With the Terrorism Risk Insurance Act of 2002 scheduled to expire at the end of the year and the Treasury due to give a report on the Act to Congress by June 30, there is renewed focus on the issue.
Fitch Ratings released a report last week stating that its policy regarding terrorism insurance remains largely unchanged except for fusion deals - which are becoming increasingly concentrated with large loans. "Recent fusion transactions are more likely to be affected by terrorism insurance issues due to this concentration, and therefore, will be reviewed closely for acceptable coverage," noted Fitch analysts, adding that rating actions will be taken if merited depending on the loan size within a pool as well as the coverage amount. The rating agency would also be taking a closer look at large loan deals, which have recently become more prevalent. Even if these deals have diversification working for them, concentration concerns still exist for these deals, Fitch said.