OLDWICK, N.J.–(BUSINESS WIRE)–Given the pending expiration of the Terrorism Risk Insurance Program
Reauthorization Act (TRIPRA) at year-end 2020, AM Best will begin
discussions with its rated insurers that have material terrorism
exposure and a significant reliance on this federal backstop over their
response to a non-renewal of the legislation. Insurers that cannot
provide a sufficient action plan to reduce exposures to terrorism risks
could face negative rating pressure by year-end 2019.
Whether TRIPRA will be extended further past Dec. 31, 2020, and if so,
under what terms and conditions, remains in doubt, particularly amid a
hyper-partisan atmosphere in Congress. In a new Best’s Commentary,
titled, “TRIPRA Expiration Raises Potential for Rating Downgrades for
P/C Insurers,” AM Best states that key concerns with regard to terrorism
are an insurer’s 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. Additionally, although TRIPRA helps with liquidity and
reduces the financial impact of a terrorist event, over-reliance on such
a mechanism is not a substitute for sound risk management.
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 if it changes significantly. As
a result, beginning mid-year 2019, AM Best will compile an internal list
of rated insurers with terrorism exposure, and those insurers exceeding
certain thresholds in AM Best’s view with regard to exposures or TRIPRA
reliance will be asked to present their detailed contingency plans.
To access the full copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=285472.
AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit www.ambest.com
for more information.
Copyright © 2019 by AM Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.
Contacts
Edward J. Zonenberg
Senior Financial Analyst
+1 908 439
2200, ext. 5135
[email protected]
Daniel J. Ryan
Senior Director
+1 908 439 2200, ext. 5325
[email protected]
Christopher Sharkey
Manager, Public Relations
+1 908 439
2200, ext. 5159
[email protected]
Jim Peavy
Director, Public Relations
+1 908 439 2200, ext.
5644
[email protected]
