Political landscape not ready to consider TRIA

Despite some 97 percent of the senate agreeing that the renewal of Terrorism Risk Insurance Act (TRIA) should go ahead, Ben Walter, chief executive officer of Hiscox USA is “less optimistic” about its renewal.

Speaking to PCI Today, Walter said that the industry has worked hard to push this forward, but said that the political environment is not focused on the issue.

“It’s no secret that the political environment is a mess,” said Walter. “Personally I’m less optimistic than some that TRIA will be renewed before its expiration.”

Aside from its renewal, Walter said he is also concerned about the difference between the property exposure and the liability exposure—something which, he said, is often misunderstood.

“The exposure on TRIA is a lot more on the liability and workers’ comp side. In a world of abundant capital, there’s a lot of capital on the property side and the downside can be defined—either the building is there or it’s not there—and what the building is worth.

“What’s harder to define is how much the lives in the building are worth. That’s where the real exposure is,” he said.

“The people who are the most worried about this are the regional carriers who carry a lot of workers’ comp. For them this is a scary thing, but I don’t know if the political will is there, so I think that’s underestimated.”

Expanding on this point, Walter said that failure to renew TRIA would cause a “dislocation” in the market, but stressed that the impact on the workers’ comp market would be substantial.

“If TRIA isn’t renewed, we’re going to see pressure to exclude the coverage from workers’ comp,” he said.

Walter also spoke of the challenges within the cyber market, saying that the risk needs to become “personal” before it will encourage buyers.

“When something bad happens to the masses, that’s when you’re going to see big sanctions and an increase in regulatory fines, which is when the non-buyers will start buying. What will grow cyber is not the exposures increasing, but the non-buyers starting to buy.”