A new report released today by Marsh confirms that demand for terrorism insurance remains strong and the existence of the TRIPRA plays a key role in making coverage available and affordable.
The report’s findings were presented at a roundtable discussion at the US Capitol, which brought together industry experts, clients, and policy makers. The event was jointly sponsored by Marsh & McLennan and the Coalition to Insure Against Terrorism.
According to Marsh’s 2014 Terrorism Risk Insurance Report, the number of companies purchasing terrorism insurance has remained constant — in the mid-60 percent range — since 2009 and pricing has also generally remained stable.
The pending expiration of the act, which occurs at the end of the year, has resulted in natural uncertainty regarding the availability and price of terrorism insurance due to concerns relating to workers' compensation.
“We believe TRIA is a model public-private partnership. Marsh’s new report confirms there is strong, long-term demand for the insurance it backstops with more than six out of 10 companies in the survey purchasing coverage,” said Dan Glaser, president and CEO of Marsh & McLennan, who hosted the roundtable discussion.
“The existence of the federal program plays a major part in the availability and affordability of the coverage.” While recent congressional activity suggests the law is likely to be extended, when and with what types of modifications remains a question.
Insurers that have the option may choose where to deploy their terrorism capacity depending on preference, should TRIPRA expire without a replacement or be renewed with significant modifications. The private reinsurance market may be pressed to provide additional capacity for insurers to find a balance between their chosen exposure and available capital, and bound reinsurance capacity.
According to a Guy Carpenter re/insurance capital study, global reinsurance dedicated capital is estimated to be at $700 billion, $100 billion of which is dedicated to US reinsurance. September 11th 2001 losses amounted to $25 billion or 25 percent of total dedicated North American reinsurance capital, providing some indication of the need for the reauthorisation.
The Marsh report notes that events like this and the Boston marathon bombings highlight the need for a streamlined TRIPRA certification process that clarifies what type of event would be certified as terrorism and the timeframe for certification after the event occurs.
Duncan Ellis, Marsh's US property practice leader, believes the recent introduction of a bi-partisan bill to re-authorize TRIPRA is "an encouraging step in the right direction."
Ellis has confidence in the survival of TRIPRA, “Every day, clients are calling us with concerns over market volatility and pricing. We look forward to the reauthorization of this important federal backstop for another seven years and working with clients to ensure they have the right coverage to protect their assets.”
TRIPRA, insurance, terrorism, Marsh, reinsurance