emil-metropoulos_guy-carp
Emil Metropoulos, SVP and workers’ compensation and terrorism practice leader at Guy Carpenter
29 October 2018 Insurance

Terrorism Act renewal begins

The US re/insurance industry must learn the lessons from when the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) was renewed in 2015 as it mulls the act’s expiration and possible renewal in 2020, Emil Metropoulos, senior vice president and workers’ compensation and terrorism practice leader at Guy Carpenter, told PCI Today.

Metropoulos said the 2015 renewal was in doubt at one point in 2014, which led to a certain amount of short-term volatility in the market. Some re/insurers were able to issue only short-term policies for some risks, leading to a degree of opportunism as competitors fought for business that had not been renewed.

While there is no talk yet of TRIPRA’s not being renewed when it expires on December 31, 2020, Metropoulos stressed that the market needs to beware of potential issues in the run up to that expiration date. For example, the rating agencies could begin contemplating TRIRPA non-renewal scenarios into their company stress tests starting mid-2019—and re/insurers need to be aware of this.

He also commented that the nature of terrorism is changing, with cyber terrorism risk becoming a bigger potential problem.

“Another area is the point of attack,” he said. “Traditionally physical industrial control systems and infrastructure are coming online. Our sister company Oliver Wyman, a subsidiary of Marsh & McLennan Companies, estimates that there could be 30 billion devices connected to the internet of things (IoT) by 2030.

“The points of potential attacks are growing as the areas that will be exposed grow.

“Cyber threats are also becoming more advanced, with highly skilled hackers—who at times could be nation state-supported—using more sophisticated tools and disseminating methodology through black market and dark web mechanisms.

“All companies, in the US and around the world, are becoming more dependent on their systems and data than ever before. Failures in cybersecurity have the potential to destabilise entire enterprises overnight.”

He added that, within this context, a particular challenge for many re/insurers is ‘silent’ cyber, where a P/C policy may not specifically exclude cyber or the coverage is ambiguous. In such a scenario, the insurer will not have priced for it. He offered the example of a transportation company hit by ransomware that shuts down systems and triggers business interruption on its property all-risks policy.

“These threats will continue to evolve as new technologies and opportunities reveal themselves to terrorist organisations: cyber terrorism is an example of a newly developing frontier within the peril.

“The mounting risk of terrorism, especially the risk beyond property covers, should spur re/insurers to differentiate their products with enhanced analytics and coverages in order to pursue the peril as an opportunity to achieve profitable growth,” he said.

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