Home / International / Terror backstop loss would ripple across US economy: Marsh chief
21 October 2019
Failure to replace the US government backstop on terrorism insurance would adversely affect workers’ compensation policies and potentially ripple across the US economy, says John Doyle, President and CEO at Marsh.
The US Terrorism Risk Insurance Program Reauthorisation Act (TRIPRA) is due to expire at the end of next year. The Act, which took effect in 2015, extended cover introduced after the September 11 terrorist attacks in 2001, which resulted in insured losses of about $US47 billion ($68.47 billion) in 2019 dollars.
In testimony before the US House Committee on Financial Services Mr Doyle advocated for a timely reauthorisation of TRIPRA. He warned that without it increased pricing could affect multiple insurance lines.
“With just over 18 months before TRIPRA’s expiration, time is of the essence,” he said. “We are concerned that TRIPRA’s expiration, or renewal with significant increases in retentions, would lead to capacity shortfalls.”
High-profile businesses, top business districts and larger employers – including universities, hospitals and hospitality companies – would be most affected, he warned, advising that a “robust” reauthorisation bill will keep the terrorism insurance market viable and competitive for all buyers in the US far into the future.
“Congress should pass legislation to extend this vital public-private backstop,” Mr Doyle urged.
The Insurance Information Institute (III) has previously warned that affordable insurance coverage for major US events such as the Super Bowl, the Summer Olympics and large construction projects may be threatened unless TRIPRA is reinstated.
“Uncertainty about the future of the federal backstop as the deadline looms will impact the availability and nature of insurance coverage,” Mr Doyle said. “That, in turn, could affect companies’ decision-making processes about hiring and investing, potentially sending ripple effects through the economy.
“There is a strong possibility that if the federal backstop ceases to exist we could see a domino effect of increased pricing across multiple insurance lines, not just terrorism, with a likely result of major marketplace disruption. This trend will intensify, beginning in January 2020.”
A review by AM Best has identified about 30 rated insurers with substantial terrorism exposures and a heavy reliance on TRIPRA. The ratings agency says no rating actions on those companies was necessary at this time, but it will follow up in 2020 to confirm they have implemented mitigation plans.
“TRIPRA’s possible expiration on December 31 2020 remains a significant concern,” AM Best said last week. “A significant nuclear, biological, chemical, or radiological (NBCR) attack would likely have far-reaching effects that go beyond reasonable rating assumptions.”