TERRORISM RISK: A CONSTANT THREAT Impacts for Property/Casualty Insurers MARCH 2014 Robert P. Hartwig, Ph.D., CPCU President (212) 346-5520
[email protected] Claire Wilkinson Consultant (917) 459-6497
[email protected] Insurance Information Institute 110 William Street New York, NY 10038 212.346.5500 INTRODUCTION With just months to go until the year-end 2014 expiration of the government-backed Terrorism Risk Insurance Program Reauthorization Act (TRIPRA), the debate between industry and government over terrorism risk is intensifying. The discussion comes in a year that marks the one-year anniversary of the Boston Marathon bombing—the first successful terrorist attack on United States soil in more than a decade. The April 15, 2013, attack left three dead and 264 injured. Industry data shows that the proportion of businesses buying property terrorism insurance (the take-up rate for terrorism coverage) has increased since the enactment of TRIA in 2002, and for the last five years has held steady at around 60 percent, as businesses across the U.S. have had the opportunity to purchase terrorism coverage, usually at a reasonable cost. However, should TRIPRA not be extended, brokers have warned that the availability of terrorism insurance would be greatly reduced in areas of the U.S. that have the most need for coverage, such as central business districts. Uncertainty around TRIPRA’s future is already creating capacity and pricing issues for insurance buyers in early 2014, reports suggest.1 New Aon data shows that retail and transportation sectors face the highest risk of terrorist attack in 2014.2 Both sectors were significantly affected in 2013, as highlighted by the September 21, 2013, attack by gunmen on the upscale Westgate shopping mall in Nairobi, Kenya, as well as the Boston bombing.