In a concerted effort to urge congressional action on the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA), key members of the insurance industry testified before the Senate Banking Committee Thursday.
A call from Douglas Elliot, president of commercial markets at The
Hartford, was especially dire. Without reauthorization of the federal backstop program for insuring against terrorism, Elliot believes the industry could actually refuse to cover certain terror-related risks in order to remain solvent.
“This could result in upsetting the public-private partnership and undermining important sectors of the economy that depend on the availability of terrorism risk insurance,” said Elliot, who spoke on behalf of the American Insurance Association (AIA).
Employers in the construction, manufacturing, infrastructure and real estate markets would especially suffer from inaction on TRIPRA, he stressed, including “small business generally.”
Producers are already seeing negative fallout relating to the possibility of TRIPRA’s nonrenewal, argued representatives from the Council of Insurance Agents and Brokers (CIAB).
Bill Henry, a CIAB representative and CEO of McQueary, Henry, Bowles and Troy, told senators that as commercial policies sold today include exclusions for terrorism risk in the event TRIPRA is not renewed. That’s a problem, Henry believes.
“I anticipate that this will cause problems for long-term construction projects, workers’ compensation and other coverages as the end of the year draws closer,” he stressed.
Workers’ compensation’s dependency on TRIPRA renewal is especially great. A recent
Marsh report argues that these terrorism risk exclusions are transferring a great deal of risk onto buyers, making it difficult for many clients in major cities to find affordable policies.
While much is dependent on Congress’s decision to renew TRIPRA, Marsh pointed out that there are some risk mitigation strategies clients and their agents can take in the interim to potentially lower workers’ comp premiums.
“The importance of providing a differentiated view of an organization’s terrorism risk profile to insurers cannot be overemphasized,” Marsh said. To achieve this, producers need to work with clients to “develop communication strategies and presentation tactics around all key risk exposures.”
Marsh identified marital/dependency status, the physical security of the building, access to the building, and management policies on workplace violence and weapons as key factors that could help clients obtain more feasible rates while waiting for congressional action on TRIPRA.
Meanwhile, the Risk and Insurance Management Society (RIMS) suggests identifying peak times of employee traffic and which works telecommute as ways to keep workers’ comp rates in check.
A renewal of TRIPRA would constitute the third renewal of the Terrorism Risk Insurance Program, originally passed in 2002 to help insurers shoulder massive terrorism-related risks. While reauthorization was initially approved rather easily, legislators have signaled they are more wary this time around. Several lawmakers are suggesting insurance carriers should have developed adequate terrorism risk models in the time since the program was conceived.
For Julie Rochman, CEO of the Insurance Institute for Business and Home Safety, however, terrorism is uniquely difficult to measure.
“It’s a very different type of hazard. You know what’s going to happen when you have a hurricane—rarely is there something other than wind and rain.” Rochman said. “That’s not true of terrorist attacks—you don’t know what they’re going to do, so you can’t predict it. You’re trying to think like a crazy person.”
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