Uncompensated Insured Losses: Key Insights into Their Legal Meaning
Definition & Meaning
Uncompensated insured losses refer to the total amount of insured losses incurred by insurers during a specific program year that are not reimbursed by the federal government. These losses occur under the Terrorism Risk Insurance Program and typically fall into two categories:
- Losses that are within the deductible amounts set by insurers.
- Losses that exceed the deductible but are not covered by federal compensation claims.
Legal Use & context
This term is primarily used in the context of the Terrorism Risk Insurance Act (TRIA), which provides a federal backstop for insurance claims related to acts of terrorism. Legal practitioners may encounter uncompensated insured losses when advising clients on insurance claims, risk management, or compliance with federal regulations. Users can utilize legal forms from US Legal Forms to manage their claims effectively.
Real-world examples
Here are a couple of examples of abatement:
Example 1: An insurance company experiences $1 million in losses from a terrorist attack. If their deductible is $500,000, they would have $500,000 in uncompensated insured losses, as this amount is not covered by federal compensation.
Example 2: A different insurer has $2 million in losses, with a deductible of $1 million. If they claim federal compensation for the $1 million above the deductible, they still have $1 million in uncompensated insured losses that are not reimbursed. (hypothetical example)
Relevant laws & statutes
The primary legislation governing uncompensated insured losses is the Terrorism Risk Insurance Act (TRIA) of 2002. This act outlines the federal government's role in compensating insurers for losses due to acts of terrorism, as well as the conditions under which losses remain uncompensated.