As a part of our Risks of 2013 coverage, we asked some industry experts their thoughts on emerging issues. This was the response from Stephen Clarke, assistant vice president of commercial multilines at ISO, a member of the Verisk Insurance Solutions group at Verisk Analytics.
RM: What insurance-related legislative issue will affect risk managers the most this year?
Stephen Clarke: Risk managers will need to monitor proceedings in Washington, as statutory and regulatory activity at the federal level in 2013 has the potential to alter the risk equation.
Pressing concerns that may affect business operations, either directly or indirectly, include ongoing discussions on deficit reduction and job creation; implementation of health-care reform; deliberations related to the extension of the National Flood Insurance Program; and whether and how — from a policy perspective — this country plans to address climate change. Those issues have the potential to affect business operations in ways both subtle and profound.
However, one issue that will require considerable attention from all stakeholders is the expiration of the Terrorism Risk Insurance Act (TRIA), which is currently scheduled for December 31, 2014. While that date appears far off, 2013 is the year when annual renewal negotiations must consider the possibility that TRIA will cease to exist. While three-year policies have already had to address the issue, all year-end negotiations will now have to contemplate it as well.
Will Congress act early in 2013 to remove the uncertainty? That would be ideal, but the history of federal response on the issue has shown a tendency to wait until the last possible moment.
The 2012 elections have resulted in some new players on Capitol Hill who will not have the benefit of past discussions to inform their positions. Business will have to educate the new members of Congress to make sure the importance of the federal backstop is not minimized.
We must also see where the administration stands on the issue, although its last three budget proposals have recommended eliminating the program outright. In addition, any extension proposals put forth may contain amendments to the current program that could affect its scope and effectiveness and may require enormous efforts to implement.