Marsh McLennan, which mourned the loss of 358 employees in the September 11, 2001 World Trade Center attacks, sent a powerful message in Washington today. Michelle Sartain, a 28-year veteran of the firm, urged lawmakers to renew the Terrorism Risk Insurance Act, underscoring the enduring need for protection against catastrophic threats.
“By all accounts, the program has been a model public-private partnership, said Sartain, president Marsh U.S. and Canada. “The backstop remains a critical component to a stable terror insurance market, particularly for nuclear, biological, chemical, and radiological (NBCR) events, and has enabled insurance to be placed and investments to be made.”
The federal terrorism-risk backstop was established in late 2002 after insurers, reeling from the massive losses of 9/11, began stripping terrorism coverage from commercial property and casualty policies. The move froze construction projects as lenders refused to proceed without that protection, while a parallel crisis erupted in workers’ compensation, where state laws barred terrorism exclusions even as exposure to catastrophic risk remained high.
Federal law mandates that insurers provide terrorism coverage, backed by a crucial safeguard: if a certified attack causes more than $5 million in damages and total industry losses top $200 million, the government steps in to share the cost. The Terrorism Risk Insurance Act (TRIA) has been renewed repeatedly—most recently in late 2019—but is set to expire again on December 31, 2027, putting its future once more in the spotlight.
On September 17, Sartain delivered 17 pages of testimony detailing TRIA’s history and key provisions, highlighting its vital role for sectors like healthcare and higher education. Speaking before the U.S. House Financial Services Subcommittee on Housing and Insurance, she emphasized that the federal terrorism backstop enables insurers and reinsurers to accurately quantify risk and maintain critical market capacity.
Although the expiration is two years away, “insurers and rating agencies closely monitor legislative activity related to [TRIA],” Sartain explained. “Any uncertainty regarding the future of the federal backstop as the deadline approaches will have an impact on the availability and nature of insurance coverage. That, in turn, could send ripple effects through the economy, 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 will 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 addressed the subcommittee, stressing that TRIA delivers the certainty insurers need to confidently offer terrorism 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, noted her firsthand experience as a leading underwriter of high-risk, terrorism-exposed properties in New York City.
“While insuring against the financial devastation that could accompany a catastrophic terrorist attack might sound like a reasonable protective measure for markets to take on, a large-scale terrorist attack – like an act of war – is not insurable,” Heck submitted to the committee.
“Terrorism is rooted in malicious, strategic human behavior creating dynamic threats that often involve unknown national or international actors. It is purposefully unpredictable and continuously evolving, always with the intent of causing harm. This is one reason why it is extremely difficult, and potentially impossible, to fully predict or meaningfully measure and confidently model terrorism risk for purposes of underwriting and rating.”
Approximately 79% of U.S. commercial multiperil policies now include some level of terrorism coverage, reflecting a growing insurer appetite for the risk. While NAMIC typically opposes federal backstop programs, Heck described TRIA as “represents the rare situation where a clearly defined problem can only be solved by a federal partnership to facilitate insurability in a way that does not harm markets or market participants and ultimately reduces risk against scenarios where other solutions have been exhausted.”
NAMIC has called for a full 10-year reauthorization of the program, urging lawmakers to keep its proven structure firmly intact.
In a letter to the committee, the American Property Casualty Insurance Association (APCIA) warned that the program was once allowed to lapse for 12 days in 2014, underscoring the risks of any future interruption.
“This led to considerable confusion among insurers and policyholders about the status of in-force terrorism coverage,” APCIA said. “Many insurers had contingent exclusions included in their non-workers’ compensation insurance policies, which provided policyholders with terrorism insurance subject to the program’s reauthorization. When the program lapsed, some of those exclusions took effect and, had a major loss occurred, the consequences for the country could have been enormous.”
Although it did not testify at the hearing, the association urged Congress to reauthorize TRIA without altering its financial thresholds. In a statement, Sam Whitfield, senior vice president of federal government relations, emphasized:“TRIA is a fiscally sound program that has operated for 23 years with minimal cost to taxpayers. Its continued existence is vital to maintaining confidence in the marketplace and ensuring the availability of terrorism coverage that businesses and communities rely on.”
