Aon: Abandoning TRIA Would Spell Disaster

By Mark E. Ruquet

NU Online News Service, 2:39 p.m. EST?A report from Aon brokerage on terrorism insurance said that failure to renew the Terrorism Risk Insurance Act would have a negative impact on a market that is still in its infancy.[@@]

The report, titled "Terrorism Risk Management & Risk Transfer Market Overview," reviews the history and current market take-up of terrorism insurance throughout the U.S.

TRIA, a U.S. government-sponsored reinsurance program, is an important component in the overall strategy for the development of terrorism insurance by the private insurance market. However, if TRIA is allowed to expire Dec. 31, 2005, it would have a detrimental impact on the insurance market, AON said.

"TRIA's importance as a backdrop cannot be overstated," the report said. "Its expiration will cause an immediate and significant diminution of the available supply of terrorism capacity that is likely to leave the market hard pressed, if not unable, to meet the potential demand for risk transfer capacity."

Currently, there is $1.1 billion in per risk stand-alone terrorism capacity and approximately $116 billion of property-casualty U.S. insurer's surplus supporting all commercial property, general liability and workers' compensation insurance. These markets depend upon the $100 billion of TRIA as a reinsurance backstop because there is no other facility privately available at this time.

Should TRIA not be renewed, the report said, many insurers are ready to exclude coverage for acts of terrorism from their Jan. 1, 2006 policies. The report said Aon fully supports reauthorization of TRIA.

The report did note that more clients are buying terrorism insurance, with 57 percent of companies purchasing some kind of terrorism insurance, an increase over the 24 percent found earlier this year, Aon said.

"After the chaotic rollout of TRIA, with its attendant pricing confusion, a more rational market has fostered rational decision-making," the report noted.

The 76-page report also notes the different proposals on the table in Congress to renew TRIA and lists Treasury Department Regulations, international programs, terror organizations and examples of terrorist acts.

Access to the report is available at www.aon.com.

Special Reports /

Aon: Abandoning TRIA Would Spell Disaster

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