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TRIPRA Remains Vital to US Terrorism Market and Captives

Terrorism-SF
May 23, 2019

Marsh's 2019 Terrorism Risk Insurance Report reveals that the global property terrorism insurance market remains strong, with sufficient capacity to respond to today's predominant terrorist threats. However, according to the report, continued stability of the US property terrorism insurance market is a point of focus as the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) is set to expire in 2020.

The report explores the state of terrorism and the terrorism insurance marketplace in key regions around the world. This year's report also includes insurance market insights from Marsh's World Risk Review ratings platform, which provides risk ratings across 9 different perils for 197 countries.

According to the report, the predominant terrorism threat globally remains from extremists focused on inflicting mass casualties in unsophisticated attacks on crowded public spaces rather than large-scale property damage. Over the last few years, the global property terrorism insurance market has responded by expanding coverage—most notably in the development of coverage for active assailant events and nondamage business interruption.

While the overall terrorism market is stable and able to respond to today's threats, the long-term viability of the US property terrorism insurance market is back in the spotlight. Marsh notes in the report that should Congress allow TRIPRA to expire without a replacement, it could create capacity shortfalls, especially for businesses located in high-profile cities and employers with significant workers compensation accumulations.

"The existence of government backstops, like TRIPRA, has played an important role in ensuring the continued stability and health of the global property terrorism insurance market," said Tarique Nageer, terrorism placement advisory leader, Marsh. "TRIPRA is in place until December 31, 2020, and all eyes are on the Congressional schedule as we approach this deadline.

"In the meantime, US businesses and organizations are advised to work with their brokers as soon as possible to map out a strategy to mitigate potential disruption." 

Other key findings from this year's report include the following.

  • From May 2018 through May 2019, terrorism risk ratings fell across 116 countries, most notably in Egypt, Turkey, and Spain. Little improvement, however, occurred in the world's riskiest states for terrorism, including Afghanistan, Yemen, and Iraq.
  • The number of Marsh-managed captives actively underwriting one or more insurance programs that access TRIPRA increased 10 percent to 182 captives in 2018.
  • The number of US companies purchasing terrorism coverage embedded in property policies under TRIPRA remained consistent at 62 percent in 2018.
  • Education entities, media, financial institutions, and real estate companies had the highest terrorism insurance take-up rates by industry in 2018.
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