Reinsurers are ready to take on more terrorism risk, the head of the Association of Bermuda and Reinsurers (ABIR) said yesterday.

Bradley Kading, the president and chief executive of ABIR, was speaking after the US Senate voted to renew a federal backstop for insurers’ losses due to terrorism — although the trigger point has been cut in half.

Mr Kading said that the January 1 renewals period had seen Bermuda reinsurers quoted a significant amount of terrorism risk coverage — some of it on a transitional basis with cancellation clauses if the US government opted to renew its protection, which had expired on December 31 last year.

Mr Kading said: “Reinsurers can take on more risk and are willing to do so.”

And he said a conference in Florida for executives of reinsurance broker Guy Carpenter had yesterday had heard that the US Terrorism Risk Insurance Programme Reauthorisation Act (TRIPRA) could be redesigned to focus on nuclear, chemical, biological and radiological protection — in line with the views of a number of ABIR members.

Mr Kading added: “Reinsurance markets are well-capitalised, well-regulated and ready to meet their customers’ needs.”

The US Senate voted a week ago to renew the federal package, which will now be signed into law by President Barack Obama and run to the end of 2020.

The package is designed to reimburse insurers after industry losses hit $200 million, compared with the $100 million under the previous legislation.

The legislation, first passed in the wake of the 9/11 terrorist attacks on the US in 2001, also increases co-payments by companies to 20 per cent from 15 per cent and raises the threshold for US government involvement in stages.

Alan Murray, a senior vice-president with ratings agency Moody’s said: “The six-year extension provides more certainty to both the insurance industry and other business groups that rely on insurance policies for terrorism exposure — for example, commercial real estate.

“However, we continue to believe that since insurance deductibles constitute a significant portion of statutory capital for most insurers ... TRIPRA 2015, like its predecessors, does not completely resolve insurers’ financial risks from terrorism.

“Consequently, we expect highly-rated insurers to continue to manage their aggregate terrorism exposures prudently, cognisant of the potential for reduced federal participation.”

Mr Murray added: “The combination of the increased loss trigger and insurance industry retention means that insurers will bear more risk.

“Since the programme’s inception, growth in industry capital has kept net insurer risk retentions at manageable levels relative to capital and should continue to do so for the industry overall.”

Mr Murray said that some smaller insurers with direct access to capital markets could find that their capital growth would not keep pace with escalating TRIPRA retentions — increasing their risk over time “absent deliberate management efforts to rein in underwriting risk”.

“For reinsurers, the renewal is also credit positive because it removes the incentive for primary insurers to shift more terrorism risk to their reinsurers and limits reinsurers’ exposure to difficult-to-model terrorism risk, given that reinsurers do not have the benefit of the federal backstop.”

ABIR was set up to represent the public policy interests of Bermuda’s international insurers and reinsurers.