they charge. Because state laws generally require employers to carry workers’ compensation insurance, which covers employees for death or injuries as a result of a workplace incident, employers generally obtain coverage either from a private insurance company or from a fund established by the state. Twenty-six states have established separate funds, either run by the state or as a separate company, according to the American Association of State Compensation Insurance Funds (AASCIF), and most of these states provide workers’ compensation coverage for all employers seeking it. An NAIC official told us that when state governments began requiring employers to purchase workers’ compensation coverage, many states established separate funds to provide a mechanism to ensure coverage for those employers that could not obtain it in the private market. The majority of state funds are competitive, meaning that the state fund competes for business with other private insurers. However, in four states, the state fund is the sole insurer for workers’ compensation, unless an employer is permitted to self-insure. The National Academy of Social Insurance reported that in 2006, just over half of workers’ compensation benefits (50.38 percent) were paid by private insurers, with just under half coming from state funds (19.66 percent), federal programs (5.98 percent), and self-insured employers (23.98 percent). Commercial property/casualty insurers and reinsurers generally seek to exclude coverage for NBCR risks or place significant restrictions on such coverage. According to industry participants, insurers interpret the language of longstanding exclusions developed for nuclear and pollution risks as excluding terrorist attacks involving NBCR weapons, but the use of such exclusions may be challenged in court. Representatives from policyholders from a variety of industries, including real estate, financial services, and hospitality, also told us that they do not have NBCR coverage either because a very limited amount of NBCR insurance is available or they do not view the rates for available coverage as reasonable. A few policyholders also reported self-insuring these risks through captive insurers. Representatives from workers’ compensation, life, and health insurers we contacted generally reported that they cover losses from terrorist attacks, including those involving NBCR materials, because they said state regulators generally do not allow these insurers to exclude such risks. While few market surveys that we identified specifically have addressed the availability of property/casualty insurance for terrorist attacks involving NBCR materials, our interviews with a range of industry participants suggests that such coverage continues to be limited. Representatives from the majority of the insurers and reinsurers we interviewed said that their companies generally do not offer NBCR coverage or offer a limited amount of such coverage. Representatives of large insurance and reinsurance trade associations, as well as national insurance brokers, also reported a general lack of coverage for NBCR risks. According to a representative from a large national insurance broker, he was not aware of any primary insurers that offered NBCR coverage as part of their standard property/casualty policies. The representative said that some insurers that offer “stand-alone” terrorism insurance policies offer NBCR coverage, but demand for this product is minimal due to its relatively high price and restrictions. Although representatives of several reinsurers based in Bermuda told us that their companies offer some NBCR coverage, the reported restrictions on these policies help illustrate some of the limitations of the available coverage. For example, the policy language of one reinsurance contract we reviewed limited NBCR coverage only to losses resulting from the initial “force or violence” of the NBCR terrorist attack and did not cover long-term effects, such as resulting illnesses or business interruption. Insurance companies seek to limit their coverage for NBCR risks by relying on long-standing exclusions for nuclear and pollution risks, which already have been approved by state regulators. As we stated in our September 2006 report, insurers have written exclusions related to nuclear hazard risks into their standard policies for decades, generally to protect themselves from losses related to nuclear power accidents. Furthermore, representatives from the Insurance Services Office (ISO), a national organization for the property/casualty insurance industry that develops standardized policy language designed to comply with regulatory requirements, said that insurers also typically exclude coverage for losses caused by pollution and contamination. ISO representatives told us that the pollution exclusion was developed to exclude coverage for the release of many different substances—such as asbestos or pesticides—that could cause harm to people and the environment. Some insurance representatives said that the pollution exclusion could be applied to biological and chemical agents released in a terrorist attack. Because these exclusions were developed for other purposes, some regulators and insurance industry participants said that their use by insurers in the event of an attack involving NBCR materials could be challenged. Representatives from one large insurer told us that language in the nuclear hazard exclusion may not be clear enough to apply to a nuclear terrorist attack. Similarly, representatives from a large insurance company said the pollution exclusion would not apply unless the terrorist attack itself was deemed to be a polluting event. An official from the New York Insurance Department also said that the Department did not interpret the definition of “pollutants” in the standard pollution exclusion forms to apply to biological and chemical terrorist attacks. Courts determine whether a particular substance is or is not a pollutant based upon, among other things, the language in the policy, the facts and circumstances of the case, and the law of jurisdiction. As we stated in our September 2006 report, given the potential for litigation and court interpretation, insurers and other industry experts have raised some concerns as to how effectively the pollution exclusion would protect insurers against losses resulting from an NBCR terrorist attack. Property/casualty insurers also may face potential exposure to losses from NBCR attacks as the result of state requirements, but it is difficult to assess the extent of this exposure. According to industry officials, 16 states—including California, Illinois, and New York—require property/casualty insurers to cover losses from fire following an event, regardless of the cause of fire. As we reported in 2006, in the case of a nuclear bomb detonation, once the property was destroyed, insurers could dispute the extent to which fire (covered in “fire following” states) or the blast (excluded by the nuclear exclusion) caused the damage.