Peter Beshar, the executive vice president and general counsel of Marsh & McLennan Companies, testified before the US house of representatives committee on financial services on the future of the Terrorism Risk Insurance Act (TRIA).
US congress is currently deciding whether to reathorise TRIA, which is set to expire on 31 December 2014.
Beshar said: “We consider TRIA to be a model public-private partnership. TRIA restored insurance capacity at a critical time after 9/11 and continues to be the backbone of a healthy terrorism insurance market.”
“In our judgment, the existence of a private terrorism insurance market, backstopped by TRIA, actually serves to protect the government and taxpayers from absorbing virtually all of the financial loss in the event of a terrorist attack."
Beshar’s testimony comes just one day after Marsh representatives shared their views on TRIA with the director of the federal insurance office.
At the meeting of the Federal Advisory Committee on Insurance (FACI), Christopher Flatt, leader of Marsh’s workers’ compensation center of excellence, and Aaron Bueler, managing director and leader of Guy Carpenter’s workers compensation practice and terrorism task force, presented the firm’s views.
After addressing FACI, Bueler said: “The continuation of TRIA is essential. Non-renewal or a major change in the programme will negatively affect the affordability and availability of commercial lines insurance vital to the economy.”
“Since TRIA’s enactment in 2002, the terrorism reinsurance market has become a critical component of risk management strategy for many insurers. A dramatic change in the federal backstop could lead to a contraction in both the insurance and reinsurance marketplace.”
Flatt stressed that TRIA affects the state-regulated workers’ compensation market, especially in the areas of pricing and capacity.
He said: “The uncertainty in the market is causing some carriers to reduce their available capacity and aggregate exposures in large cities, and workers’ compensation prices on these risks are certainly going up.”
Aon also expressed its views on a TRIA extension this week when it called on the US government to extend the act.
Aon’s call for the TRIA extension came in response to the US Treasury Department’s request for comment on the long-term availability and affordability of TRIA.
