TRIPRA – The Industry Needs Certainty Now
Unless it is reauthorized by Congress, the Terrorism Risk Insurance Protection Act (TRIPRA) - the Federal terrorism insurance backstop program - is set to expire at the end of December 2014. First established in 2002, the Act created a shared public and private compensation scheme for privately insured property-casualty losses resulting from certified acts of terrorism.
Although it was amended and reauthorized in 2005 and 2007, a question mark now hangs over TRIPRA. If the Government does not decide soon on whether or not to renew this crucial reinsurance backstop, the immediate outlook for terrorism insurance will be damagingly uncertain.
Our national Government's behavior in recent months is creating real anxiety about the potential for TRIPRA being renewed. Yet insurance companies already have to think about the implications of non-renewal in the context of issuing insurance policies that offer coverage in to 2015.
If TRIPRA is not reauthorized, insurers will have to exclude or dramatically reduce terrorism coverage from their policies.
A few facilities may become available to cover small pockets of conventional terrorism cover, but the industry does not have the ability to support the demand that exists for terrorism coverage for fire-following nuclear, biological, chemical and radiological (NBCR).
And it is worth pointing out that "fire-following NBCR" cannot be excluded in Standard Fire Policy states. The potential accumulation of exposures in such an event dwarfs the capital of the insurance industry.
Companies need to protect their solvency in the face of such statutory requirements. Meanwhile, rating agencies are already asking companies about terrorism aggregates and loss scenarios.
It is clear that TRIPRA and its antecedents have been incredibly valuable solutions that worked for insurers and the economy at large - that’s why we join with the industry to strongly recommend the program’s reauthorization.