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Government Relations & Public Policy

State of terrorism insurance marketplace and FIO request for comment

April 17, 2018

Since the tragic events of September 11, 2001, ICSC has worked to ensure that our members can obtain comprehensive and affordable terrorism insurance. Due to the Terrorism Risk Insurance Act (TRIA), it has been possible for businesses to purchase terrorism risk coverage continuously since its enactment in 2002. TRIA and its subsequent reauthorizations have helped to keep the US terrorism insurance market stable, contributing to low costs and wide availability. The current bill is due to expire on December 31, 2020.

State of terrorism insurance marketplace

Marsh recently released its “2018 Terrorism Risk Insurance Report,” providing their take on the state of the terrorism insurance marketplace. The full report can be found here. Here are some of the key takeaways:

  • Terrorism Insurance Likely to Remain Stable in 2018 – “Overall property terrorism insurance capacity is abundant and, barring unforeseen changes, is likely to remain stable in 2018, backed by new entrants and a commitment by incumbents to underwrite the risk. Although attacks continue, insured losses have been limited in frequency and severity.”
  • Terrorism threats and impacts shift – “Although fewer people were killed in terrorist attacks in 2017 than in 2016, the means of attack and perpetrators have shifted. Past attacks were carried out primarily by specific groups against perceived high-value/high-profile targets. While that threat remains, many recent attacks have come against soft targets and been perpetrated by ‘lone wolves’ and small groups with no direct connection to known terrorist organizations. Weapons of choice now include vehicles, knives, and other handheld devices.”
  • Take-up rates – “62% of US companies in 2017 purchased coverage embedded in property policies under the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA).” Real Estate had one of the highest take-up rates by industry, at 73%.
  • Consumer confidence – “Although US consumer confidence increased in the third quarter of 2017, terrorism was cited as the top concern for 21% of consumers, trailing only the state of the economy (28%).”
  • Broadening terrorism coverage – “On the buyer side, more insureds are adding political violence coverage to standard terrorism insurance policies. The potential for cyber-based terrorist attacks has also raised interest in cyber-related business interruption coverage at owned and non-owned facilities… Hotels and casinos, sports arenas, restaurants, retailers, movie theaters, and others are looking to expand definitions of terrorism to include active shooter threats, which can result in bodily injury to employees and customers, property damage, direct or indirect business interruption, and reputational damage… Many insurers appear receptive to broadening terrorism coverage to include such exposures.”
  • Reinsurance market conditions – “Reinsurance capacity for terrorism risks continues to develop and grow. Many insurers continue to use the commercial reinsurance markets — at least in part — to buy down their TRIPRA deductibles and buy out their co-shares at acceptable prices, especially for conventional weapon attacks… Since 2002, the federal terrorism risk insurance program has helped facilitate increased private market involvement, with commercial treaty and facultative reinsurance capacity increasing each year… Private market reinsurance capacity is not sufficient to provide the same level of capacity as offered by TRIPRA, making the federal terrorism backstop essential.”

Federal Insurance Office (FIO) request for comment

A notice was published recently in the Federal Register seeking comments on the effectiveness of the TRIA program for purposes of the Federal Insurance Office’s (FIO) annual report on this issue. The Coalition to Insure Against Terrorism (CIAT) – of which ICSC is a member – has commented on these solicitations in the past and would like to do so again, as the next reauthorization effort will begin in the months ahead. 

To aid us in preparing comments, an updated perspective from risk management professionals within the ICSC membership is vital. The notice solicitation can be found here. We encourage you to weigh in on your most recent experiences with TRIA coverage – in particular with regard to standalone terrorism insurance, NBCR availability, and cyber terrorism. Please submit your input to Tyler McIntosh by April 27.