February 3, 2005 by Canadian Underwriter
With no clear indication that the U.S. Congress will extend the Terrorism Risk Insurance Act (TRIA) beyond its December 31, 2005 sunset, the insurance industry is already seeing the potential impact of TRIA’s non-renewal, says a new report by Standard & Poor’s.
The rating agency says workers’ compensation (WC) carriers could be hardest hit if the government reinsurance backstop for terrorism losses is not extended. This is because, by law, primary WC insurers must cover on-the-job injuries as a result of terrorism regardless of whether they have reinsurance coverage or not. If reinsurance becomes
unavailable, these insurers will likely develop new risk models for this
coverage, says Thomas Upton, director in S&P’s insurance group.
The report also notes that landlords could suffer, as p&c carriers may drop terrorism coverage without a government backstop in place, which could depress property values. For this reason, real estate groups are joining with insurers and other to press for a two-year TRIA extension.