Captive insurance could be the only way of gaining cost-effective terrorism insurance that covers nuclear, biological, chemical and radioactive impacts (NBCR), according to Arthur Koritzinsky, managing director of Marsh’s captive solutions group.
Speaking during a session covering terrorism insurance at the Western Region Captive Insurance Conference, Koritzinksy said: “Using a captive to write NBCR may be the only affordable way of getting it.”
Fellow panellist, and the Missouri Department of Insurance’s captive programme manager, John Talley added: “Some commercial insurance companies are not offering NBCR coverage in their terrorism package.”
“What does a company do in that circumstance? Well if they have a captive, they can use that. Captives can provide NBCR because Terrorism Risk Insurance Act (TRIA) and the Terrorism Risk Insurance Program Reauthorisation Act (TRIPRA) authorise federal backstop reinsurance."
According to TRIPRA, as long as NBCR is covered in the underlying policy it will be covered by the TRIA.
TRIA is a federal programme created by the US Treasury that allows for a transparent system of shared public and private compensation for certain insured losses resulting from a certified act of terrorism.
According to Marsh’s 2018 Terrorism Risk Insurance Report, 166 Marsh-managed captives were actively underwriting one or more insurance programmes that access the TRIPRA, a 44 percent increase from 115 captives in 2016.
TRIPRA ends in 2020, but it is thought that it will be quickly reauthorised at that time, similar to the reauthorisation in 2015.
Questions still remain over whether there would be any alterations to the Act in that event, but it is thought to be unlikely we would see any clarifications in the way ‘terrorism’ is defined in the act.
It is suspected that the trigger, the minimum amount of damage required to result in compensation for insurance companies, would continue to increase (it is currently at $160 million and is increasing $20 million annually).
