Government Programs / Residual Markets Flashcards
What coverage restrictions might an insurer place on a high-risk driver before voluntarily providing coverage?
- higher deductibles (comprehensive or collision)
- lower limits (liability)
- exclusion of certain coverages (medical, glass coverage)
This is all in addition to higher premiums, often significantly higher.
Cook
Identify 3 mechanisms for operating a state residual auto insurance market
- ARP (Assigned Risk Plan) also sometimes called AIP (Auto Insurance Plan)
- JUA (Joint Underwriting Association)
- RF (Reinsurance Facility)
Cook
How does Assigned Risk Plan work?
- driver applies & is rejected by the voluntary market
- driver applies to the ARP
- driver is assigned to an insurer based on insurer’s WP market share (Written Premium)
- regulator sets uniform rates (same rates across all insurers)
- insurer fully services policy as if voluntarily written (collects premiums, pays claims)
- insurer retains profits/losses
Note that Alice knows she is in the residual market, and there could be stigma attached to this. Contrast this with a JUA or RF, where the insured doesn’t know they have been relegated to the residual market. Note also that these plans must all offer policies with the minimum statutory limits, although the particular insurer may offer higher limits if they wish. Alice declines the higher limits. Even the premiums for the minimum limits are high.
Cook
Identify items that may make a driver ineligible, even for an ARP
- no valid driver’s license
- felony conviction within the past 36 months
- habitual violation of the law
Cook
Identify 2 important differences between an ARP and a JUA/RF
- driver doesn’t know they have been placed in the residual market
- premiums, losses & expenses are shared among all auto insurers in the state (by their share of the voluntary market)
Cook
Identify a difference between JUA and a RF
JUA:
- policy is serviced by servicing carrier
RF:
- policy is serviced by insurer
Cook
Describe the details of how a JUA works
- driver applies to insurer in voluntary market
- insurer chooses: keep policy or insurer/agent/broker forwards to JUA servicing carrier (driver doesn’t know if they go to JUA)
- JUA sets uniform rates based on pool experience
- servicing carrier services claims
- insurer shares in profits/losses/expenses in proportion to their voluntary business market share
- all insurers in state must share profits/losses/expenses even if they haven’t been assigned any risks
Cook
Describe the details of how a RF works
- driver applies to insurer in voluntary market
- insurer chooses: keep policy or forward to RF (driver doesn’t know if they go to RF)
- Cook doesn’t really explain how RF rates are set but RFs are essentially intended to be non-profit enterprises to fulfill the social good of universal availability of auto insurance (and rules can vary greatly from state to state anyway)
- insurer services claims
- insurer shares in profits/losses/expenses in proportion to their voluntary business market share
- all insurers in state must share profits/losses/expenses even if they haven’t been assigned any risks
Cook
Describe why the residual market may be worse for policyholders than the voluntary market
- Social Stigma (with ARP)
- Higher Premium / More Expensive
- Limited Coverage
- Poor Service
Cook
How do ARPs (Assigned Risk Plans) achieve a social purpose?
- makes coverage more afforable & available to high-risk drivers who may not otherwise have acces
- reduces number of uninsured drivers and increases likelihood of compensation in accidents
Cook
Identify actions an insurer can take if a rate change is not approved (approved rates lower than requested)
- appeal decision
- apply for another rate increase ASAP
- tighten U/W requirements
- increase deductibles, reduce limits
- exit market through runoff or reinsurance
Cook
Identify similarities between JUAs & ARPs (JUA = Joint U/W Association, ARP = Assigned Risk Pool)
- both provide coverage for uninsurable risks
- both have uniform rates for all insureds
- both assign high-risk insureds to specific insurers
Cook
What is FAIR?
FAIR is the Fair Access to Insurance Requirements. Basically insurance for uninsurable risks.
Cook
What is the purpose of FAIR?
