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 REMARKS TO THE TRIA FEDERAL ADVISORY COMMITTEE

1. Greater New York Insurance Company history and post 9/11 experience

GNY was formed in 1914 at a time when there was a large flood of immigration 

to NYC and an insurance availability crisis due to overcrowding and the difficult 

litigation environment in New York. The legacy of Greater New York is that of 

early immigrants who came from humble beginnings to become real estate 

owners who started an insurance operation because they couldn’t otherwise buy 

insurance.

Today, GNY is a multi-line regional commercial lines company specializing in 

commercial real estate operating in fifteen states. We ended 2016 with direct 

written premium of $343 million of which $183 million was written in New York 

State with 85% of that business located in the five boroughs of New York, mostly 

Manhattan. We are the 6th largest writer of commercial multi-peril premium in 

New York State and the largest writer of co-op and condominium apartment 

houses in New York City and a leading writer of habitational business throughout 

our footprint. 

At December 31, 2016, we carried statutory surplus of $473 million and in excess 

of $1 billion in assets; we have been rated A+ by A. M. Best for many consecutive

years.

We target a 90% retention rate so we underwrite for the long-term. As a result, 

we have insured many of our policyholders in excess of 20 years or more so we 

were unwilling to abandon them after 9/11.

Greater New York Mutual Insurance Company

200 Madison Avenue / New York, NY 10016 / (212) 683-9700 Fax (646) 746 - 1339
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2. Impact of the Terrorism Backstop on our ability to provide insurance protection 

to New York and other urban property owners

As a result of the terrorist attack on 9/11, and prior to the passage of TRIA in late 

2002, most primary insurance carriers operating in New York City began to nonrenew their commercial property and workers’ compensation business, or 

reduce limits of coverage to levels below what was needed by the business 

community. 

The extreme hard market was worse in New York City because New York State 

prohibits insurance carriers from excluding coverage for terrorism and 

reinsurance companies universally excluded terrorist acts in reinsurance treaties. 

The only alternative was to offer less coverage or not write business at all. 

The few companies willing to provide the coverage increased their premiums 

because of the significant terrorism exposures, but even those companies had 

limited capacity due to aggregation issues. 

The lack of capacity had a negative impact on the New York economy resulting in 

the postponement of many construction projects, lack of adequate property 

coverage for commercial office buildings, and significant increases in the pricing 

of commercial property business.

With the passage of TRIA and changes to our underwriting strategy, we were 

able to continue to do business in New York. 

3. Underwriting Changes Post 9/11

Understanding our limitations as a mid-sized carrier, we reduced our risk 

accumulations within 500 feet and avoided those areas in close proximity to high 

risk target buildings. We also stopped insuring commercial tenants at properties 

where we also insure the building to limit our exposure at any one location. 

With respect to workers compensation, we cut way back on the number of 

employees we would consider at a single location. 
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And, because of our size and our limited ability as a mutual company to raise 

capital, we began purchasing very expensive stand-alone terrorism reinsurance 

to cover as much of our TRIA deductible and co-insurance as we could 

reasonably afford.

4. Current state of the market

In the 15 1/2 years since 9/11, the terrorism backstop has allowed the New York 

primary insurance market to stabilize. Primary coverage is available and 

affordable, a limited amount of reinsurance is available, and take-up rates are in 

the 90’s in urban centers such as New York City. That said, it is important to note 

that the market as it stands today has everything to do with the existence of the 

terrorism backstop and the availability of insurance coverage to the business 

community.

5. Capacity for terrorism since 9/11

We don’t offer standalone terrorism but our capacity for property coverage 

which includes terrorism has increased in part because the insured values of the 

same buildings we were writing over many years increased. This happened postfinancial crisis as a result of credit tightening at the banks, but also because we 

manage our balance sheet exposure through a combination of underwriting 

restrictions, aggregation management, and the purchase of private reinsurance 

to cover the program trigger and much of the TRIA deductible. 

The consensus by terrorism experts is that the threat in the US is greater today 

than before 9/11, particularly when you consider the reach of ISIS and other 

terror organizations. So it is not that our appetite for terrorism risk has 

increased, we provide the coverage because we have no other alternative.
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6. Impact of the increased TRIA deductible and program trigger

Increasing the TRIA deductible and program trigger to an amount higher than the 

$200 million that will be in place by 2020 is analogous to having no backstop for 

companies with statutory surplus less than $1 billion. The reason that this is true

is because a single company could suffer a disproportionate share of a loss for a 

terror attack which is an event that occurs within a concentrated area. This is 

different than a natural catastrophe event which is spread geographically over a 

wide area. Because the potential exposure to a single company is there, smaller 

companies would not be able to participate in the market if the trigger were 

higher than $200 million. 

Terrorism is not sold as a stand-alone coverage by primary companies and 

carriers are not necessarily interchangeable. Every carrier develops its own risk 

appetite and not all carriers write the same underlying business. 

Small and mid-sized insurance carriers inject competition into the markets and 

provide coverage that may otherwise be unavailable in certain regions and 

serving specific niche markets. 

