The continuing need for terrorism insurance is underscored in Marsh's 2013 Terrorism Risk Insurance Report, which was released yesterday during a briefing with Marsh & McLennan and the Coalition to Insure Against Terrorism (CIAT).
The Terrorism Risk Insurance Act (TRIA), which created a federal backstop for terrorism-related insurance claims, was passed in 2002 as a result of the September 11, 2001 attacks. The act was then extended, with modifications, in 2005 and 2007. If not renewed, it will expire on December 31, 2014.
According to Marsh's report and yesterday's briefing, if TRIA expires or is extended with significant changes, "there may be fewer insurers offering terrorism insurance and prices potentially could increase." This finding is based on a survey indicating that 68% of insurance companies would have excluded terrorism coverage if TRIA was not extended in 2005 and current data indicates that terrorism insurance capacity and pricing would be similarly impacted if the Act is allowed to expire in 2014.
Industries and areas that would be significantly impacted if TRIA was allowed to expire include business in major cities, the real estate market and new construction. In addition, since workers compensation policies are not permitted to exclude terrorism, these policies could be hit with less capacity and greatly increased premiums. Captives, when compared to larger insurers, would also be disproportionally impacted if TRIA was allowed to expire or reauthorized with significant changes.
The report and briefing did not include an in-depth discussion on the politics surrounding TRIA, but did allude to the reality that TRIA remains a divisive political issue, with many House republicans questioning the continuing need for the federal government to backstop terrorism insurance.
TRIA reauthorization is one of ABIA's legislative priorities and we continue to educate members of Congress on its important role in the insurance market and the greater US economy. If you would like to join ABIA's effort regarding TRIA, please contact Renee Galbraith to learn more about our members-only TRIA working group.
Press release from Marsh on their 2013 TRIA Report.