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Terrorism insurance backstop key to coverage availability

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Terrorism insurance backstop key to coverage availability

The federal terrorism insurance backstop remains “an important mechanism in ensuring that terrorism risk insurance remains available and generally affordable,” according to a report issued by the U.S. Treasury Department.

The Terrorism Risk Insurance Program Reauthorization Act of 2015, which extended the program through 2020, requires the secretary of the Treasury, with the assistance of the Federal Insurance Department, to issue an annual report on the program's performance.

“Viewed on a national basis, the coverage being made available is comprehensive and would likely not be possible in the absence of the program,” according to the “Report on the Overall Effectiveness of the Federal Terrorism Insurance Program,” issued Thursday. “Although some regional differences exist, premiums for terrorism risk insurance generally remain a relatively small percentage of total premiums” for lines of coverage eligible for the program. The report said that in “many cases, insurers report the coverage is provided for a disclosed premium of $0.”

The report said that there is no evidence that coverage would be more available without the backstop. “Rather, costs would presumably increase and availability decrease, at least in certain areas,” it said.

Workers compensation could be particularly hard hit without the program, said the report.

“Given the manner in which such coverage is required to be provided as a matter of state law, the absence of the program may result in insurers exiting from that market,” said the report.

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