The number of captive insurance companies insuring terrorism risk rose in 2017, according to a report from Marsh.
The 2018 Terrorism Risk Insurance Report revealed that last year, 166 Marsh-managed captives were actively underwriting one or more insurance programmes that access the Terrorism Risk Insurance Programme Reauthorisation Act of 2015 (TRIPRA) a 44 percent increase from 115 captives in 2016.
TRIPRA 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.
The report also noted that captives can prove a more cost-effective solution to implementing terrorism insurance than commercial insurers, and are sometimes the only viable option—such as when attempting to secure significant limits for nuclear, biological, chemical and radioactive (NCBR) coverage.
According to the report, NBCR coverage is not widely available in the traditional insurance marketplace due to the lack of a TRIPRA mandate, but captives can offer the coverage and gain access to the reinsurance protection afforded by TRIPRA.
Tarique Nageer, terrorism placement advisory leader at Marsh, said: “By using a captive to access TRIPRA coverage or to supplement coverage purchased from commercial insurers, organisations can cost-effectively manage their net retained terrorism risk.”
He added: “Businesses often conclude that using a captive to write cyber terrorism risk is a cost-effective and relatively easy way to reduce net retained risk, especially for companies that already own captives.”