X
    X
    X
    X

    TRIA Update: Insurers May Be Asked to Segregate TRIA Premium

    Publications

    This month, the Federal Insurance Office (“FIO”) issued its “Report on the Overall Effectiveness of the Terrorism Risk Insurance Program” (the “Report”, found here), required by the latest reauthorization of the Terrorism Risk Insurance Act (“TRIA”) in 2015. The Report found that insurers have collected over $24 billion in TRIA-related premiums, yet there has not been a single certified act of terrorism under TRIA since its inception. The result, according to the Report, has been a “modest” increase in surplus levels of participating insurers, at least partially accountable to the lack of any TRIA-related events.

    In order to effectively hedge against future catastrophic events, the Report has suggested the possibility that participating insurers be required to segregate premiums attributable to TRIA coverage to specifically support future terrorism risk. The Report indicates that TRIA-related premiums are, on average, a small fraction of the premiums derived from the overall coverage, with only 2.6% of premium attributable to terrorism-related risk across all insurers. Furthermore, nearly a quarter of all insurers offer TRIA coverage for no additional charge. Of course, certain industries see much higher take-up rates and accordingly charge higher premiums. For example, only 1% of aircraft policies provide TRIA coverage for free, and excess workers’ compensation insurance coverage will often demand significantly higher premiums.

    It remains to be seen whether legislators will adopt the FIO recommendation and require a form of premium segregation in the future for terrorism contingencies. What is clear from the Report is that, should segregation of premiums be required, the impact will be far greater on those insurers who derive substantial premiums from TRIA offerings.

    Explore Additional Topics

    Disclaimer

    Please understand that your communications with Locke Lord LLP through this website do not constitute or create an attorney-client relationship with Locke Lord LLP. Any information you send to Locke Lord LLP through this website is on a non-confidential and non-privileged basis. Therefore, do not send or include any information in your email that you consider to be confidential or privileged.