Terrorism insurance2014 uncertainty over renewal of Terrorism Risk Insurance Act changed consumer behavior

Terrorism insurance take-up rates dropped off toward the end of 2014, due to the anxiety stemming from the unexpected expiration of the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA). Through much of 2014, there was uncertainty whether Congress would renew the program, which initially passed in the wake of the 9/11 terrorist attacks. This uncertainty led customers, and potential customers, to change their insurance buying plans.

Congress quickly authorized a slightly amended version of the law in January 2015 and buyers of terrorism insurance since have generally experienced a favorable rate environment, a trend that is expected to continue, barring unforeseen events or market changes.

Still, the changes Congress made to the original bill did change consumer behavior. One of the changes Congress made was to raise the trigger amount needed in total losses before federal reinsurance coverage kicks in from $100 million to $200 million over five years, starting in 2016. The terms of the new law “prompted some organizations to look for certainty of coverage elsewhere, namely the standalone property terrorism insurance market,” Marsh says.

Marsh’s 2015 Terrorism Risk Insurance Report analyzes terrorism risk insurance pricing and take-up rates, breaking down the data by company size, industry, and region.

Among the key findings from the report:
Terrorism insurance take-up rates have remained relatively stable since 2009, although they decreased slightly in 2014 as a result of the anxiety surrounding TRIPRA at the end of 2014.

• Underwriters continue to scrutinize employee concentration exposures, highlighting the importance of accurate data and risk differentiation, particularly for workers’ compensation exposures.
• Organizations that purchased terrorism coverage in the first half of 2015 typically saw competitive rates offered by standalone property terrorism insurers.
• Among industry sectors, education organizations had the highest take-up rate for terrorism insurance in 2014.

The report also covers:

• Insurance market capacity among the major carriers.
• The role of political violence coverage in mitigating exposures not covered by terrorism policies.
• Benefits of using captives to secure terrorism coverage under TRIPRA.
• Potential applicability of terrorism coverage under standard fire policy statutes
• Applicability of insurance coverage for cyber-attacks.
• Terrorism reinsurance markets.

— Read more in 2015 Terrorism Risk Insurance Report