Category: Terrorism Risk Insurance Program

Treasury Department Reports on Effectiveness of Terrorism Risk Insurance Program

Posted on by Trey Jackson

The federal government’s Terrorism Risk Insurance Program has been effective in making terrorism risk insurance available and affordable throughout the United States, according to a recent report by the U.S. Department of the Treasury’s Federal Insurance Office. 

The  Treasury based its June “Report on the Overall Effectiveness of the Terrorism Risk Insurance Program” on marketplace data collected for the past two years, along with public comments such as those submitted by the broad-based Coalition to Insure Against Terrorism (CIAT), which includes The Real Estate Roundtable.

  • The Terrorism Risk Insurance Program – authorized by the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) of 2015 – provides a federal backstop for certain U.S. property and casualty insurance losses resulting from a certified act of terrorism.
  • TRIPRA directs Treasury to provide reports on the Program’s effectiveness and estimate the total amount of premiums earned on terrorism risk insurance since January 1, 2003.  Treasury published its first Program effectiveness report two years ago.  (Roundtable Weekly, July 8, 2016).
  • In last month’s report, Treasury’s estimate of total earned premiums for terrorism risk insurance from 2003 to 2017 is approximately $37.6 billion (excepting captive insurers).  This amount is between 1 and 2 percent of the total premiums earned in the Program-eligible lines of insurance during that period.  Treasury estimates that an additional $7.4 billion has been earned by captive insurers. 
  • The total of terrorism risk premiums earned is comparable to the loss sustained by the insurance industry in connection with the attacks on September 11, 2001. 
  • While the purchase of terrorism risk insurance is not mandated by the Program, a significant proportion of commercial policyholders nationwide have elected to obtain such insurance, and take-up may be even higher in metropolitan areas at greater risk of terrorism. 

Without Congressional action, the Terrorism Risk Insurance Program, authorized by TRIPRA, will expire on Dec. 31, 2020.  The Roundtable is working with industry partners to develop a proposal that would make terrorism insurance available for the long-term.

Coalition To Insure Against Terrorism (CIAT) Submits Comments to Treasury on Effectiveness of Terrorism Risk Insurance Act(TRIP)

Posted on by Trey Jackson

The Roundtable and its partners in the Coalition to Insure Against Terrorism (CIAT), submitted  detailed comments Monday on the overall effectiveness of the Terrorism Risk Insurance Program (TRIP) to the U.S. Department of Treasury’s Federal Insurance Office (FIO).

This week’s   comments   support TRIP as a “tremendous success” yet provide recommendations on three primary aspects of the program: Standalone terrorism insurance; Nuclear, Biological, Chemical or Radiological (NBCR) availability; and Cyber terrorism.

The Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA) requires  Treasury to issue proposed rules to implement changes to TRIP, which is set to expire on Dec. 31, 2020 (Roundtable Weekly – Jan. 16, 2015) 

As FIO works on preparing its 2018 report on TRIP’s effectiveness, the coalition’s comment letter presents views from policyholders and risk managers – and supplement earlier remarks submitted by CIAT in 2016 (Roundtable Weekly, June 3, 2016). 

This week’s comments support TRIP as a “tremendous success” yet provide recommendations on three primary aspects of the program: Standalone terrorism insurance; Nuclear, Biological, Chemical or Radiological (NBCR) availability; and Cyber terrorism. 

The CIAT comments note there has been no evidence that private markets can develop adequate terrorism risk capacity without some type of federal participation.  The letter also notes that “in the wake of a major terrorist attack, (the program) ensures that a significant portion of the costs of recovery would be borne by the private sector.”  

The comments also include a suggestion that FIO should consider making the program permanent, stating that most other countries insurance programs are “of continuous duration, and it would benefit market stability to make TRIP permanent as well.” 

How other nation’s implement terrorism risk insurance programs was the focus of a discussion with Julian Enoizi, chief executive of Pool-Re during last week’s Spring Roundtable Meeting in Washington, DC. 

Additionally, Marsh  recently released its 2018 Terrorism Risk Insurance Report, which presents data on purchasing and pricing trends in the terrorism insurance marketplace. The report finds that the highest terrorism insurance take-up rates by industry in 2017 were real estate companies, education entities, health care organizations and financial institutions.  It also explores how the terrorism insurance market continues to innovate and respond to the needs of global organizations in light of an evolving risk landscape.  (BusinessInsurance, April 20, 2018) 

With TRIP set to sunset at the end of 2020, The Roundtable has formed a Terrorism Risk Insurance Working Group to explore potential options in advance of the reauthorization debate that is expected to begin in earnest next year.  The Working Group’s goal is to develop a strategy for a permanent, or long-term, national terrorism insurance program that would enable policyholders to secure the terrorism risk coverage they need without facing periodic renewals by the government.