TRIA takes encouraging first steps towards renewal

Last week six senators from both major US political parties introduced a bi-partisan agreement that would see TRIA extended for at least seven more years beyond 2014. The move was welcomed by US risk manager organisation RIMS, which sees the proposed legislation as an encouraging sign that industry may be winning the debate on the need for ongoing state backing of terrorism insurance. "We see the recent Senate agreement as a positive sign that lawmakers do understand the need for the programme and the urgency for getting an extension passed sooner rather than later," RIMS president Carolyn Snow told CRE this week. Insurance broker Marsh was also encouraged by the introduction of legislation in the US Senate. "Swift reauthorisation of TRIA is critical," the broker said in a statement. Marsh said that a survey due to be published later this month shows that terrorism insurance take up rates under TRIA have increased and the price of coverage has dropped.hideFollowing the move in the Senate, RIMS is now 'hopefully optimistic' that TRIA will renew, according to Ms Snow. However, RIMS warned that the move is just the first step in a long legislative process towards reauthorising the regime. "There is still more work to do in the House of Representatives, as there is more scepticism surrounding the programme in that chamber of Congress," said Ms Snow. Concerns also remain over potential changes to TRIA as the legislation makes its way through the political process. "The Senate legislative is certainly a positive first step, but we have a long way to go," said Ms Snow. "There are also still concerns what, if extended, that extension will ultimately look like and whether the House looks to make such major changes that the programme is essentially undermined." While welcoming the Senate bill, some insurer groups are concerned with some of the provisions in the proposed legislation, which could increase insurer costs and shrink the market. For example, the Senate's bill included a provision increasing insurer co-payment costs from a catastrophic attack by 33% for each company, according to the National Association of Mutual Insurance Companies (NAMIC). "By keeping much of the programme, including its trigger and deductible levels, at current levels, the Senate bill will ensure that small-and medium-sized insurers can continue to participate in the programme and offer competitive terrorism insurance coverage," said Jimi Grande, Senior Vice President of Federal and Political Affairs for NAMIC, in a statement. "However, we are concerned by the increase in co-payments. The programme was designed to soften the economic blow of a catastrophic terrorism attack by providing insurers with a degree of certainty regarding their immediate losses, but the co-payment increase runs counter to that thinking," he said. Leigh Ann Pusey, President and CEO of the American Insurance Association, was also critical of the proposed increase in insurers' share of losses. She argues that the move 'could lead to decreased market capacity'. Nat Weinecke, Senior Vice President of Federal Government Relations at the Property Casualty Insurers Association of America (PCI), said the increase in the co-share could mean that 'what insurance protection is available for [nuclear, biological, chemical and radiological weapons terrorist attacks] will become increasingly unstable if TRIA's coverage is narrowed'. Insurers also see potential problems as TRIA moves through the political process. "Leaders of the House Financial Services committee will have a bill of their own out soon, likely just after Congress returns at the end of the month, and they're probably going to make some substantial changes," said Mr Grande. "If those changes go too far, it will cost the bill in terms of bipartisan support and make getting it passed more difficult." RIMS, like many other supporters of the extension, believes that failure to renew TRIA would result in many companies going self-insured due to lack of available or affordable coverage. "Many organisations will likely look to self-insure their terrorism risks, which will put their economic future at stake in the event of an attack. Some larger organisations, particularly those with lender agreements that require terrorism coverage, will likely look to procure standalone terrorism policies, but at much higher premiums," said Ms Snow. As a result, RIMS is advising risk managers to prepare for the worst, should it happen. "Risk managers should be thinking about contingency plans, if TRIA were to expire," said Ms Snow.

TRIA takes encouraging first steps towards renewal

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