The main conclusion that the GAO was able to draw is that "Comprehensive data on the terrorism insurance market are not readily available and Department of the Treasury (Treasury) analysis to better understand federal fiscal exposure under various scenarios of terrorist attacks has been limited...without more data and analysis, Treasury lacks the information needed to help ensure the goals of the Terrorism Risk Insurance Act (TRIA) of ensuring the availability and affordability of terrorism risk insurance and addressing market disruptions are being met and to better understand potential federal spending under different scenarios."
The GAO recommends that the Secretary of the Treasury take the following three actions:
- Collect the data needed to analyze the terrorism insurance market. Types of data may include terrorism coverage by line of insurance and terrorism insurance premiums earned. In taking this action, Treasury should determine whether any additional authority is needed and, if so, work with Congress to ensure it has the authority needed to carry out this action.
- Periodically assess data collected related to terrorism insurance, including analyzing differences in terrorism insurance by company size, geography, or industry sector; conducting hypothetical illustrative examples to help estimate the potential magnitude of fiscal exposure; and analyzing how changing program parameters may impact the market and fiscal exposure.
- Gather additional information needed from the insurance industry related to how cyber terrorism is defined and used in policies, and clarify whether losses that may result from cyber terrorism are covered under TRIA –– clarification could be made through an interpretative letter or revisions to program regulations, some combination or any other vehicle that Treasury deems appropriate.
Despite the lack of definite finding in the GAO study, Congress is still expected to vote on TRIA this summer. House Financial Services Committee Chairman Jeb Hensarling said yesterday that the panel will likely vote on a bill to renew the government’s backstop for terrorism insurance losses before July 4, and possibly as soon as next week.
If you are a member of the ABIA and would like to learn more about our support of TRIA or join our TRIA Task Force, please contact us and visit our website.