- provide affordable coverage to areas rejected by private market due to risk of crime/riots
- federally-backed mortgages require insurance and FAIR fulfills this purpose
Cook
What risks are often covered under FAIR plans are:
- properties in areas susceptible to crime/riots
- individuals with high number of prior claims
Cook
Describe how the FAIR plan works (Fair Access to Insurance Requirements)
rationale:
- property owners in urban areas couldn’t find coverage due to crime/riot risk
operation:
- policies are serviced by a syndicate or private company (who collect premiums, handle claims, & take a cut for their service)
- premiums & losses are shared by all property insurers in state
eligibility:
- coverage must have been denied by the private market
- property must not be vacant or trespassed onto, must not be damaged or poorly maintained, and must meet building codes
Cook
What is a Difference in Conditions Policy?
A policy that covers (some) perils that a standard policy won’t. Large organizations might use a DIC policy to fill coverage gaps related to catastrophes
Cook
What are exposures that are covered by FAIR plans?
- Urban areas that are susceptible to damage to property due to riots or civil commotion
- Coastal properties that pose greater-than-average exposure to windstorm damage
- Properties in some wooded areas subject to brush fires
- sinkhole-susceptible properties
Cook
What are exposures that are uninsurable under FAIR plans?
Properties that are vacant/open to trespass
* Properties that subject to poor housekeeping
* Poorly maintained homes
* Properties that are not in compliance with applicable laws of the state
* Homes that are already damaged
* Houses that do not follow the building codes
* Unsafe/hazardous conditions of the home which are not due to the environment
Cook
What are Beachfront and Windstorm plans?
They are similar to FAIR plans in that they protect at-risk properties that would otherwise be uninsurable in the voluntary market (some states have merged these plans with their FAIR plans)
Cook
Describe 5 reasons for governmental participation in insurance and provide examples
for FILLING NEEDS unmet by private insurance (Ex: TRIA - Terrorism Risk Insurance Act)
- may occur when private insurance is not economically viable (after 9/11 terrorist attack in NYC, private market withdrew coverage)
when insurance is COMPULSORY (Ex: WC)
- if insurance is compulsory but not offered by the private market (for whatever reason) then government must be the provider
for CONVENIENCE (Ex: NFIP - National Flood Insurance Program)
- government may already have necessary structures in place (government already provides disaster relief after floods)
for EFFICIENCY (Ex: auto insurance)
- agent commissions eliminated → lower expense ratio → lower premiums for consumer
for SOCIAL purposes (Ex: Medicare)
- private market is motivated by profit, sometimes at the expense of social purposes like universal medical coverage for seniors
Germani
What are the 3 levels of government involvement in insurance?
- government as SOLE provider (Ex: Social Security, UI - Unemployment Insurance)
- government as a provider in PARTNERSHIP with private insurance (Ex: NFIP - National Flood Insurance Program)
- government as a provider in COMPETITION with private insurance (Ex: WC competitive state funds in some states)
Germani
What are the criteria for evaluating government insurance programs?
- is the program one of WELFARE or INSURANCE
- does it achieve SOCIAL purposes
- is it EFFICIENT
- is it ACCEPTED by the public
- is it NECESSARY
Germani
Describe characteristics of a social welfare system
social welfare:
- payments are based on need not on reimbursement for covered losses
- funding is through taxation not policyholder premiums
Germani
What is the level of Government/Private Insurance involvement in:
Crop Insurance
Unemployment insurance
Terrorism Insurance
Crop Insurance - Private Insurers Write, Government Reinsures
Unemployment - Private does not write, completely government
Terrorism - Private Insurers Write and service, Government Reinsures
Germani
How does Crop Insurance work?
Private insurers market, write, and service policies. Government sets rates and acts as reinsurer. Premiums are subsidized by Risk Management Agency of the U.S. Department of Agriculture). Farmer must pay to get benefits
Germani
What are the 2 types of Crop Insurance Coverages?
Low Yields - yields that fall below a certain baseline
Low Prices - Prices that fall below a ceratin $-value
Germani
Advantages and shortcomings of crop insurance
Advantage - Provides stability to important sector of market
Shortcomings - encourages over-production, encourages farming in risky/marginal areas, private insurers make money while government subsidizes losses
Germani
What steps can be taken to mitigate shortcomings of Crop Insurance?
Limit Coverage (discourage over production)
Shift balance of loss-sharing more towards private insurers (to relieve tax payer burden)
Germani
What is the role of the Risk Management Agency (Dept. Agriculture) vs Federal Government in Crop Insurance?
