A coalition of insurers and reinsurers have penned a letter to members of the US Congress, urging them to pass a long-term reauthorisation of the Terrorism Risk Insurance Act (TRIA), which is currently set to expire at the end of 2020.
The appeal described the act as a “vital public-private risk sharing mechanism” that ensures private terrorism risk coverage remains available to commercial businesses, educational institutions, and non-profit organisations.
“Absent TRIA, there is not sufficient insurance and reinsurance capital available to provide comprehensive terrorism coverage to U.S. insurance buyers,” the group argued.
To this end, Congress has been urged to enact a long-term extension of the program, without further reforms.
The organisations claimed that key ‘dials’ in the program are already effectively indexed to premium growth at both the company and industry level, meaning the federal share will continue to decrease in future even if no changes are made to the program besides the expiration date.
They added that making changes to the TRIA mechanism to increase insurer retentions could affect the ability of many insurers to write risks or markets altogether, ultimately impacting the ability of policyholders to secure adequate coverage.
“Maintaining a workable federal terrorism insurance mechanism is vital for our nation’s economic security, and without adequate coverage, our ability to mitigate further economic fallout in the event of an attack would be greatly impaired,” the letter stated. “There is no homeland security without economic security.”
TRIA was signed into law in 2002 as a way to create a federal backstop for insurance claims related to acts of terror.
It was enacted in response to the September 11, 2001 attacks, which changed the landscape for terrorism risk insurance and forced many insurers to pull out of the market.
A lack of insurance is thought to have contributed to a stagnation in the US economy at this time, particularly in the construction, travel and tourism, and real estate finance sectors.
The program was originally set to expire on December 31, 2005, but was extended to 2007, and then again to 2014. The act expired on December 31, 2014, but was later renewed at the start of the next congress.
“The American business community remembers all too well the twelve-day lapse in the program in early 2015 and the disruption that lapse played in a variety of markets,” the letter to Congress warned.
“We urge Congress to help provide much needed certainty by passing a long-term reauthorization of this important program without delay,” it concluded.