A majority of risk professionals believe expiration of the federal terrorism reinsurance program would result in a decrease of affordable terrorism coverage or, even, the total elimination of the coverage, according to a poll by the Risk and Insurance Management Society (RIMS).
According to the survey, 45 percent of respondents expect a decrease in terrorism coverage limits while 24 percent believe coverage would no longer be offered by insurers upon expiration of the Terrorism Risk Insurance Act (TRIA). The program is now set to expire at the end of 2014 unless Congress renews it.
Insurers have been warned not to expect Congress to renew TRIA until late next year if at all given politics in Washington. Back in July, Leigh Ann Pusey, president and CEO of the American Insurance Association, said Congress has a history of “running right up against the deadline” on TRIA and she expects the same will happen again.
In a related report, “Terrorism Risk Insurance Act: The Commercial Consumer’s Perspective,” RIMS says that failure to renew the program will affect both availability and affordability of coverage and that the uncertainty surrounding the program is already having effects.
“The main impacts will be on capacity and therefore pricing. As carriers look to reduce their exposure, especially in certain high-threat areas like the Northeast and other populous areas of the country, the cost of insurance, if available, will rise. This is already being seen in New York City where at least one carrier has been issuing non-renewal notices to high profile financial service companies,” the RIMS report says.
The report also says that this reduction in capacity “will force prices up and may move some insureds into state funds or cause them to self-insure the risks.”
RIMS used the report to appeal to Congress for TRIA renewal.
“It’s clear that risk professionals are concerned that TRIA’s expiration will prevent their organizations from attaining the necessary coverage to protect assets and employees from devastation caused by terrorism,” said RIMS Board Director Carolyn Snow. “TRIA is integral to keeping affordable lines of terrorism insurance available to all organizations conducting business in the United States. Without it, not only will individual organizations be more exposed in the event of a terrorist attack, our federal government would also take on the extraordinary burden of supporting its constituents during, an often costly, rebuilding process.”