RMA:
* Sets rates
* acts as reinsurer
* determines what crops can be insured in different parts of the country
* helps monitor and control risks
Federal Government:
* Reimburses insurer operating costs and expenses
* Subsidizes policyholder premiums
Germani
How does RMA reduce the risk of adverse selection in multi-peril crop insurance?
- RMA limits amount that can be collected & names specific crops that are covered
- RMA requires purchase prior to planting (or can’t get federal disaster relief)
- RMA sets rates to be actuarially sound using aggregate data
- RMA helps set U/W guidelines that recognize & reduce advserse selection
Germani
What function does state/federal government play in workers compensation?
States cover most employees through WC programs
Some Categories of workers (longshoremen, railroad workers) are covered by federal programs
Germani
What are the 3 federal WC programs?
Federal Employees Compensation Act (FECA)
Longshore & Harbor WC Act (1927)
Black Lung Benefit Act (BLBA, 1969)
Germani
Describe the Federal Employee Compensation Act
- For civilian government employees
- Costs are controlled because there is no judicial review or litigation
Germani
Describe the Longshore & Harbor WC Act (1927)
- For workers (other than seaman) injured on/near navigable waters
- created because it wasn’t always clear which state’s WC program would apply
- Considered effective: fills a coverage gap and reduces benefits if state funds are available
Germani
Describe the Black Lung Benefit Act (1969)
- wage replacement & medical benefits to totally disabled coal-miners (for black lung disease)
- created because of inadequate state compensation
- note that federal compensation is reduced by amount of state compensation
- FUNDING: federal excise tax on coal miner operators
- if fund goes into deficit, may borrow from federal government
Germani
What are the levels of state government participation in WC & describe a benefit of each level?
PARTNERSHIP: state defines benefits, but private insurers write policies
- more choice for consumer, but still assured of minimum statutory benefits
EXCLUSIVE STATE FUND: state is sole provider, no private WC is permitted
- no advertising or agent commissions means lower cost → pass savings to consumer
* states can offer better heabilitation options
* Fund covers only WC -> more specialization
COMPETITIVE STATE FUND: state competes with private insurers
- state funds provide a stable source of coverage & competition can help keep costs of private WC down
Just a reminder that the rates are actuarially sound for state funds
Germani
Describe 3 mechanisms that states can use to operate a residual market
[1] state assigns applicants to carriers based on WC market share (insurers then service policies as if they were voluntary)
[2] state uses a reinsurance pool (profits & losses are shared among all insurers in proportion to voluntary market share)
[3] state authorizes a JUA or Joint Underwriting Association (profits & losses are shared among all insurers in proportion to voluntary market share)
→ Just to be clear: A JUA is loss-sharing mechanism combining several insurance companies to provide extra capacity due to type or size of exposure.
Germani
What are the advantages and disadvantages of state funds for WC?
advantages of state funds:
* lower cost for consumers (no advertising or commissions for state funds)
* provides coverage for high-risk customers (if insurance is mandatory, government should ensure coverage is available by being an insurer of last resort)
disadvantages of state funds:
* private markets are more innovative (and private competition drives prices down)
* private markets can operate efficiently (about half of states don’t have state funds so state funds may not be needed to fill unmet needs)
How many states have state funds fow WC?
23 (4 are exclusive, 19 are competitive)
20% of benefits paid nationally
As of 2016
Identify a similarity & difference between a state WC fund & a WC residual market
similarities:
- both are markets of last resort
- both have lower expenses (relative to private insurers)
differences:
- residual market services policies with private insurers WHEREAS state funds uses state resources
- residual market only insures high risks rejected by admitted market WHEREAS state funds insure all risks
- residual market requires proof of coverage denial from private market WHEREAS state fund doesn’t
Germani
What is Medicare Set-aside Allowance?
- a portion of the WC (or liability) settlement set aside for future medical costs due to the injury
- all parties to a settlement must agree & fund the MSA
Germani
What is Center for Medicare & Medicaid Services?
administers Medicare, and establishes guidelines for review & approval of MSAs
Germani
What is Medicare & Medicaid SCHIP Extension Act (2007)?
