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The insurance and allied industries, including the actuarial sector, have been encouraged by progress in the quest for an extension of the federal terrorism insurance backstop program, observers say.
They applaud both the U.S. House of Representatives’ early action on the bill, over a year in advance of the current extension’s expiration at the end of next year, as well as the addition of a provision for a study on cyber exposures.
“We’re excited to see the House act on this issue early so we don’t have a lapse like last time,” said Catherine A. Mulligan, global head of cyber for Aon Reinsurance Solutions in New York.
“It would appear that a clean reauthorization of the legislation is well supported by both sides of the House, “ said Wendy Peters, global head of terrorism and political violence for Willis Towers Watson PLC in Radnor, Pennsylvania, and a member of the advisory committee on risk-sharing mechanisms for the U.S. Treasury.
She said the cyber study proposal also “seems to have support from both sides of the House.”
The program was allowed to lapse briefly at the end of 2014 before Congress acted to extend it.
“We’re concerned the reauthorization does take place without a gap,” said Lisa Slotznick, vice president of casualty issues for the Washington-based American Academy of Actuaries.
Members of the House Financial Services Committee voted Oct. 31 to pass H.R. 4634, the Terrorism Risk Insurance Program Reauthorization Act of 2019, as amended.
“We are encouraged by the House Financial Services Committee unanimous vote and will continue to advocate that Congress acts swiftly to move this very important bill through its legislative processes to provide market certainty,” Adam Posner, head of U.S. terrorism and political violence in Schaumburg, Illinois-based Roanoke Insurance Group Inc. said in an email.
The amended bill differed from the original introduced in House to extend the federal terrorism insurance backstop by requiring a report from the U.S. Government Accountability Office “on cyber terrorism risks, and require biennial Treasury reporting that includes disaggregated data on places of worship.”
The amended bill also shortens the extension to seven years from the original bill’s 10 years.
“TRIA has long been a bipartisan priority and we are pleased that the House Financial Services Committee acted and voted unanimously to reauthorize it,” Nat Wienecke, Washington-based senior vice president of federal government relations at the American Property Casualty Insurance Association, said in an email.
The bill in its current form should garner broad insurance industry support, Ms. Peters said. “We would assume that industry should be content with the bill as proposed by the House, a clean seven-year reauthorization with a cyber terrorism study to be conducted by the Government Accountability Office.”
The cyber report is expected to analyze overall vulnerabilities and the potential costs of cyberattacks to U.S. infrastructure; whether “cyber liability under a property and casualty line of insurance is adequate coverage for an act of cyber terrorism”; whether cyber risks can be adequately priced and whether the risk-sharing mechanism under TRIA is appropriate for a cyber terrorism event; and set out recommendation on how Congress could amend the act to “meet the next generation of cyber threats.”
The cyber study will help the industry quantify cyber exposures by focusing more resources and attention on the potential for systemic cyber exposures, Ms. Mulligan said, adding Aon has been studying the aggregations and systemic potential of a cyber event.
“Businesses are relying more on software as a service and moving certain operations to outside vendors,” such as the reliance on cloud computing, she said, which means cyberattacks can result in “significant” downtime for supply chains and even physical damage.
“The potential magnitude has only increased,” she said. “Cyber can happen and the threat actors have been strongly linked and their motivation strongly linked to terrorism.”
Pricing for terrorism coverage would almost certainly be affected by changes to or a lapse in TRIA, Ms. Slotznick said.
“TRIA is part of the current scenario of how insurance policies are priced, and it would be a good thing to continue that because it is part of what is keeping the industry stable,” she said.
“We strongly endorse — on behalf of our clients — a timely reauthorization of TRIPRA,” John Doyle, president and CEO of Marsh LLC, said in an email, referring to the Terrorism Risk Insurance Program Reauthorization Act of 2015. “H.R. 4634 would keep the terrorism risk insurance market viable. It’s an imperative for our clients, who rely on this coverage in big and small cities all over the country, and for the U.S. economy.”
“TRIA has worked to this point. Insurance has been available. It has kept people in the marketplace. Keeping it in place keeps the marketplace working,” Ms. Slotznik said.
NEW YORK — Advocates are calling for an extension to the Terrorism Risk Insurance Act of up to 10 years to help take the law out of the cycle of needing renewal every few years.