The reauthorization and modernization of the Terrorism Risk Insurance Act (TRIA) is vital for the continued provision of affordable coverage.
That is the view of Peter Beshar, executive vice president and general counsel of Marsh & McLennan Companies, who recently testified before the United States House of Representatives Committee on Financial Services on the future of the Terrorism Risk Insurance Act (TRIA).
"We consider TRIA to be a model public-private partnership. TRIA restored insurance capacity at a critical time after 9-11 and continues to be the backbone of a healthy terrorism insurance market," he said.
In April, Marsh released its 2013 Terrorism Risk Insurance Report, a comprehensive look at the terrorism insurance market. A survey of more than 2,500 Marsh clients demonstrated that demand for terrorism risk insurance remains strong and that the TRIA program plays a major part in the availability and affordability of coverage.
According to the report, 62% of Marsh's clients purchased property terrorism coverage backed by TRIA in 2012.
"Our clients across the US – including real estate developers, media companies, healthcare organizations and educational institutions – need and want terrorism coverage and would be less likely to get it without TRIA," it stated.
"In our judgment, the existence of a private terrorism insurance market, backstopped by TRIA, actually serves to protect the government and taxpayers from absorbing virtually all of the financial loss in the event of a terrorist attack," Beshar said.
The company also offered three recommendations for refinement of the program including: specific clarification that coverage is provided by TRIA for all forms of terrorism – including nuclear, biological, chemical and radiological events – if coverage is afforded on the primary policy; modernization of TRIA to reflect new terrorist threats that have emerged – in particular, the risk of cyber terrorism; and establishment of a 90-day time period for determining whether or not an act of terrorism is covered by TRIA.
Beshar's testimony comes shortly after Marsh & McLennan Companies representatives shared their views on TRIA with the Director of the Federal Insurance Office. At a meeting of the Federal Advisory Committee on Insurance (FACI), Christopher Flatt, leader of Marsh's Workers' Compensation Center of Excellence, and Aaron Bueler, managing director and leader of Guy Carpenter's workers compensation practice and terrorism task force, presented the company's views.
After addressing FACI, Bueler stated: "The continuation of TRIA is essential. Non-renewal or a major change in the program will negatively affect the affordability and availability of commercial lines insurance vital to the economy.
“Since TRIA's enactment in 2002, the terrorism reinsurance market has become a critical component of risk management strategy for many insurers. A dramatic change in the federal backstop could lead to a contraction in both the insurance and reinsurance marketplace."
Flatt stressed that TRIA affects the state-regulated workers' compensation market, especially in the areas of pricing and capacity. "The uncertainty in the market is causing some carriers to reduce their available capacity and aggregate exposures in large cities, and workers' compensation prices on these risks are certainly going up," he told members of FACI.
TRIA, Terrorism Risk Insurance Act, Marsh & McLennan Companies, insurance