When Congress reconvenes on September 8, it will have just 12 days to pass an extension on the Terrorism Risk Insurance Act (TRIA) before recessing again for mid-term elections.
TRIA, currently set to expire at the end of the year, could be the key holding together the US economy and workers’ compensation industry. Without congressional action to reauthorize the program, many leading industry experts fear dire circumstances for both.
“The uncertainty [over TRIA’s renewal] has impacted workers’ compensation coverage more than any other line of insurance due to the uniqueness of the coverage,” said broker
Guy Carpenter. “Without the essential support of TRIPRA, private market alternatives would be significantly reduced for those insureds most in need of coverage.
“Demand for coverage could easily begin to outpace the supply of available capacity and in effect cause harm to the US economy.”
Though the Senate approved a version of TRIA, which would extend the program through 2021, it is uncertain whether the House will follow suit. And because workers’ compensation does not exclude any particular cause, including terrorism, it is the line most at risk if TRIA is not passed, says Larry Mirel, a partner at Nelson Brown & Co.
“Depending on the nature of the attack, you could have one insured suffering huge amounts of workers’ comp exposure,” Mirel said, noting that companies with workers in urban areas may experience the most severe rate increases.
In fact, a new report from
Marsh suggests fears of terrorism-related losses are already causing many insurers to scale back the policy options available for companies with a high concentration of employees in major cities.
“Because insurers cannot exclude terrorism-related losses and employers are required to buy it, the options available to buyers have been reduced and rate increases have accelerated,” Marsh said.
In fact, Marsh found that some insurers are actually setting policy expiration dates to coincide with the anticipated expiration of TRIPRA. This transfer of risk onto buyers may make it difficult for producers in the workers’ compensation space to find affordable policies for clients in major cities.
The issue is an extremely important one for independent agents and brokers working with commercial clients, said Ted Besesparis of the National Association of Professional Insurance Agents.
“We really don’t want to get into a worst-case scenario, but our members’ commercial clients need terrorism coverage for their businesses and homes,” Besesparis told Insurance Business America. “The concern is particularly acute among insurance agents and something they need to be able to offer to their clients.
“The overarching issue of TRIA is number one in our book.”
Mirel, however, worries about the timeline of congressional passage of the program.
“This is the third time it’s come up for renewals and each time, the program has only been renewed at the last minute,” Mirel said. “This time it’s going to be the same. There will be no agreement and in the meantime, insurers are having to sell insurance that covers 2015 and beyond.”
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