- addressed the problem of CMS being unaware of primary payer responsibilities
- primary payers were trying to shift costs to Medicare (involved MSAs & other payers)
- Act requires RREs to report claim data to CMS (so that Medicare doesn’t start paying when it shouldn’t)
- there’s a substantial penalty for non-compliance
Germani
What is Responsible Reporting Entities?
just a fancy term of claim payers
Germani
At what age are people eligible for Medicare (passed by congress in 1965)? How were companies sneaky/how did that get addressed?
65 (though WC is primary if applicable)
Lame Solution: MSAs. The idea was that MSAs provide coverage for all future medical costs. The fatal flaw was that the MSA must be agreed upon and funded by all parties to the settlement. There was no incentive for the parties to comply. They just waited for the injured worker to become Medicare-eligible then passed the remaining costs to Medicare.
Awesome Solution: MMSEA. They still use MSAs but MMSEA requires that CMS now review & approve the MSAs. Aha! That worked. The incentive is that Medicare can refuse payment for any future medical care if the MSA is not approved. The primary payer doesn’t want to get stuck paying permanently, so they make sure their MSA is approved.
Germani
What are the CMS requirements on an injured worker receiving MSA funds?
Medicare will not make ANY payments if these conditions are not met:
- claimant must PAY medical bills with an interest-bearing account
- claimant must properly REPORT payments
Germani
What is a ‘conditional payment’ in the context of WC and Medicare?
- when medical costs are incurred BEFORE primay coverage begins, Medicare will make CONDITIONAL payments
- to be reimbursed once primary insurer is determined
Germani
Describe the actuarial implications of MMSEA
- may distort loss triangles & reserves estimates due to:
- SPIKE in claims closures BEFORE effective date of law:
- SLOWDOWN of settlements AFTER effective date of law
- MSA approval process is lengthy (60-90 days)
- WC reserves may increase since:
- MSAs are forced to be fully funded as primary payer (can’t lean on Medicare anymore)
- MSA filing requirements may be costly
Germani
Briefly describe the National Flood Insurance Program
Created to fill an unmet need in the market. Created in 1968 when private flood insurance was withdrawn (though private insurers still write and service policies underwritten by NFIP)
- a federal flood insurance program administered by FEMA (Federal Emergency Management Agency)
- Main provider of primary residential flood coverage (versus private flood insurance)
- involves private insurers and all tiers of government
- created in 1968 and participation is (mostly) voluntary
Horn
What are the policy goals of NFIP?
Access: provide access to primary insurance, transfers some of the financial risk to the federal government
Mitigate and Reduce: mitigate and reduce flood risk through floodplain management standards
Horn
What are the objectives of NFIP, according to Horn & Webel? (More specific than goals)
Risk-based premiums
Affordability
Sustainability (premiums should cover claims costs & expenses)
High participation rates
Horn
Identify ways that NFIP is different from traditional private insurance
social goals: (of NFIP)
- provides coverage to high-risk customers who would not be able to obtain affordable coverage in the private market
non-insurance goals:
- distribute flood maps (to assist with flood-risk management)
- require land use and building standards for participation in NFIP
- reduce the need for other post-flood disaster aid
- fund rebuilding after a flood (makes it easier for people to recover)
- protect lenders against mortgage defaults due to uninsured losses
distribute - require - reduce - fund - protect
Horn
What is FIRM?
Flood Insurance Risk Maps made by FEMA that identifies Special Flood Hazard Areas
Horn
What are SFHAs?
