9 May 2014 Insurance

RAND supports TRIA reauthorisation

A study by think-tank the RAND Corporation has cautioned that the expiration of the Terrorism Risk Insurance Act (TRIA) could have potentially serious consequences.

The study, on how the market for workers’ compensation (WC) insurance would be affected if TRIA were to expire, explains that as WC coverage is mandatory for nearly all US employers, companies would be placed in a difficult situation.

TRIA expiration would affect WC insurance markets differently from other insurance markets because WC statutes rigidly define the terms of coverage, such that if TRIA was not renewed insurance companies would limit their terrorism risk exposure by declining coverage to employers facing high terrorism risk.

The mandatory nature of the cover would mean that employers that could not purchase coverage would be forced to obtain coverage in markets of last resort.

“Migration of terrorism risk to these markets of last resort would increase the likelihood that WC losses from a catastrophic terror attack would largely be financed by businesses and taxpayers throughout the state in which the attack occurs, adding to the challenge of rebuilding in that state. TRIA, in contrast, spreads such risk across the country,” said the think-tank.

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