What a Lapse in Terrorism Insurance by US Congress Means for BusinessesDecember 26, 2014 in Terrorism
largely as reported by PBS NewsHour host Judy Woodruff last week
The US Congress has adjourned without reauthorizing the Terrorism Risk Insurance Act beyond its sunset on Dec. 31, 2014, and the absence of the program could have far reaching effects on businesses across the United States. In an interview with PBS NewsHour, American Insurance Association (AIA) President and CEO Leigh Ann Pusey warned, “It’s very hard to conceive of the kinds of losses that can be associated with a terrorist attack. They’re well beyond the capacity of the insurance market right now to provide that.” She says as the program stands currently, many insurers would have to cover between $1 billion and $2 billion in losses before the government backstop would kick in, “and they’re paying a percentage of that backstop even after they have met the deductible.” She says that the program enables the market to charge premiums in exchange for covering the risks of terrorism, which otherwise would be covered by the US taxpayer, “and the more we get can comfortable with this risk over time, the more we can learn about it, we can take on more of it. It will never be a risk that can be totally borne by the private market. And it shouldn’t be… because … it’s national security.” Pusey says that because TRIA was not renewed, insurers will have to review their risks and capacity is likely to shrink over time, prices in certain markets are likely to rise, and some projects could be delayed if developers cannot obtain the required coverage.