RIMS, the risk management society, submitted a comment letter to the U.S. Treasury Department calling for 90-day deadline to be set on certifying acts of terror.
“A long-term extension of the Terrorism Risk Insurance Act (TRIA) was of critical importance to our membership and the stability of the marketplace; however, a streamlined certification process was one area in which we urged improvement,” wrote RIMS President Richard J. Roberts letter to Michael McRaith, the director of the Federal Insurance Office, dated Mar. 6, 2015.
The letter was written in response came in to a request from Treasury, RIMS said.
“Unnecessary complications or delays in the Government’s decision-making process regarding terrorism certification only leads to greater uncertainty in the insurance marketplace,” Roberts said.
Specifically, RIMS recommends a 60-to-90 day deadline from the date of an event for the Secretary of Treasury to make a formal decision on its certification.
Explaining the need for this further, the letter stated that for several months following the 2013 Boston Marathon bombings, policyholders were left “in limbo” because of uncertainty surrounding whether the attack would be certified as an “act of terrorism” for the purposes of TRIA.
“Those that had chosen to purchase terrorism coverage were unable to have claims paid under that coverage, as policies typically required the act to be certified.
“Likewise, those business owners who had chosen to forego terrorism insurance were at risk of having claims denied if the act was certified as acts of terrorism are generally excluded from standard property and casualty policies,” the letter says.
RIMS also recommends allowing insurers to quickly assess the total loss projected from the event and to use this projection as the “insured loss” until additional information is collected. This would expedite the process for determining whether the event meets the required TRIA trigger, RIMS said in a statement.
In the letter, Roberts noted that one explanation given for the delay in certification following the Boston bombings was that it was necessary to “wait to see if the total property and casualty losses would meet the $5 million threshold required for certification.
He observed that shortly after an event—terror or not—insurers typically set assess set reserves for projected loss amounts.