TRIA expiration 'credit negative' for property/casualty industry: Moody's
Reprints
The Dec. 31 expiration of the federal government's terrorism insurance backstop program is “credit negative” for the U.S. property/casualty insurance industry, Moody's Investors Service Inc. said in a report released Tuesday.
In “Non-Renewal of the Federal Terrorism Backstop Is Credit Negative,” Moody's said that it expects “market dislocation, with coverage becoming less widely available and more costly, and in some cases potentially unavailable in large urban markets” following the non-renewal. Moody's adds that “we consider it likely, but not certain, that some type of reauthorization of the federal backstop for terrorism insurance will emerge fairly early in the legislative session when Congress reconvenes” next month.
The Senate's failure to reauthorize the program before adjourning “will likely produce significant strain on workers' compensation renewals” unless the program is reauthorized in early 2015, said Moody's.
“Large employers in areas considered most vulnerable to terrorism-related losses will likely see a significant reduction in the number of insurers willing to write their (workers compensation) risks,” said Moody's, adding that insurers may seek “significantly higher premiums, and/or shift coverage to an excess basis, under which they can exclude terrorism coverage.” The report noted, however, that insurers “remain constrained by pre-notification requirements,” under which they have to file requests for rate increases with state insurance regulators and receive approval before changing policies, “typically with a three-month advance notice.”
The House approved a bill that would extend the program for six years in early December. Retiring Sen. Tom Coburn, R-Okla., objected to a provision in the bill calling for the creation of a National Association of Registered Agents & Brokers to facilitate interstate producer licensing and blocked consideration of the measure.
Read Next
-
Rating agencies take calm approach to TRIA expiration
The lapse of the federal governments' terrorism insurance backstop program is unlikely to have any short-term impact on the ratings of insurance companies, according to rating agencies.
Related Stories
-
-
TRIA reauthorization supporters pin their hopes on the next Congress
-
Senate's failure to reauthorize TRIA sends shockwaves through insurance sector
