Expected TRIA Nonrenewal Outcomes and Association Reactions

As the insurance industry reacts to the failure to pass legislation reauthorizing the Terrorism Risk Insurance Act (TRIA), resulting in its expiration December 31, 2014, Captive.com looks at predictions for the outcome that is now expected.

An Insurance Information Institute (III) Capitol Hill briefing in late April 2014 suggested if TRIA was not reauthorized:

• Only limited private insurance will be available to cover losses arising from future attacks
• There will potentially be a large gap between insured and economic losses
• The federal government would be called upon to provide very large amounts of aid (tens of billions of dollars)
• The federal government has no delivery mechanism for post-terrorism-attack aid
• The existing stand-alone market will likely seize and contract
• Terrorism coverage prices will soar
• Terrorism exclusions will become common

A March 16, 2014, article in Business Insurance quoted a Strategic Risk Solutions (SRS) official as saying the end of the backstop also could prompt captives formed solely to access the federal backstop to close up shop.

Broker comments in early December during one of the 2014 Cayman Captive Forum panels indicated they were already seeing underwriter proposals with terrorism exclusions conditional upon whether Congress enacted the TRIA renewal. Many captive owners and members will quickly face the impact of the failure of the U.S. Senate to act on TRIA’s renewal with their January 1 reinsurance renewals.

"Shock, dismay and disappointment: P&C insurance industry's reaction to TRIA news" is the headline of an article in Property Casualty 360 that provides a summary of the reactions to the failure of the U.S. Senate to enact the TRIA renewal. The article contains comments from P&C insurance organization leaders including National Association of Professional Insurance Agents (PIA), Independent Insurance Agents & Brokers of America (IIABA), Insurance Information Institute (III), Risk Management Society (RIMS), Property Casualty Insurers Association of America (PCI), American Insurance Association (AIA), National Association of Mutual Insurance Companies (NAMIC), Coalition to Insure Against Terrorism (CIAT), Commercial Real Estate Development Association (NAIOP), and National Association of Insurance and Financial Advisors (NAIFA).

The reason why TRIA failed in the Senate is described in a subsequent article published by Property Casualty 360.