With the expiration of the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) approaching at the end of 2014, the Insurance Information Institute has issued an updated white paper, “Terrorism Risk: A Constant Threat: Impacts for the Property/Casualty Insurers.” The paper updates the developments surrounding the TRIPRA legislation and highlights the increased takeup of this coverage since the enactment of the initial legislation in 2002.
As TRIA has evolved, private insurers and businesses have assumed a greater share of their terrorism risk. The current program- The Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA) – is slated to expire at the end of 2014, which could significantly undermine the terrorism risk insurance market. The insurance marketplace is already reacting to the potential nonrenewal of this legislation by curtailing writings, in certain cases instituting sunset clauses that effectively terminate coverage if the legislation is not renewed, and implementing increased pricing. Ancillary pressure on other placements, such as captives formed to access reinsurance capacity under the TRIPRA legislation, are also being impacted and alternate avenues are being investigated to secure coverage.
There is no certainty that this legislation will be extended upon its expiration at the end of 2014, and accordingly, we recommend a proactive approach to this exposure. Lockton works with its clients to develop ways to mitigate and manage terrorism risk for the long term.