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Ratings agency A.M. Best & Co. will compile a list of rated insurers with exposure to terrorism. beginning midyear 2019, the company said in a statement Friday, with potential ratings ramifications.
Those companies “viewed to have material terrorism exposure in addition to a significant reliance on (the Terrorism Risk Insurance Program Reauthorization Act)” will be asked “to present detailed plans on how they will mitigate this exposure in the event that TRIPRA is not renewed” the statement said.
Although the vast majority of catastrophe-exposed insurers typically rely on reinsurance to mitigate catastrophe risk, insurers that have substantial terrorism exposure might also rely on TRIPRA to stay within their stated risk tolerances, Best said.
Key concerns for the ratings agency with regard to terrorism are insurers’ net loss exposures to terrorism excluding the benefit of TRIPRA, aggregate exposures of risks in certain geographic areas, the number of locations in those areas and the impact on risk-adjusted capitalization, the statement said.
Failure to properly address such issues could have ratings implications, Best said.
“Insurers that currently would be materially affected by the absence of TRIPRA, and that cannot provide a sufficient action plan to reduce exposures to terrorism risks, likely will face negative rating pressure by year-end 2019.”
Best also said it would look at potential effects on the stand-alone terrorism market, which is not backed by TRIPRA.
“Although private terrorism reinsurance is currently available, a rating concern will be the future availability and affordability of reinsurance if the federal backstop is eliminated or changes significantly,” Best said.
The TRIPRA of 2015 extended the expiration for the TRIPRA of 2007 to December 31, 2020, according to Best.
The original bill, referred to as the Terrorism Risk Insurance Act, was passed in late 2002 in response to the 9/11 attacks and was authorized to address the availability and affordability crisis for those commercial businesses in need of terrorism insurance.
There is concern over uncertainty surrounding the legislations renewal, Best said.
“Although this public/private collaboration seems to have achieved its goal, there is some uncertainty as to TRIPRA’s future role. As of today, whether TRIPRA will be extended again —and if so, under what terms and conditions — remains in doubt.”
Pool Reinsurance Co. Ltd., Britain’s terrorism risk reinsurer, has put £10 million ($13.15 million) into an information-sharing platform in a joint project with the UK National Counter-Terrorism Police HQ and the Home Office’s Joint Security & Resilience Centre, Pool said in a statement Wednesday.