Employers who are planning to renew their workers compensation premiums may face substantial hikes in these premium costs and be compelled to meet the residual markets, if Congress does not renew the federal terrorism reinsurance backstop program during the first quarter of 2015.
Congress to Reconvene on Jan 6th
Resulting from certain objections in the senate, this program, which was set up by the Terrorism Risk Insurance Act in 2002, right after the Sept. 11th, 2001 terrorist attacks, had expired on December 31st. Industry experts are hopeful that the new Congress, which convenes on January 6th under the pro-business and pro-job Republicans, will renew the TRIA.
This has led reinsurers and workers compensation insurers to reassess the risks they might be entailed to undertake without the safety net they had thus far. Many industry experts have cited that up until now, the market has been operating under the belief that the TRIA will be renewed in the January 6th convention. But if this reauthorization doesn’t happen for some reason, it could change the face of workers compensation in the United States.
Insurers Looking to Limit Potential Losses
While it is fairly uncommon, there are some insurers who are including language in workers compensation policies. In the event that the TRIA is not extended, this will allow them to revoke coverage for those companies that have a large amount of workers in those areas which are termed as “high-risk, Tier 1 cities” such as san Francisco and New York.
Other insurers have even filed their own endorsements which identify how much of a premium they might be willing to charge for a terrorism risk, thereby allowing them to tweak their cost in the future.
According to sources, due to the fact that terrorism coverage can’t be excluded in any state from its workers compensation policies, it will result in insurers looking to minimize any potential losses.
Non-renewal May Lead to Employers Having to Turn to a Last Resort
If by February, Congress has not renewed TRIA, industry experts claim that it could lead to employers experiencing much hassle in purchasing or renewing their workers compensation coverage. This could subsequently force these employers into residual markets, a last resort. This leads to a waterfall effect of sorts, wherein employers that are forced into these residual or higher markets may have to start laying off employees.
A Workers Compensation Attorney will Offer the Advice Needed
For any employer, this scenario seems a tumultuous one. With no clarity on the future of the renewal of the TRIA, what can on do? The first step to take is to consult with a qualified and experienced workers compensation attorney who will proceed to advise employers on their next steps.
A workers compensation attorney is familiar with the law in the state within which they practice, and will also be able to foresee the future scenario, no matter which direction the pendulum sways. Both employers and employees can benefit from the expert services of a workers’ compensation attorney.