Terrorism insuranceDemand for terrorism insurance remains strong

The fourth edition of the Terrorism Risk Insurance Report has found that demand for terrorism insurance remains strong and the renewal of the Terrorism Risk Insurance Program Reauthorization Act (TRIA) plays a key role in making coverage available and affordable.

The 2014 Marsh & McLennan Companies survey of roughly 2,600 clients found that the demand and price for terrorism insurance has remained constant since 2009. Education organizations purchase property terrorism insurance at a higher rate, 81 percent, than companies in any other industry segment surveyed in 2013, followed by healthcare organizations, financial institutions, and media companies.

Insurance Journal notes that findings from the report were presented at the U.S. Capitol earlier this month as part of a roundtable discussion that brought together industry leaders, clients, and policymakers to encourage Congress to renew TRIA. Uncertainty over the extension of TRIA when it expires at year’s end is affecting the availability of terrorism coverage, although demand remains constant.

“We believe TRIA is a model public-private partnership. Marsh’s new report confirms there is strong, long-term demand for the insurance it backstops with more than six out of ten companies in the survey purchasing coverage,” said Dan Glaser, president and CEO of Marsh & McLennan Companies, who hosted the roundtable discussion. “The existence of the federal program plays a major part in the availability and affordability of the coverage.”

Findings from the report also include:

• In 2013 the percentage of Marsh clients purchasing terrorism coverage was 62 percent, unchanged from 2012.
• Massachusetts has the highest property terrorism insurance take-up rates (84 percent) among all states in 2013, followed by Maryland at 81 percent. Hawaii has the lowest take-up rate, at 36 percent.
• Median rates for companies with total insured value (TIV) of less than $100 million rose slightly in 2013 to $51 per million from $49 per million of TIV, while median rates for companies with TIVs of more than $1 billion, fell slightly to $18 per million from $19 per million in 2013.
• Construction companies paid the most for terrorism insurance in 2013, a median rate of $66 per million TIV, followed by power and utility companies, which paid a median rate of $48 per million of TIV.
• Healthcare companies paid the least for terrorism insurance in 2013, a median rate of $14 per million of TIV, followed by education and manufacturing companies, which each paid a median $17 per million of TIV.

The Boston Marathon bombings highlighted the need to reauthorize TRIA and to include a streamlined process and shorter timeframe for determining if an event can be classified as terrorism (see “Boston bombing spurred small, midsize businesses to buy terrorism insurance,” HSNW, 23 April 2014). A recently introduced Senate bill would reauthorize TRIA for seven years while increasing the industry’s co-share on losses but insurers are against the proposed co-share increase.

A reportto Congress by the President’s Working Group on Financial Markets found that private insurers could not financially support the demand for terrorism insurance if TRIA is not renewed, but the report also agreed that an increase in insurers’ co-share could occur without hurting the availability or affordability of terrorism insurance (see also “Extending terrorism insurance would save U.S. government money after future attacks,” HSNW, 14 April 2014).