The Terrorism Risk Insurance Act (TRIA) remains the best solution for handling the terrorism insurance exposure in the United States, according to Aon, a risk management, insurance and reinsurance company, in its response to the Treasury Department’s request for comment on the long-term availability and affordability of TRIA, which is scheduled to expire Dec. 31, 2014. The American Insurance Association also has publicly supported reauthorization http://www.insurancenetworking.com/news/AIA-supports-tria-reauthorization-33030-1.html.
“Today’s successful terrorism risk marketplace relies on the TRIA program,” said Aaron Davis, a managing director with Aon Risk Solutions, the firm’s global risk management business. “TRIA minimizes price volatility and coverage uncertainty. This makes TRIA reauthorization imperative for our country and the economy. Should the program expire, Aon’s market intelligence suggests that more than 85 percent of insurers will no longer continue to insure terrorism risk. Ultimately, in the unfortunate event of a large-scale attack, the U.S. government would face the full burden of the associated costs of said terrorism.”
The Terrorism Risk Insurance Act created a federal backstop to ensure the availability of risk coverage offered through private markets in the event of a large-scale terrorist attack, which has helped keep coverage affordable, Aon said, enhanced the private market for the coverage and helped stabilize the economy. Its renewal would help ensure a functional market for commercial P&C terrorism coverage, according to Aon.
“The main hurdle in assessing and underwriting terrorism risk is that the frequency of loss from terrorism is neither predictable nor random,” said Ed Ryan, a senior managing director with Aon Benfield, the firm’s global reinsurance business. “Therefore, terrorism insurance is unlike any other marketplace risk. The uncertainty surrounding terror risk makes insurance coverage unique and this requires a novel approach.”
