April 1, 2004 by Canadian Underwriter
With the 2005 sunset deadline for the U.S. federal government terrorism backstop fast approaching, commercial brokers are urging legislators to extend the program.
In a survey of its members, the Council of Insurance Agents and Brokers (CIAB) found 80% want to see an extension of the Terrorism Risk Insurance Act (TRIA) past December 31, 2005. The U.S. Treasury Department is currently surveying insurers to determine market availability for terrorism coverage, with a report due out in early summer.
The program was put in place in the wake of the September 11, 2001 terrorist attacks, when reinsurance coverage for terrorism risks dried up and insurers told the government such coverage could only be offered if the government stepped in to act as a reinsurer.
Despite commercial brokers calling for an extension of the plan, many of them say their clients are not using the program. Half of the brokers say that less than 20% of their clients are buying coverage, citing the high cost of coverage and clients feeling they are not terrorism targets.
As well, about 70% of the brokers say terrorism coverage is now more available than a year ago, partly due to the fact that there have been no further terrorism attacks in the U.S.
Nonetheless, there is fear that uncertainty over TRIA’s future will be a problem for “at risk” properties, notes Ken A Crerar, president of the CIAB. “Because negotiations over renewals for large accounts typically begin several months before the policy renewal date, we could start seeing the impact of the expiration of TRIA as early as this fall for January 2005 renewals,” he says. “Lawmakers need to realize when evaluating a TRIA extension that some carriers may choose not to renew a yearly contract on a high-profile property if it means that for a short period of time, there would be no federal protection in the event of a terrorist act.”