The insurance industry is concerned that uncertainty regarding the renewal of the Terrorism Risk Insurance Act (TRIA), which expires at the end of this year, could affect the affordability and availability of terrorism risk insurance.
The government backstop, which provides insurance coverage against losses from devastating terrorist attacks, is set to expire at the end of 2014.
The US President’s Working Group on the long term availability and affordability of insurance for terrorism risk, has issued a report that found that in the absence of TRIA, terrorism risk insurance would be less available, with coverage that is available likely to be more costly and/or limited in scope.
“The US insurance industry remains unprepared to retain the entire exposure to terrorism risk. In fact, 28 of the 29 commenters to the PWG notice assert, to varying degrees, that pricing for terrorism risk insurance will be adversely affected, and its availability substantially curtailed, should TRIA expire at the end of 2014,” said the report.
In response to the notice, re/insurance broker Aon, concluded from a client survey that “if TRIA were to expire in 2014, the vast majority of the existing insurance market for terrorism will disappear.”
Industry services provider Marsh & McLennan made a similar observation and noted that some insurers it had surveyed “have indicated to us that they could be forced to withdraw from geographical areas that have the greatest need for terrorism coverage or they may even exit certain lines of business, such as workers’ compensation or commercial property in high profile jurisdictions.”