Marsh McLennan lost 358 employees in the terrorist attack on the World Trade Center on Sept. 11, 2001, a
nd in Washington today Michelle Sartain, who has worked at Marsh for more than 28 years, encouraged lawmakers to reauthorize the Terrorism Risk Insurance Act.
“By all accounts, the program has been a model public-private partnership, said Sartain, president Marsh U.S. and C
anada. “The backstop remains a critical component to a stable terror insurance market, particularly for nuclear, bi
ological, chemical, and radiological (NBCR) events, and has enabled insurance to be placed and investments to be made.”
The federal backstop for terrorism risk was first initiated late in 2002 to respond to insurers’ forced exclusion of te
rrorism risks from commercial property/casualty insurance policies following losses from the terrorist attacks. The change put construction projects on hold since fin
ancers required the insurance. Meanwhile, a crisis began in workers’ com
pensation due to the high levels of exposure faced in the line of business since state laws prohibited prohibited a terrorism exclusion.
The federal legislation requires insurers to offer terrorism coverage while the industry has the assurance th
at if losses from a certified terrorism event reach a certain thresholds (the event needs to exceed $5 million in losses a
d $200 million in industry losses), the government will step in. TRIA has been reauthorized several times, the latest at the end of 2019. It is due to expire again Dec. 31, 2027.
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Sartain offered 17 pages of testimony covering TRIA’s history and features—and outlined how certain indu
ly on TRIA. On Sept. 17 she told the U.S. House Financial Services Subcommittee on Housing and Insurance that the terror
ism backstop allows for insurers and reinsurers quantify exposures and provide capacity into the market.
Although the expiration is two years away, “insurers and rating agencies closely monitor legislative activ
ity related to [TRIA],” Sartain explained. “Any uncertainty regarding the future of the federal backstop as the deadline approaches will have a
impact on the availability and nature of insurance coverage. That, in turn, could send ripple effects through the eco
nomy, and potentially affect companies’ decision-making processes about hiring and investing.”
If the backstop were to expire without a replacement, “insurers that are still able to offer terrorism coverage wi
ll likely only write coverage for buyers with operations in preferred locations, and could consider increasing prices for other locations,” Sartain wrote.
“This would lead to capacity shortfalls for central business districts, at-risk industries, and employers with significant workers’ compensation accumulations, such as office workers, manufacturing facilities, and healthcare and education facilities,” she continued.
Elizabeth Heck, former chair of the National Association of Mutual Insurance Companies (NAMIC), also testified before the subcommittee. She said TRIA provides certainty, and has allowed insurers to offer coverage.
“Thankfully, the program has yet to be tested and as we look back nearly 25 years after the attacks, it is important to recognize how much construction and economic development TRIA has supported, all at no cost to the taxpayers,” said Heck, adding that she was in lower Manhattan on Sept. 11 and evacuated with her family. They never returned home, she said.
Heck, president and CEO of Greater New York Insurance Company, said she has experience as a “major writer of terror exposed property in New York City.”