In its preparations for the expiration of TRIA at the end of 2020, the U.S Treasury Department is casting a wide net in its investigations into risk transfer mechanisms, industry sources said.
“There are all different ways to look at this,” said Wendy Peters, executive vice president of financial solutions terrorism and political violence for Willis Towers Watson PLC in New York. Ms. Peters also sits on the Advisory Committee on Risk-Sharing Mechanisms of the U.S. Treasury Department.
The committee, she said, is “exploring all different types of solutions including the use of the (insurance-linked securities) markets as well as the traditional marketplace and trying to get a better understanding of what’s available in terms of capacity,” as well as “other comparable tools around the world like Pool Re.”
Pool Reinsurance Co. Ltd., Britain’s terrorism risk reinsurer, in February secured £75 million ($99.1 million) in coverage through a catastrophe bond. The three-year bond, issued through special-purpose vehicle Baltic PCC Ltd., was Pool Re’s first use of the ILS market to secure retrocessional reinsurance coverage.
Although such methods have been employed on a limited basis by other nations, sources say any ILS role in supporting TRIA could be several years away.
The capital markets’ role in the insurance markets is evolving but likely still a decade or more away from participating in the terrorism backstop or insurance markets, according to Aaron Davis, managing director for Aon Property Broking within Aon PLC.
