A topic known within the industry but not by the everyday citizen is the impending expiration of the Terrorism Risk Insurance Program. The bottom line is that the private sector will not insure this risk alone and this coverage is necessary to sustain the economy.
Instead of recreating the wheel, the insurance company, Greater New York,summarized this issue with a terrific letter to their agents. We recommend you read excerpts from the letter to be informed on the issue:
As you know, the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) will expire on December 31, 2014 unless Congress extends or renews the Act. At this point it is uncertain whether this program, which has been extended twice before, will be extended again, and, if so, in what form and on what terms. One thing, however, is certain: without a government program that limits the exposure of insurers to acts of terrorism carriers will be forced out of the market for terrorism coverage at a great cost to insureds who wish to purchase the coverage.
TRIPRA keeps the terrorism market open by allocating the terrorism exposure between the Federal government and the private sector when (1) the act is declared to be a “certified act of terrorism”; (2) the losses exceed $100 million in a single calendar year; and (3) the insurers have met their deductibles under TRIPRA. TRIPRA not only enables insurers to meet their obligations across all economic sectors and product lines after a terrorism attack, but, even more importantly, serves our nation’s vital national-security interests by allowing commerce to regain its footing after a terrorist attack.
Congress will introduce an unacceptable level of instability into the insurance market and the economy as a whole if it does not extend TRIPRA on at least substantially the same terms that exist now. Without TRIPRA real-estate owners and developers will have great difficulty obtaining terrorism insurance. Construction will be seriously impaired, and business start-ups will be slowed, because, among other things, banks may stop providing loans. In addition, the price for terrorism coverage will spike, making terrorism coverage unaffordable to many.
Whether it was testifying, four times, before Congress in support of TRIPRA, or meeting privately with Congressman Michael G. Grimm, a major supporter of TRIPRA, GNY has supported, and will continue to support, TRIPRA in the strongest possible terms.
But even with strong industry and Congressional support, GNY, like other insurers, will face difficult choices leading up to, and beyond, TRIPRA’s expiration date, if, one, Congress does not extend or renew TRIPRA, or adversely alters its terms, and, two, states prohibit insurers from excluding terrorism…