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ORLANDO, Fla. — The workers compensation industry needs U.S. lawmakers to act on renewing terrorism risk insurance coverage, according one expert weighing in on the pending renewal of the Terrorism Risk Insurance Act at the National Council for Compensation Insurance Inc.’s annual Issues Symposium on Tuesday.
“TRIA has been effective and essential in making terrorism risk and workers compensation available in the United States,” said David Priebe, New York-based vice chairman of Guy Carpenter & Co. LLC, who survived the attack on the World Trade Center on Sept. 11, 2001, one year before then-President George W. Bush signed into law a safety net for insurers who lost $46.3 billion, including $2.8 billion in comp losses, in the attack.
The Sept. 11 losses would have been worse had the attacks taken place later in the morning, Mr. Priebe said.
Terrorism risk, considered “uninsurable” due to the unpredictable nature of attacks, “is highly correlated with all lines,” he said, adding that comp coverage in particular is required by law in most states and that there are no limits to losses, which can quickly become catastrophic.
“All it takes is a location with a few hundred employees … to lead to losses to the effect of $200 million,” he said. “Terrorism risk is among the most challenging lines to underwrite.”
Enter TRIA, the 2002 act slated to expire Dec. 31, 2020, which Mr. Priebe said he and other industry stakeholders are hoping to see renewed in the coming months.
TRIA offers property/casualty insurers nine levels of protection, including a workers compensation industry aggregate deductible estimated at $17 billion — a little more than one-third of the total deductible, according to Mr. Priebe.
“There is a strong desire to have a reauthorization sooner rather than later,” he said.
“Let’s hope out federal government moves from inaction to action on reauthorization.”
Failure to renew or replace the federal terrorism insurance backstop could push employers into the residual workers compensation market and require them to pay higher comp premiums, potentially causing a slight reduction in overall economic growth, according to a study released Wednesday by RAND Corp.