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Moody’s: Stakes for P/C Insurers High If Congress Shifts TRIA Burden

A new report on the effort to renew to the Terrorism Risk Insurance Act by Moody’s Investor’s Service says changes to TRIA could have market consequences...
June 18, 2014

A new report on the effort to renew to the Terrorism Risk Insurance Act (TRIA) by Moody’s Investor’s Service says changes to TRIA could have market consequences. Moody’s says if Congress acts to extend the federal government backstop for terrorism insurance, the new version will likely impose higher deductibles and risk retentions on U.S. property/casualty insurers.

Failure to extend TRIA would affect “virtually every property owner or business” in major metropolitan areas that wish to, or must, carry terrorism insurance, according to the Moody’s report. “Many of these insureds now have embedded coverage, which is typically much less expensive than stand-alone coverage.” The report predicted that repercussions of a failure to renew TRIA would be “wide-ranging, from stalled expansions to the divesting of real estate in high-risk markets.” It also said the impact on workers compensation would be severe.

“The stakes for U.S. P&C insurers and their insureds are high,” said Alan Murray, a Moody’s senior vice president and author of the report. “Non-renewal of this program, or a significant reduction of the federal backstop, could result in insurance market dislocations, as insurers find themselves with sharply higher risk exposures. Coverage would become less widely available, more costly and perhaps even unavailable for some high-profile risks in certain large urban markets.” To hedge against exposures that would cease to be backstopped if the program is not renewed, many insurers have included measures such as sunset clauses or short-term policies in their 2014 terms and conditions, according to Moody’s.

Moody’s: Much Riding on TRIA Extension (Business Insurance 6/11/14)

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