September 10th, 2014

Reliance on TRIPRA

Posted at 1:00 AM ET

In 2012, there were over 850 insurers participating in the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA), writing over USD183 billion in premiums. Using the current 20 percent deductible requirement of TRIPRA and policyholder surplus as a filter, Guy Carpenter found that the smaller to mid-sized insurance carriers would be most affected should there be an increase in the deductible of any program that replaces TRIPRA (see table below). Without TRIPRA, insurers with less than USD300 million in surplus would likely need to incorporate additional private reinsurance market capacity to protect their capital and to satisfy rating agencies and regulators.

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Reinsurance capacity for terrorism can differ by reinsurers’ preference, appetite and expertise for the various applicable lines of business. For conventional weapon loss scenarios, reinsurers can deploy multiple aggregates to individual geographical footprints. However, the loss footprints for nuclear, biological, chemical or radiological (NBCR) events are much larger and “net” to reinsurers as typical retrocessional facilities do not cover NBCR losses.

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