Lloyd’s testifies in favour of U.S. Terrorism Risk Insurance Act renewal

Lloyd’s has testified to the United States government that the reauthorization of the Terrorism Risk Insurance Act (TRIA) is essential for the private market offering terrorism insurance coverage there, joining other industry players who are also in favour of renewal. 

Sean McGovern, Lloyd’s director of risk management and general counsel, testified Nov. 13 in front of the U.S. House Committee on Financial Services, which is conducting hearings on TRIA, according to an article on the Lloyd’s website.

That hearing was titled “The Future of Terrorism Insurance: Fostering Private Market Innovation to Limit Taxpayer Exposure” and included several other insurance and reinsurance industry witnesses.

“…(C)hanges to TRIA to facilitate private insurance and reinsurance capacity should not sacrifice the stability TRIA has already achieved. How changes are made can be just as important as what changes are made,” McGovern said.

Any changes should then be “incremental over the course of a long-term extension of the programme [which] may provide a transparent process of reductions in the risk borne by the taxpayer,” McGovern is quoted as saying in the Lloyd’s article.

“The current take-up rate for government-backstopped commercial terrorism cover is about 60%. Raising the private sector’s burden could lead to increased premiums and reduce the take-up rate, which would increase the burden on the taxpayer if there was an attack,” he also said.

“There is mounting pressure on Congress to announce a decision before next year’s renewal season but, even with a fair wind, I think serious congressional action won’t happen until next year,” he also noted, according to Lloyd’s.

“If a vote is left to the floor I would expect TRIA to be renewed in its current form. The current political climate, however, means it is likely there will be some changes to the bill.”

In September, several other insurance industry players testified that the renewal of TRIA is crucial for continued terrorism coverage in the U.S.

“We consider TRIA to be a model public-private partnership,” Peter J. Beshar, executive vice president and general counsel of Marsh & McLennan testified. “TRIA restored insurance capacity at a critical time after 9-11 and continues to be the backbone of a healthy terrorism insurance market.”

“In our judgment, the existence of a private terrorism insurance market, backstopped by TRIA, actually serves to protect the government and taxpayers from absorbing virtually all of the financial loss in the event of a terrorist attack,” he added.