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Terrorism Risk Insurance Act Expiration Notice

December 22, 2014

The Terrorism Risk Insurance Act (TRIA) is scheduled to expire on December 31, 2014.  The U.S. Senate did not move forward a House-approved TRIA renewal bill before adjourning on December 16, and thus, in all likelihood TRIA will expire on December 31, 2014.

As a result of the legislative actions and uncertainty in the terrorism insurance marketplace, it is likely that insurance coverage against acts of terrorism will not be commercially available.  This issue will impact all loans held by Freddie Mac Multifamily.  Therefore, Freddie Mac is announcing the following policies with regard to terrorism insurance for the loans which Freddie Mac owns.  These policies will remain in effect for no longer than 90 days while we evaluate the legislative and insurance market conditions.

  • For those borrowers that have terrorism coverage in place on existing policies, that coverage must be maintained through the current policy term unless the insurer notifies the borrower of substantial changes in either coverage or premium cost such that the insurance is no longer commercially reasonable.  If their terrorism insurance is no longer commercially reasonable, borrowers will not be required to maintain their current insurance and will not need to apply for a waiver of the requirement to maintain terrorism insurance.

  • For those borrowers that receive a notification that (1) the terrorism coverage is cancelled, or (2) either the premium cost or coverage has been so substantially changed that the coverage is no longer commercially reasonable, Freddie Mac is hereby instructing its Servicers that it is not requiring that the Servicers force place terrorism coverage.

  • Freddie Mac recognizes that in most cases the Loan Agreements and/or the security instruments for its loans require the borrowers to obtain and maintain terrorism coverage. Freddie Mac is not waiving this provision and intends to enforce this provision at such time as terrorism insurance is again commercially available. Therefore, Freddie Mac will not entertain any requests for a waiver of this requirement in the Loan Documents.

Seller/Servicers should advise borrowers to consult with their insurance agents and brokers regarding options for terrorism coverage available in the private market.  As noted above, we are requiring borrowers to obtain and maintain terrorism coverage to the extent it is reasonable and commercially available.

Since the lack of commercially available terrorism insurance will impact all Freddie Mac loans, including those loans that have been securitized in K-deals, this notice should be considered Freddie Mac’s Servicing Standard regarding terrorism insurance.

If Congress renews TRIA in 2015, we will evaluate the provisions of the new law and advise our customers of any changes in our policy.

If you have questions, please contact your Freddie Mac insurance representative.


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