WASHINGTON – The President’s Working Group on Financial Markets (PWG) today released its report and analysis to Congress on terrorism risk insurance. The report, mandated by the Terrorism Risk Insurance Act (TRIA), requires the PWG to conduct, on an ongoing basis, an analysis of the long-term availability and affordability of insurance for terrorism risk.
The PWG is composed of the Secretary of the Treasury, the Chairman of the Board of Governors of the Federal Reserve System, the Chair of the Securities and Exchange Commission, and the Chairman of the Commodity Futures Trading Commission. The Secretary of the Treasury serves as the Chairman of the PWG.
The findings of the PWG in this report include:
· Insurance for terrorism risk currently is available and affordable. The availability and affordability of insurance for terrorism risk has not changed appreciably since 2010.
· Prices for terrorism risk insurance vary considerably depending upon the policyholder’s industry and the location of the risk exposures.
· Such prices have declined since TRIA was enacted and, in the aggregate, currently approximate 3 to 5 percent of commercial property insurance premiums.
· Take-up rates have improved since the adoption of TRIA and are roughly stable at 60 percent in the aggregate.
· Information provided to the PWG in response to the PWG Notice indicates that the market currently is tightening in light of uncertainty as to whether TRIA will be renewed.
· The private market does not have the capacity to provide reinsurance for terrorism risk to the extent currently provided by TRIA.
· In the absence of TRIA, terrorism risk insurance likely would be less available. Coverage that would be available likely would be more costly and/or limited in scope.
The report released today was developed through stakeholder engagement and using comments provided in response to a Federal Register Notice. On behalf of the Chairman of the PWG, Treasury’s Federal Insurance Office coordinated the development of the report.
A copy of the report is available here