The long-term viability of the U.S. property terrorism insurance market is back in the spotlight as Congress looks at renewing the federal reinsurance backstop, the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA), which is set to expire in Dec. 31, 2020.
Despite a trend of decreasing risk, new threats will likely arise. A report from Marsh points to events that will likely affect terrorism risks in 2019, including the territorial defeat of First, Islamic State (IS) that the report warns will likely bring new threats both in the Middle East and in Western states, especially in the wake of the chaos in Syria. Religious extremism is expected to remain the dominant terrorism threat globally, but the threat from the “extreme right-wing groups” is also expected to rise in Western states, most likely in the form of “low-capability attacks that “generate little property damage, but pose significant risks to people.”
Why do I bring this up now? We all remember the last-minute deal for the last reauthorization, and are seeking to avoid it. Congress held a hearing on October 16th on the subject, and Joe Carter, acting president and CEO of United Educators, a risk retention group, testified on behalf of the American Property Casualty Insurance Association. United Educators is a longstanding and active member of VCIA.
Joe testified that the “TRIA program has been successful in making much needed terrorism insurance coverage available to meet the needs of the market and protect the nation’s economy. Reinsurers’ appetite for writing terrorism insurance without the program in place may be limited. Failure to reauthorize the program could have significant economic implications and would expose taxpayers to even greater risk because pressure for federal disaster assistance to compensate for uninsured losses would increase in the aftermath of an attack.” I couldn’t agree with him more.
The good news is that the new chair of the House Financial Services Committee, Maxine Waters, supports the reauthorization. The more troubling news is that a letter was filed from the Consumer Federation of America stating that TRIA should NOT be reauthorized as there was “plenty of capacity in the market”. It is hard to fathom why the Consumer Federation of America is taking this stance, especially as there is no impact to taxpayers or consumers with TRIPRA.
Jim McIntyre, VCIA’s DC counsel, believes there is sufficient support on Capitol Hill to get it reauthorized, and VCIA will work with a coalition to move the agenda forward – so we are hopefully wringing our hands at the end of 2020 wondering if it will pass!
Thank you very much, I look forward to hearing from you.