Nearly half (45 percent) of risk managers expect terrorism coverage limits to decrease if TRIA is not re-authorized, shows a poll by the Risk and Insurance Management Society (RIMS), and a quarter believes this would terminate terrorism coverage entirely.

“TRIA is integral to keeping affordable lines of terrorism insurance available to all organizations conducting business in the United States,” says RIMS board director Carolyn Snow. “Without it, not only will individual organizations be more exposed in the event of a terrorist attack, our federal government would also take on the extraordinary burden of supporting its constituents during, an often costly, rebuilding process.”

RIMS has publically voiced its support of TRIA reauthorization, and states in its report, Terrorism Risk Insurance Act: The Commercial Consumer's Perspective, that offering a government backstop on acts of terrorism causing $100 million or more in insured losses is an economic necessity.

Without TRIA, says RIMS, organizations may be forced to self-insure for terrorism attacks, which would inadequately protect businesses from a serious terrorist strike; also, because the private policies that would be required by lenders come with “unreasonable” premiums, businesses may be unable to secure financing for projects, slowing the present economy.

A poll of RIMS members states the majority—85 percent—of risk managers have purchased or renewed terrorism insurance within the U.S. in the past year, mostly to protect the company from liability in the event of an attack.

The second-top reason survey respondents gave for purchasing terrorism insurance was the location of their organization's assets. However, more than 70 percent of respondents had less than 25 percent of their assets located in one of 11 major U.S. cities, such as New York or Houston.

“This reinforces RIMS' position that terrorism insurance recertification is not a concern limited to big cities,” says Janice Ochenkowski, managing director of real estate services company Jones Lang Lasalle, former RIMS president and author of the report. “Public entities may be concerned over the physical locations of their assets even if they are scattered across the country.

92 percent of respondents have had no difficulty obtaining full limit terrorism insurance coverage in any market, with 92 percent saying they are able to obtain adequate terrorism coverage for all their properties.

If they did encounter trouble, 40 percent of risk managers' companies went without terrorism insurance, and nearly as many said they accepted a limited amount of coverage.

“If buyer's responses are to non-renew their policies, then insurers and reinsurers will drop from the market,” says Ochenkowski. “Prices will increase, and insurance buyers won't be able to get coverage or choose it because of its expense.”

Currently, 66 percent of respondents don't use stand-alone terrorism coverage, and 74.8 percent don't use any terrorism risk transfer alternatives such as captives, cat bonds or reinsurance. Only 16.4 percent equally said they paid a higher price for coverage from another carrier or established a terrorism-insurance captive.

Special Reports /

Without TRIA, Risk Managers See Drop in Limits or Terror Cover to Vanish

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