NEW YORK–The Terrorism Risk Insurance Act isn't set to expireuntil the end of 2014, but that doesn't mean it won't be an issuein 2013, says Lloyd's director for North America.
|Given the fiscal deficit, the insurance industry has a lot ofconvincing to do. And it needs to start now, says Sean McGovern,Lloyd's director responsible for North America.
|Some lawmakers in Washington may think we can do without TRIAbecause there hasn't been a su
ccessful attack on the U.S., he says.
"The risk [of terrorism] has not gone away," says McGovern fromLloyd's New York office. "Together with our clients, we need topersuade Congress that the country still needs TRIA."
|ALSO READ: TRIA Renewal: No Guarantee
|Simply stated, terrorism remains an extremely tough risk tounderwrite. Most of the features of insurance are not there.Terrorism risk is very difficult to model and price and it has avery high concentration of loss potential. A sustainable privatemarketplace of the necessary size does not exist.
|Educating the new Congress after the 2012 election needs tostart this year in an attempt to avoid another last-minutereauthorization of the act, which in November 2002 created abackstop to provide coverage to insurance companies following adeclared terrorism event.
|"I don't think there is any real alternative," McGovern says ofthe backstop.
|The industry additionally needs to ensure the solution doesn'tbecome less valuable to insureds and insurers, since with everyreauthorization, limits and deductibles have gone up, McGovernadds.
|Many insurance executives testified about TRIA's importancebefore a House subcommittee on Sept.11, 2012. More hearings are expectedlater this year.
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