Implications of Non-Renewal of TRIPRA in 2021

The Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA) — the federal terrorism insurance backstop that was last reauthorized on January 12, 2015 — is set to expire on December 31, 2020. Marsh and many industry groups are actively lobbying for reauthorization, including a proposal for a longer extension period ranging from seven to ten years. Despite active lobbying efforts, the reauthorization timetable has not yet been determined and appears to be slipping to 2020. 

US-domiciled captives are obligated to offer terrorism protection under TRIPRA on certain types of directly issued policies such as property, workers’ compensation, and general liability. Policies for coverage lines subject to TRIPRA and the associated compliance processes will be affected should TRIPRA expire.

Practical Implications of Non-Renewal

Day-to-day management:

• The requirements to make terrorism coverage available and to provide specified disclosures at the time of offer for coverage lines subject to TRIPRA will no longer be required. Any reference to TRIPRA, and the mandated notations regarding the allocation of the portion of the policy premium attributable to terrorism coverage, should be removed from the policy.
• TRIPRA’s Data Call reporting to the Secretary of the Treasury, put in place to assist with the review of the effectiveness of the program, will no longer be required. This requirement was introduced during the 2015 reauthorization of the Act. The first mandatory reporting was in May 2017. 

Risk financing:

• There will be gaps in coverage for organizations currently utilizing captives to access TRIPRA via their captives. This could be especially significant for captive owners utilizing their captives for: very large conventional terrorism limits; NBCR (nuclear, biological, chemical, radiological) terrorism; and cyber terrorism.
• The resulting higher demand in the insurance market for terrorism coverage will impact capacity as well as pricing. We explore the potential pricing and availability impacts in Marsh’s 2019 Terrorism Risk Insurance Report.

Next Steps

Given the ongoing uncertainty around TRIPRA’s extension, and the temporary expiration and subsequent reinstatement that occurred at the time of the last renewal of the program, US-domiciled captives providing terrorism coverage should now begin to:

• Review their programs to understand and quantify the impact non-renewal would have on the insurance protection provided to their insureds.
• Talk to their insureds about exploring alternatives, which could include the standalone terrorism insurance market, reinsurance, and/or additional utilization of their existing commercial terrorism coverage.
• Review their policies and confirm they include TRIPRA sunset clauses, especially for policies in effect beyond December 31, 2020. This will make sure there is clarity of coverage in the event of expiration or a material change in the backstop.

In the event of TRIPRA’s renewal, captives should evaluate the impact of any changes in TRIPRA’s program structure and adjust policy provisions accordingly.

TRIPRA plays an important role in ensuring the continued stability and health of the insurance market. Marsh will continue to monitor developments and provide updates regarding its renewal.