The focus on the availability and affordability of terrorism (re)insurance coverage comes as the US House of Representatives and Senate are currently considering various changes to Terrorism Risk Insurance Program Reauthorization Act (TRIPRA). TRIPRA expires on December 31, 2014 and the future of the federal backstop is the headline issue within the terrorism market this year given that either substantial modification or non-renewal have the potential to impact terrorism coverage in the United States. The full Senate passed their committee’s recommended version 93-4 on July 17, 2014. The House of Representatives has yet to vote on their version. Implications could also be felt outside the United States. How the expiration of TRIPRA would affect the global terrorism market remains unclear but one possible outcome could see increased pressure on other pool structures to dissolve, resulting in fragmentation towards a more open market approach.
Many organizations with large concentrations of insured employees in the United States are already experiencing significant pressure on their workers compensation insurance programs (from rate increases to the possibility that insurers will not renew coverage) due to the uncertainty surrounding TRIPRA’s future.
This uncertainty has impacted workers compensation coverage more than any other line of insurance due to the uniqueness of the coverage. Workers compensation is regulated by state laws that preclude carriers from putting a policy limit on the coverage, or exclude any perils (including conventional or NBCR terrorism) on workplace injuries. Furthermore, employers in nearly all US states are required to secure workers compensation coverage, resulting in terrorism insurance take-up rates of effectively 100 percent. Due to its compulsory nature, employers will always need to have the ability to secure coverage through some combination of private market solutions, state funds, assigned risk pools or as a qualified self-insured. Without the essential support of TRIPRA, private market alternatives would be significantly reduced for those insureds most in need of the coverage. Demand for coverage could easily begin to outpace the supply of available capacity and in effect cause harm to the US economy.