Aon adds voice to call for TRIA extension

Following the release of a survey indicating the increasing desire to purchase terrorism coverage under the Terrorism Risk Insurance Act (TRIA), broker Aon is adding its voice to the call for an extension of the U.S. government program.
Aon says the TRIA-backed coverage is being taken up by 57% of the companies it surveyed, an increase over 24% reported earlier this year. TRIA, through which the U.S. government acts reinsurer for terrorist events, requires insurers to make available the coverage. Under the program, Aon notes, terrorism coverage has become increasingly affordable for buyers.
However, the program is set to expire at the end of 2005, and insurers and brokers have joined together to ask Congress to extend the program through 2007. It is hoped that the extension will allow private market terrorism coverage to become more available, but failing this, insurers have already gained approval for standard terrorism exclusions in most states.
It should come as no surprise to the industry that the coverage offered through TRIA has become increasingly desirable for business,” says Gary Marchitello, managing director for Aon’s U.S. national property syndication group. “However, we are facing a watershed year for this coverage. With the possible expiration of TRIA, Capitol Hill and the insurance industry cannot afford to postpone efforts to renew TRIA or create a similar mechanism to manage the global terror risks the ‘new reality’ has created.”
In its report, Aon speculates that if the program expires in 12 months time, there will likely be a severe coverage availability problem in the marketplace. “Its expiration will cause an immediate and significant diminution of the available supply of terrorism capacity that is likely to leave the market hard pressed, if not unable, to meet the potential demand for risk transfer capacity,” the report notes.