In 2015, of the 2,600 property and casualty insurance companies operating in 

the US, only 132 had policyholder’s surplus of $1 billion or more. Of the 

companies that write TRIA covered lines of business, 95% have less than $1 

billion in surplus. 

If TRIA were eliminated or scaled back, it is unrealistic to expect that 132 insurers 

with surplus of $1 billion or more would satisfy market needs in urban areas 

which could negatively impact the economy.

7. Experience as a buyer of terrorism risk reinsurance since September 11, 2001

One of the central problems with providing terrorism coverage has been the 

inability of the insurance industry to spread the risk to enough insureds with 

varying degrees of terrorism exposure and having the availability of terrorism 

reinsurance at affordable rates. 
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The availability of terrorism reinsurance has increased since 9/11, but is still 

limited in high risk regions such as New York City and other urban centers. And, 

reinsurance premiums continue to be quite high relative to what we can charge 

our policyholders so reasonable pricing is as necessary as having the capacity. 

Primary rates are regulated by the state departments of insurance, while 

reinsurance contracts and premiums are not. Therefore unless primary 

companies are able to pass on the high reinsurance cost to their policyholders 

they would need to subsidize the terrorism premium even if the reinsurance was 

available. This puts mid-size insurance companies at a competitive disadvantage 

when compared to the large national and international insurance companies 

who may not require the purchase of standalone terrorism reinsurance.

It’s also important to remember that the capacity that is currently available in 

the market today is there in a large part because of the existence of TRIA. If TRIA 

were to change in a dramatic way, the aggregate amount of coverage available 

would likely fall and would be inadequate for the needs of the business 

community.

Because of our size and location, we were one of the first insurance companies 

to seek reinsurance immediately after 9/11. There were very few markets 

willing to provide the coverage and the pricing was very high. Since that time we 

have built a sizeable bank of premiums with these markets which has helped to 

stabilize the pricing for our coverage, but capacity is still very limited in the areas 

where we need it most. Most primary carriers have not been purchasing 

terrorism reinsurance so don’t have a bank necessary to justify more moderate 

pricing.

Over the past few reinsurance renewal cycles, I have attempted to increase our 

terror capacity by adding coverage to our standard property treaties which is 

common for many companies whose business profile is in less densely populated 

areas. Reinsurers universally reported limited terror capacity in urban areas. 
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This past year I attempted to buy additional reinsurance to expand our capacity 

on fire resistive buildings in urban areas with a limit of terror. Very few markets 

were willing to provide capacity in New York City at pricing that works, but some 

were willing to provide limited coverage for fire following. Each reinsurer cited 

limited capacity due to aggregation issues.

8. Thoughts on whether the market has a better understanding of the exposure

I believe that the market has a better understanding of the terrorism exposure, 

but underwriters still believe that the risk is uninsurable. There are inherent 

differences between catastrophic events that are insurable versus those that are 

not. Even though few terror events have occurred on US soil since 9/11, the 

potential to have a large scale event is there and could have an outsized impact 

on a single business, property owner or insurance carrier.

Unlike natural catastrophes that can be modeled and the impact mitigated, 

terror events are designed to be unpredictable so history is not predictive and 

mitigation must be handled at the national level. A private home exposed to 

flooding can be raised above the flood line and a homeowner can relocate to 

avoid the exposure altogether. However, a property owner cannot provide 

meaningful protection against a terror attack and moving a target building out of 

an urban area won’t keep a terrorist from attacking. 

Because property owners are not compelled to buy the coverage, terrorism 

exposure is largely subject to adverse selection because only those business 

owners that perceive that they have a terrorism exposure purchase the 

coverage. As a result, our take-up rate in Manhattan is almost 100%, but as we 

move away from the center of the city the take-up rate begins to decline. This 

limits the ability of primary companies to fund losses and build capacity.
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9. Impact to GNY if TRIA were to disappear

Without the federal backstop, my firm would be forced to abandon or 

dramatically scale back our exposure in NYC and other urban markets where we 

currently write, including Boston, Chicago, and Washington DC. 

Primary insurance companies do not operate in a free market which puts 

limitations on every carrier regardless of size. States dictate permissible rates 

and certain states, like New York, do not permit terrorism exclusions or sublimits and most states do not permit primary carriers to use the cost of 

reinsurance to justify a rate increase. State regulators are cognizant to the cost 

to the consumer so even if an actuarially sound rate could be reasonably 

determined primary carriers would likely have trouble getting an adequate rate 

increase approved in highly populated urban areas. 

As a mid-sized insurance carrier the potential exposure to a terror event would 

stress our balance sheet too much to operate because there is not enough 

reinsurance available at a price that we could reasonably charge. Property 

values on commercial buildings in NYC and other urban areas are just too high 

for our size and we would be subjected to potential downgrade by the rating 

agencies. 

It is important to also note that as a mutual company owned by our 

policyholders, we manage our balance sheet very carefully because we are 

limited in our ability to raise capital should we need it. 

Elizabeth Heck, President and CEO

March 31, 2017