Special Flood Hazard Areas indicated by the Flood Insurance Risk Map made by Federal Emergency Management Agency
Horn
Identify situations where purchase of flood insurance is mandatory
- for property owners in a SFHA with a federally backed mortgage
- when a mortgage lender specifically requires participation (even if outside a SFHA)
Horn
Briefly describe flood insurance pricing & subsidies through NFIP
rates should be risk-based but Congress has authorized FEMA to admit certain exceptions as follows:
* pre-FIRM: properties built or improved before December 31, 1974, or before the first FIRM for their community (whichever is later)
* newly mapped: properties mapped to a SFHA on/after April 1, 2015 (if applicant obtains coverage within 12 months of map revision date)
* grandfathered: properties originally built in compliance with FIRM (even if they are subsequently mapped into a higher-priced class)
Horn
Identify ways that private insurers can be involved in the flood insurance market
- service policies (marketing, selling, writing, claims management)
- assume full risk as primary insurer
- assume a portion of risk as a reinsurer
Horn
Describe the 2 specific servicing arrangements available to private companies within the NFIP framework
Direct Servicing Agent (DSA): (~13% of NFIP)
- private contractor for FEMA
- facilitates purchase of flood insurance directly from NFIP
Write-Your-Own program (WYO): (~87% of NFIP)
- private companies directly write and service policies themselves
- the majority of NFIP policies are currently written through WYO
Policy terms and Premiums are the same either way, NFIP retains the financial risk for both
Horn
Briefly describe the NFIP risk management tools of private reinsurance and capital markets
private reinsurance:
- purchase from a varied group of reinsurers with each bearing part of the risk
capital markets:
- catastrophe bond reinsurance is facilitated by a single company
- risk is then transferred to capital market investors who purchase the bonds
- investors pay a certain percentage of the losses from a single, large scale event
Horn
Describe advantages & disadvantages in using private reinsurance for NFIP
advantages:
- FEMA knows the cost of (some) of its flood risk up front instead of borrowing from the Treasury after a flood (the cost is just the cost of the reinsurance policy)
- reinsurance reduces the volatility of losses (this helps manage risk)
disadvantages:
- expected value of long-term costs is higher because reinsurers must be compensated for assuming risk (in addition to paying out claims)
- NFIP may have insufficient funds after reinsurance premiums to pay claims it retains
- NFIP may have insufficient funds after reinsurance premiums to fulfill other goals & objectives like risk mitigation, flood mapping, improving NFIP rating structures
Horn
Why do private insurers consider flood risk to be uninsurable?
- catastrophic nature of flooding
- pricing difficulties (data is highly variable from year to year, unlike auto pricing which has a stable data history)
- adverse selection (only high-risk customers would purchase flood coverage)
- affordability (risk-based pricing could lead to unaffordable rates for high-risk customers who need it the most)
Horn
What are the most common types of private flood insurance?
- commercial coverage
- secondary coverage (excess coverage above NFIP maximums, coverage for business interruption,…)
- lender-placed coverage (that’s when a bank forces a borrower to obtain coverage to protect the bank’s loan)
Horn
Identify and briefly describe issues & barriers to private flood insurance
- coverage must be “at least as broad” as NFIP coverage (might be hard to determine since policy forms can be written differently)
- continuous coverage requirement (coverage must be continuous to retain NFIP premium subsidies, and a customer switching to private insurance may constitute a lapse in coverage)
- non-compete clause (a private insurer who sells NFIP policies as a WYO carrier may not offer private coverage that competes with NFIP) ← removed, although possibly not permanently
- NFIP subsidized rates (a private insurer can’t compete with taxpayer-subsidized rates)
- regulatory uncertainty (private coverage increases state involvement which increases compliance costs since each state may have different regulations)
- accurate assessment of flood risk (private insurers don’t have credible data, but due to the 1974 Privacy Act FEMA can’t release NFIP data)
- participation rates (necessary to manage & diversify portfolio, but even where flood insurance is mandatory participation can be low)
Horn
Briefly describe how these issues & barriers to private flood insurance could be addressed
- replace “at least as broad” with “comply with state regulations” (that’s easier for state regulators to determine)
- pass a federal law stating that private flood insurance counts when assessing whether coverage has been continuous
- eliminate the non-compete clause (or give WYOs temporary authority to sell certain types of flood insurance) ← this has essentially been done
- reform NFIP rate structure so that prices match what a private insurer would charge ← this is the purpose of FEMA’s redesigned risk-rating system: Risk Rating 2.0
- don’t change anything - state level authority may be better in the long-term because it encourages state-specific solutions
- remove personally identifiable information from NFIP data then make data public (or release only aggregate data)
- expand mandatory purchase requirement (require all SFHA properties to buy flood insurance, not just those with a federally-backed mortgage)
Horn
Identify and briefly describe potential effects of increased private sector involvement in flood insurance
- more choice (higher limits, expanded coverages like business interruption and living expenses, shorter waiting periods before policy becomes effective)
- lower prices (lower-risk, non-subsidized NFIP customers may be charged lower rates by private insurers)
- variable protections (consumer protections for private policies are enforced at the state level and may vary considerably from state to state)
- adverse selection (private companies may cherry-pick profitable, low-risk policies from NFIP, leaving NFIP with underpriced high-risk policies and weakening its future ability to pay claims)
- impaired flood mapping & floodplain management (NFIP pays for flood mapping and floodplain management with policy fees so a significant decrease in NFIP policies could weaken NFIP’s ability to perform these functions)
Horn
What does TRIA stand for? What is it?
