Terrorism Risk Insurance Act

The United States Department of Treasury’s Federal Insurance Office (FIO) is seeking industry input and feedback on how available reinsurance and retrocession support from the capital markets may be for terrorism related risks.

Following its successful sponsorship of the first terrorism risk catastrophe bond earlier this year, Pool Re has been sharing its experience with other aggregators of terrorism insurance risk to help them understand the option to tap into capital markets appetite.

Terrorism insurance and reinsurance risks are seen by investors as a useful but complex diversification opportunity for their ILS funds, hot topics discussed at the annual IFTRIP conference suggested.

The United States Treasury continues to explore its options for terrorism risk sharing with private markets, with terrorism catastrophe bonds once again under discussion at committee level.

The involvement of the U.S. government in provision of terrorism insurance, through the Terrorism Risk Insurance Program under TRIA, limits traditional and alternative reinsurance capital’s ability to play a meaningful role, according to the Congressional Budget Office (CBO).

Yesterday the Terrorism Risk Reauthorisation Act of 2015 (HR 26) passed the U.S. Senate, renewing the government backed terrorism insurance facility for six years. Part of the reauthorisation calls for advice to be sought from the ILS and alternative risk markets.

The United States Congress is not going to extend the Terrorism Risk Insurance Act (TRIA), the financial backstop for U.S. property insurers against terrorist attacks, this year but with reinsurance capacity high this may result in a shortage of terrorism reinsurance cover.

The availability and price of terrorism risk insurance and reinsurance coverage has increased this year, as reinsurers look to provide additional terrorism re/insurance capacity as competition from alternative capital prompted them to be more supportive of the class.

So says the U.S. President’s Working Group on Financial Markets (PWG), in a recent report to Congress looking into the long-term availability and affordability of terrorism risk insurance which was published last Thursday.