The April 15 bombing that left three people dead at the annual Boston Marathon is expected to spur the debate on Capitol Hill over whether lawmakers should extend the Terrorism Risk Insurance Program Reauthorization Act, currently set to expire in December 2014.
The insurance industry is taking stock of what the attack may mean for TRIPRA and for insurers who offer coverage for events that could serve as targets for terrorists.
President Obama labeled the bombing as an "act of terror" during an April 16 press conference at the White House. As of press time, investigators had not linked any suspects to the bombing. However, it is confirmed that two explosions near the marathon's finish line killed three individuals, including an 8-year-old boy, and injured more than 170 people.
The U.S. House of Representatives introduced legislation in February that would extend TRIPRA through 2019. While widely popular among insurance industry and other business organizations, the legislation faces a tough legislative battle in a Congress divided along party lines on federal spending decisions.
Insurance Information Institute President Robert Hartwig, who attended the marathon to watch his son participate, said "it is inevitable that this event will factor into the debate over TRIPRA."
Hartwig told Best's News Service that he had been seated about 100 yards from the site of the first explosion throughout the race. He and his family left the area shortly before the bombs went off. Hartwig, his wife and their son Jordan were not injured by the blasts.
"I actually walked past the exact spot where the bomb went off, and I thought about sitting there," Hartwig said.
Jordan Hartwig, a member of the Army Reserve Officer Training Corps at Syracuse University, marched the length of the marathon with a group of his fellow cadets, who wore 40-pound backpacks and boots, to raise money for wounded veterans. The ROTC group finished the race about an hour and a half before the bombs went off. "We were about four blocks away in the staging area taking pictures when the bombs went off," Robert Hartwig said.
In addition to the "eerie" feeling that he and his wife had walked over the same ground where a bomb later exploded, Hartwig said he felt certain there were going to be insurance questions raised by the bombing, which he noted was the first successful attack on U.S. soil since the terrorist attack of Sept. 11, 2001.
"The bombing comes just months before language will be circulated in the marketplace, saying that any policies sold after January 2014 will exclude coverage for terrorist events that take place starting in 2015," Hartwig said. "This attack shows just how vulnerable we still are to a terrorist attack."
The insurance industry has made obtaining an extension to the federal Terrorism Risk Insurance Program a top legislative priority this year.
Congress enacted what was then known as the Terrorism Risk Insurance Act following the terrorist attacks of Sept. 11, 2001 as a way to generate more insurance coverage capacity for terrorism events and in turn, provide greater economic stability following future attacks. Congress reauthorized the program in 2004 and again in 2007. Without the program, industry representatives said fewer insurers would be willing to offer coverage to "trophy properties" that could become the target of a terrorist attack.
For federal government funding to kick in, the country would have to see total terrorism-related damages exceed $100 million in a given year. At that point, each insurer offering terrorism insurance would be required to cover a deductible amounting to 20% of its annual premium income for TRIPRA-covered lines of business. Once the federal backstop kicks in, insurers would still be required to cover 15% of all claims up to the law's $100 billion cap. The other 85% would be covered by the federal government and paid back over time.
Although no loss estimates have been released yet, the Boston Marathon bombing almost certainly will not cause the federal TRIPRA backstop to kick in. But industry representatives said the attack shows just how unpredictable terrorist attacks are.
When Congress takes up TRIPRA legislation again, the industry will press lawmakers to act as quickly as possible to pass an extension, Jimi Grande, senior vice president of federal and political affairs at the National Association of Mutual Insurance Companies, said in an email.
"When we return to the debate over TRIPRA, with a sad reminder that the threat of terrorism has never left us, NAMIC will continue to make the same arguments we've made all along," Grande said. "TRIPRA is a vital part of our nation's economic defense. Terrorism is a unique risk whose very nature makes it impossible for insurers to cover against major events, and the information needed to even begin to price coverage is rightly kept classified as a matter of national security."
Nat Wienecke, senior vice president federal government relations for the Property Casualty Insurers Association of America, said, "This horrible attack is a grim reminder of the ongoing threats to our country and underscores the importance of having plans in place to quickly help citizens in need and ensure economic stability."
Hartwig said the industry will also try to learn from the Boston Marathon bombing when writing coverage for future events. The challenge will be trying to identify the risks facing an event as large as the Boston Marathon. Spread across 26.2 miles of Boston's most densely populated areas, the race brings in some 27,000 runners and another 500,000 spectators.
"Security was as tight as it always is. I saw bomb-sniffing dogs and over the last couple hundred yards, there were hundreds of police officers," Hartwig said. "Yet this still occurred.
London's Metropolitan Police were "reviewing our security arrangements" ahead of the London Marathon this weekend, according to a statement on the department's website. The London Marathon is expected to bring in 35,000 runners.
Hartwig said marathons are especially difficult to control from a risk standpoint because they are not held in a stadium, where authorities can inspect bags or pat down spectators prior to the event. But he said the industry will use the Boston Marathon bombing to build on lessons learned after the Sept. 11, 2001 attacks.
We don't have a lot of information yet. But I expect Boston next year, the New York City Marathon and London this weekend are going to be very different events than they were before," Hartwig said. "Unfortunately, we have been through this before."
A.M. Best has warned that if Congress makes significant changes to the federal TRIPRA backstop or allows it to lapse entirely, insurers could face raise ratings concerns.