Fitch Ratings has issued a report on what it believes will be the impact on different aspects of business should the Terrorism Risk Insurance Act not be renewed. Present legislation, the Terrorist Risk Insurance Program Reauthorization Act, doesn’t expire until Dec. 31, 2014, but renewals of current policies will begin in January.
TRIA was passed after the 9/11 terrorism attacks to act as a backstop of sorts in the event a future event yielded similar financial losses.
The report finds that the most critical impact will be on workers compensation. Reduced workers’ compensation coverage availability would have broad economic consequences for employers, according to the report. Workers’ compensation insurers could be especially susceptible to large losses if a major terrorist event takes place without TRIPRA coverage. “Recognition of this vulnerability may lead to a withdrawal of insurer’s underwriting capacity from the workers’ compensation market, particularly in industries and geographic areas with greater perceived risk of terrorism-related losses,” Fitch said in its report.
Impact will also be felt in commercial property and business interruption lines of insurance, in addition to insurer credit ratings and the commercial mortgage-backed securities market.
The report cautions that if TRIA is not renewed, “demand for private market terrorism insurance protection will inevitably increase and premium rates will significantly rise.” If renewal is unsuccessful, “the private market is unlikely to duplicate the coverage limits available under the current program if renewal is unsuccessful.”
Download Fitch TRIA Report here.