Workers' Comp Policy Renewal

Terrorism Risks Weigh On Workers’ Compensation Renewals

Insurers are trimming workers’ compensation policy periods amid terrorism backstop reauthorization uncertainty.
By: | February 17, 2014

Large financial institutions in New York are finding  insurers unwilling to renew their workers’ compensation policies for a full year due to Terrorism Risk Insurance Program Reauthorization Act uncertainties.

In a broader range of renewal cases, insurers are attaching endorsements to workers’ comp policies that would allow the underwriters to amend their pricing for policies extending coverage into 2015 should Congress fail to renew TRIPRA, said Anthony DeFelice, managing director of Aon Risk Solution’s national casualty practice.

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TRIPRA provides the property/casualty industry a terrorism loss backstop, but it is set to expire December 31, 2014 if Congress does not reauthorize it.

The backstop is particularly important for workers’ comp policies because under statutory requirements the insurance provides employers with unlimited coverage.

Without guarantees of a backstop in place, underwriters are particularly anxious about renewing coverage for employers who are at a higher risk from terrorism threats and have a large concentration of employees, particularly in areas like New York and Washington, D.C., sources said.

“Those [policyholders] that have the large concentration, it creates a lot of uncertainty and anxiety among underwriters. Those are the [employers] that are getting the less than 12 month [renewal] policies.” – Anthony DeFelice, managing director of Aon Risk Solution’s national casualty practice

The same is occurring for defense-industry employers with operations in the Northeast United States, said Mark Walls, senior vice president and workers’ comp market research leader at Marsh Inc.

“It’s the type of risks that have a higher probability terrorism exposure,” Walls said. “Those financial institutions in New York and defense contractors are pretty high on that list.”

Walls and DeFelice said brokers are scrambling to find alternative coverage for their clients who recently have learned insurers will not renew their coverage beyond year’s end without TRIPRA’s reauthorization.

“Those [policyholders] that have the large concentration, it creates a lot of uncertainty and anxiety among underwriters,” DeFelice said. “Those are the [employers] that are getting the less than 12 month [renewal] policies.”

In other cases employers who do not have a concentration of employees are seeing the endorsements allowing underwriters to “amend” their premiums should TRIPRA not be renewed, DeFelice said.

The “endorsement says insurers can amend the premium and that has only one implication, which means they will increase the premium” if TRIPRA is not renewed, DeFelice said.

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While underwriter concern mounts, opinions vary on whether Congress will reauthorize the backstop before year’s end.

Walls said that given Congress’ recent lack of accomplishments he is pessimistic, while DeFelice said that common expectations are for reauthorization, but with changes to the program.

For now, insures are urging their policyholders to join them in lobbying Congress to reauthorize, DeFelice said.

“Insurers want to be shoulder to shoulder with their clients to make sure TRIPRA gets renewed,” he said.

Roberto Ceniceros is senior editor at Risk & Insurance® and chair of the National Workers' Compensation and Disability Conference® & Expo. He can be reached at [email protected] Read more of his columns and features.

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The R&I Editorial Team can be reached at [email protected]