A bipartisan group of senators today introduced legislation to extend the Terrorism Risk Insurance Program. According to Sen. Chuck Schumer of New York, the legislation would advance the federal backstop program—currently set to expire at the end of the year—through 2021.
The program, which requires the government to help cover a portion of insured losses from a terrorist attack, has been the focus of insurance industry advocates since a deal was reached to cap flood insurance increases last month.
According to experts, failure by Congress to reauthorize the Terrorism Risk Insurance Program could destabilize many aspects of the property-casualty insurance industry—especially workers’ compensation.
According to a report from
Marsh & McLennan, terrorism risk exclusions in property and workers’ comp policies are transferring greater risk to buyers, making it difficult for clients in major cities to find affordable rates.
“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, some insurers are even setting policy expiration dates to coincide the anticipated expiration of the program.
Marsh Executive Vice President Peter Beshar welcomed the news today, saying:
“The new legislation…continues the arc of appropriately transferring risk away from taxpayers and back to the private market and reassures policyholders and carriers that the program will continue.”
The legislation is not a straightforward renewal, however. The new program would increase insurers’ copay after the deductible to 20% (up from 15%), while the government would cover 80% of each insurer’s additional losses. The increase would be phased in incrementally over five years if the bill is passed.
The bill also raises the mandatory recoupment threshold to $37.5 billion—up from $27.5 billion.
Those changes was necessary to gain bipartisan support of the measure, Sen. Schumer said.
Meanwhile, three bills that would extend the Terrorism Risk Insurance Program have already been introduced in the House of Representatives.
