The number of Marsh-managed captives accessing the Terrorism Risk Insurance Act (TRIA) following its reauthorisation has increased by 17 percent from 93 in 2014 to 109 in 2015.
The Marsh 2016 Terrorism Risk Insurance Report also revealed, however, that many captives that could offer a terrorism insurance programme currently do not.
The US Treasury has recently proposed rules on whether to apply TRIA to self-insurance arrangements, including captive insurance companies, prompted by passage of the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) last year, which extended the programme until 2020.
The programme is designed to allow for terrorism coverage similar to other insured peril, and provides compensation for insured losses resulting from a certified act of terrorism.
Marsh’s report found that since 2015, take-up rates for TRIA coverage embedded in property policies have increased from 59 percent to 61 percent.
It claimed that large companies are more likely to purchase TRIA coverage, and also see the lowest cost as a percentage of overall property premiums.
In 2015, media organisations had highest take-up rate of TRIA.
According to the report, standalone property terrorism insurance capacity remained constant year-on-year.
Standalone property terrorism coverage can be more competitively priced and offer wider coverage than TRIA coverage. In addition, standalone property terrorism policies can provide critical terrorism and political violence coverage to clients’ operations outside of the US.
With terrorism and cyber both on the increase, the report asked how would TRIA respond to cyber terrorism. It suggested: “The language of TRIA is silent on cyber as a vector attack”.
The report said: “A cyber terrorism event that meets TRIPRA’s prerequisites, including being certified as terrorism by the secretary of Treasury, should be eligible for coverage under TRIPRA. As a result, many lines of coverage could be triggered by a cyber terrorism event.”
The report also stated that TRIA would likely not respond to losses under cyber insurance policies because, when it was first enacted, cyber insurance was not included as a covered line of insurance.
According to the report: “Although pricing and take-up of terrorism insurance has remained relatively stable through the years, organisations should regularly assess their needs and mitigation strategies.”
“The changing nature of terrorist attacks globally has caused the risk management and insurance industry to explore coverage enhancements that further address risks related to business disruption and extra expenses. With a thorough understanding of terrorism exposures and cost-effective risk transfer options organisations can better assess, manage, and respond to their terrorism risks.”
