Two recent reports from the Presidential Working Group (PWG) on Financial Markets and Marsh & McLennan Companies support the argument for a long term extension of the federal Terrorism Risk Insurance Program, otherwise known as TRIA. The much anticipated report from the PWG draws upon comments from many industry groups and interested parties, including RIMS, while the Marsh report is a follow-up to a similar report issued in May 2013.
The “2014 Marsh Terrorism Risk Insurance Report,” released Tuesday, states that “if Congress does not renew or extend the federal backstop, the market dynamics for terrorism insurance will be disrupted and will likely result in increased pricing and limited capacity.” Marsh’s support for a long-term extension of the program is in line with the majority of the insurance industry as TRIA nears its December 31, 2014 expiration. “The potential for adverse economic consequences due to limited or unavailable terrorism insurance should be an impetus for quick congressional action to reauthorize [TRIA].”
Similarly, the PWG study, required by TRIA legislation, made several findings relating to the need for extending the program:
- Insurance for terrorism risk currently is available and affordable;
- Prices for terrorism insurance have declined since TRIA was enacted;
- Take-up rates have improved since TRIA’s passage;
- The market is currently tightening in light of TRIA’s uncertain future;
- The private market does not have the capacity to provide reinsurance for terrorism risk to the extent currently provided by TRIA; and,
- Terrorism insurance would likely be less available should TRIA be allowed to expire
Bi-partisan legislation was recently introduced in the Senate that would extend TRIA for seven years; however, the industry continues to eagerly await legislation from the House Financial Services Committee leadership. While the Senate bill reforms the program, many expect House leadership to ask for more far reaching changes.