Claims News Service, Oct. 20, 4:50 p.m. EDT — (MARKET WIRE) — A governmental-private sector partnership reinsurance facility to provide a long-term replacement for the federal Terrorism Risk Insurance Act, which expires at the end of this year, has been proposed by The U.S. RE Group, Tal P. Piccione, Chairman/CEO, announced.
"We met with senior executives of the American Insurance Association and plan to meet with other associations and industry leaders over the foreseeable future," Piccione said. "We are finding a receptive attitude toward achieving an industry-government partnership. Financing the coverage requires a government backstop because it is impossible to predict the frequency and severity of potential terrorism events," he explained.
The Terrorism Risk Reinsurance Facility (TRRF) proposed by U.S. RE would be a tax-exempt, quasi-governmental entity to pay terrorism losses in excess of individual company retentions for all commercial lines up to a maximum industry loss of $45 billion in any year. Industry retentions would be pegged at 15 percent of prior year commercial premiums, or about $30 billion. This would provide up to an estimated $75 billion of terrorism coverage per year.
Funding for TRRF would be provided by insurance companies through payment of a percentage of commercial lines premiums annually. In the event that an act of terrorism occurs before the fund is capable of paying the losses, the federal government would lend the facility money to cover the shortfall until the fund builds up.
More information is available at www.usre.com.
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