Lloyd’s lobbies House of Representatives for TRIA renewal
Lloyd's most senior lawyer, Sean McGovern, warned the US House of Representatives last week that increasing the trigger for TRIA, the US government backstop for terrorism risk, could increase the burden on the US taxpayer.
Addressing the Committee on Financial Services on Wednesday (13 November), he said higher prices and lower take-up rates were a real possibility if it increased the $100mn trigger on TRIA.
Speaking to The Insurance Insider after the hearing, McGovern said the current take-up rate for government-backstopped commercial terrorism cover was about 60 percent. He argued that raising the private sector's burden could lead to increased premiums and reduce the take-up rate, which would increase the burden on the taxpayer if there was an attack.
McGovern said history suggests that the industry could be waiting for an 11th hour extension towards the end of 2014, when the policy expires. But there is mounting pressure on Congress to announce a decision before next year's renewal season.
"Even with a fair wind, I think serious congressional action won't happen until next year," he predicted.
McGovern was one of five witnesses giving testimony at the hearing, which was the final consultation before the House is left to decide whether it will renew TRIA and, if so, in what form. All of the witnesses argued that the backstop should be continued.
McGovern said TRIA had made terrorism coverage possible in the wake of the 9/11 terror attacks.
Validus Re CEO Kean Driscoll also gave testimony, and said that while the industry could model and price conventional terrorism risk it could not cover nuclear, biological, chemical or radiological risk. He argued that TRIA should be continued to cover risks that fall into those four categories.
Democrat representative Carolyn Maloney said TRIA was one of the rare pieces of government policy that had done exactly what Congress wanted it to do.
"Under the current TRIA programme the taxpayer's exposure is already extremely limited," she said.
McGovern said that if a vote was left to the floor he would expect TRIA to be renewed in its current form. But he warned that an atmosphere of philosophical dislike of government programmes in Washington could result in some changes to the bill.