Press Release - MAY 14, 2019
Best’s Commentary: TRIPRA Expiration Raises Potential for Rating Downgrades for U.S. Property/Casualty Insurers
FOR IMMEDIATE RELEASE
OLDWICK - MAY 14, 2019
Whether TRIPRA will be extended further past Dec. 31, 2020, and if so, under what terms and conditions, remains in doubt, particularly amid a hyper-partisan atmosphere in Congress. In a new Best’s Commentary, titled, “TRIPRA Expiration Raises Potential for Rating Downgrades for P/C Insurers,” AM Best states that key concerns with regard to terrorism are an insurer’s net loss exposures to terrorism, excluding the benefit of TRIPRA; aggregate exposures of risks in certain geographic areas; the number of locations in those areas; and the impact on risk-adjusted capitalization. Additionally, although TRIPRA helps with liquidity and reduces the financial impact of a terrorist event, over-reliance on such a mechanism is not a substitute for sound risk management.
Although private terrorism reinsurance is currently available, a rating concern will be the future availability and affordability of reinsurance if the federal backstop is eliminated or if it changes significantly. As a result, beginning mid-year 2019, AM Best will compile an internal list of rated insurers with terrorism exposure, and those insurers exceeding certain thresholds in AM Best’s view with regard to exposures or TRIPRA reliance will be asked to present their detailed contingency plans.
To access the full copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=285472 .
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