TRIA lapse demonstrated terrorism risk appetite
The temporary lapse of the Terrorism Risk Insurance Act (TRIA) highlighted the willingness of the private sector to assume some types of risk currently off limits.
Speaking to Intelligent Insurer, Robert Hartwig, senior vice president and chief economist for the Insurance Information Institute (III) and Jennifer Rubin, vice president, underwriting manager for terrorism, war and political violence at Hiscox said that while re/insurer appetite is evident, issues such as pricing, an inability to calculate the frequency of such events and a level of coverage that cannot compete with TRIA still pose significant challenges for insurers.
“There has always been a modestly sized standalone market for terrorism coverage, and in 2014 it was recognised that there was a possibility that TRIA wouldn’t be reauthorised, so there was limited contingent capacity available on the market to cover the eventuality that TRIA would lapse or be delayed,” said Hartwig.
“When the lapse became imminent, a number of insurers announced some additional capital, but they were in general anticipating that this would be an interim source of capital that was deemed to be only a short-term solution.”
Rubin said that while appetite is there, there was a mixed reaction from insurers during the lapse period.
“The interest in taking on terrorism risk really depends on the line of business. Some property carriers were willing to include automatic coverage for up to three months, as Hiscox did, but some carriers were very strict and did not offer any cover. However, given the soft property market, there is an appetite to allocate capital to terrorism risks,” she said.
Given the suspected eventual renewal of TRIA, it is hard to gain a true view of how this risk would have been supported by the industry. However, among the many observations to come from the temporary lapse, the solid partnership between insurers and reinsurers was one of them.
To read the full feature on the Intelligent Insurer website, click here.