The US Senate Banking, Housing and Urban Affairs Committee has heard from industry experts about the importance of extending the federal terrorism insurance backstop, which expires at the end of 2014.
Various stakeholders, led by the insurance industry, have consistently pushed to make the law permanent. The law was created as the Terrorism Risk Insurance Act (TRIA) of 2002, and has been renewed three times for short periods—most recently as the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA).
Thomas Stokes, managing principal and US consulting practice leader of JLT Towner, said: “Making the backstop permanent or at least extending it for a longer period of time would provide needed stability to insurance markets. Since its establishment, the federal backstop has given companies much-needed peace of mind and one tool to help them manage this catastrophic risk.”
While committee leaders agree that the terrorism law should be extended, some in the committee believe the market has greater capacity and can be scaled back. Stokes, however, cautions against taking out features that are vital to insurers.
“Most commercial insurers don’t insure against nuclear, biological, chemical and radiological (NBCR) risks, so the backstop is crucial to insure these risks…and don’t forget that captives are ideal vehicles to help protect against these and other risks,” added Stokes.
JLT Towner is an independent, full-service captive insurance management and captive consulting company with a multi-domicile reach.
