Advertisement

April 23, 2014

Marsh Report Shows Continued Demand for Terrorism Coverage

As the current Terrorism Risk Insurance Act (TRIA) moves closer to its scheduled expiration date of December 31, 2014, the debate is heating up over whether the federal backstop remains necessary and whether the market demand for terrorism coverage still exists. According to the Marsh 2013 Terrorism Risk Insurance Report, released April 30, demand for coverage has remained both steady and strong. These results only reinforce the need for a long-term extension of the terrorism backstop.

During the first full year of TRIA, only 27% of organizations obtained terrorism coverage as the market was still adjusting to the TRIA program and the fallout from the 9/11 attacks. Since that time, take-up rates have grown steadily. By 2005 the take-up rate for terrorism insurance was 58%. Today the rate is more than 60%—where it has been since 2009. The take-up rates are highest among companies with total insured value (TIV) over $500 million, but even those companies with less than $100 million in TIV obtained terrorism insurance at a 59% rate in 2012.

Take-up rates did vary amongst different industry sectors. Companies within the media, education, financial institutions, health care or nonprofit sectors obtained terrorism coverage at a rate above 70% during 2012, with the media sector leading the way with an 81% take-up rate. The food and beverage, manufacturing, chemical and energy and mining and sectors were at the low end with take-up rates of 50% or lower.

With regard to region, companies located in the Northeast were most likely to obtain terrorism insurance with a take-up rate of 77% in 2012. This is to be expected given the concentration of large metro areas with high population density. However, other regions are showing a strong need for coverage as well. Companies located in the South, West and Midwest regions obtained coverage at the rates of 63%, 53%, and 58% respectively in 2012. The threat of terrorism is not just a Northeast problem, and companies in regions with a less-perceived threat of terrorism are showing recognition of that fact.

If TRIA is allowed to expire, these numbers could change drastically as capacity would be significantly decreased. Without TRIA, insurers would no longer be required to offer terrorism coverage. The Marsh report shows that terrorism pricing, as a part of property premiums, has remained within the 3-5% range since 2010. Premiums would likely rise, however, without TRIA, and the certainty it provides insurers essentially subsidizes current rates. Additionally, companies with a high exposure concentration in central business districts or major metropolitan areas would likely not be able to purchase the necessary amount of coverage, forcing them to self-insure all or part of their terrorism risks.

The Marsh report covers many other issues surrounding the terrorism market that are not discussed here, including: considerations in using captives for terrorism coverage; the terrorism reinsurance market; the standalone terrorism market; and implications on workers compensation and general liability coverage if TRIA were allowed to expire.

Risk Management Magazine and Risk Management Monitor. Copyright 2014 Risk and Insurance Management Society, Inc. All rights reserved.

About the Author

Senior Government Affairs Manager

Nathan Bacchus is senior government affairs manager at The Risk and Insurance Management Society (RIMS).

212-655-5922

Boost: AJAX core statistics

Legal Disclaimer

You are responsible for reading, understanding and agreeing to the National Law Review's (NLR’s) and the National Law Forum LLC's  Terms of Use and Privacy Policy before using the National Law Review website. The National Law Review is a free to use, no-log in database of legal and business articles. The content and links on www.NatLawReview.com are intended for general information purposes only. Any legal analysis, legislative updates or other content and links should not be construed as legal or professional advice or a substitute for such advice. No attorney-client or confidential relationship is formed by the transmission of information between you and the National Law Review website or any of the law firms, attorneys or other professionals or organizations who include content on the National Law Review website. If you require legal or professional advice, kindly contact an attorney or other suitable professional advisor.  

Some states have laws and ethical rules regarding solicitation and advertisement practices by attorneys and/or other professionals. The National Law Review is not a law firm nor is www.NatLawReview.com  intended to be  a referral service for attorneys and/or other professionals. The NLR does not wish, nor does it intend, to solicit the business of anyone or to refer anyone to an attorney or other professional.  NLR does not answer legal questions nor will we refer you to an attorney or other professional if you request such information from us. 

Under certain state laws the following statements may be required on this website and we have included them in order to be in full compliance with these rules. The choice of a lawyer or other professional is an important decision and should not be based solely upon advertisements. Attorney Advertising Notice: Prior results do not guarantee a similar outcome. Statement in compliance with Texas Rules of Professional Conduct. Unless otherwise noted, attorneys are not certified by the Texas Board of Legal Specialization, nor can NLR attest to the accuracy of any notation of Legal Specialization or other Professional Credentials.

The National Law Review - National Law Forum LLC 4700 Gilbert Ave. Suite 47 #230 Western Springs, IL 60558  Telephone  (708) 357-3317 If you would ike to contact us via email please click here.