Terrorist Risk Insurance Act
Prior to 9/11, insurers did not exclude or charge separately for terrorism coverage. After this catastrophic event however, insurers and reinsurers withdrew coverage. This was due to lack of credible data for pricing & reserving, and the risk of catastrophic losses.
TRIA is a federal reinsurance mechanism designed to ensure availability & affordability of coverage to commercial insurance customers.
Webel
Motivation for terrorism insurance in the U.S.
Fill Unmet Need: private insurers and reinsurers withdrew coverage after 9/11
Convenience: government can set up a program quickly and can work with the Treasury Department regarding compensation
Social Purpose: lessen economic disruption from lack of terrorism insurance availability (new construction projects couldn’t get required insurance)
Webel
What are the 3 goals of TRIA?
STABILIZE private market by providing temporary public/private terrorism insurance
PROTECT consumers by ensuring AA (Availability & Affordability)
PRESERVE state regulation of insurance
Webel
How is the TRIA goal “Stabilize Market” met?
- TRIA created a government-backed loss-sharing mechanism
Webel
How is TRIA goal “Protect Consumers” met?
- TRIA requires insurers to offer commercial coverage
- but insureds are not required to purchase
- insurers must provide transparency (disclose terrorism premium separately, and potential federal share of compensation)
- terrorism premium requires regulator approval (no specific premium limits however)
Webel
How is TRIA goal “Preserve State Regulation of Insurance” met?
- this is explicitly written into TRIA
- but with certain exceptions like: the state cannot enact its own definition of terrorism (otherwise they would create a lax definition to generate reimbursement)
Webel
What are the Terrorism Loss Sharing Criteria?
[1] certification
* terrorist act must be certified
* certification is done by Secretary of the Treasury (SOT), in consultation with the Secretary of Homeland Security (SOHS) and Attorney General (AG)
* losses must be ≥ $5 million in the United States (or to U.S. air carriers or sea vessels)
[2] federal government threshold
* aggregate insurance industry losses ≥ $200 million for federal assistance to begin (amount valid beginning 2020)
[3] coverage
* covers only commercial P&C
[4] deductibles
* insurer’s deductible = 20% of direct earned premium
[5] coinsurance
* insurer pays 20% of losses above deductible (federal government pays 80% and these are the percentages valid beginning in 2020)
[6] ** federal government limit**
* no federal coverage for aggregate losses ≥ $100 billion
* insurers are not required to provide coverage beyond this limit
[7] surcharges
* SOT (Secretary of Treasury) must establish surcharges to recoup 140% of federal outlay when aggregate losses are ≤ $37.5 billion
* for aggregate losses > $37.5 billion, the SOT may establish surcharges but it is not mandatory
Webel
Three levels of loss sharing in TRIA
small losses (aggregate industry losses ≤ $200 million)
→ covered by private insurance
medium losses
→ federal government makes loans to private insurance (but spreads the repayment across time & industry with future premium surcharges)
**large losses ** (aggregate industry losses between $37.5 billion & $100 billion)
→ federal government covers most of the loss without recoupment
Webel
What does NBCR stand for?
Nuclear / Biological / Chemical / Radiological
Webel
Are NBCR events covered by TRIA?
- not explicitly included or excluded so should be covered by TRIA
- but most primary policies covered by TRIA have exclusions for NBCR
- note that NBCR coverage has never been legally tested
Webel
Are cyber-terrorism events covered by TRIA?
yes, but only 50% of standalone cyber insurance policies included terrorism
Webel
Briefly describe terrorism insurance programs in Spain, U.K., Germany, Canada
Spain: government-owned reinsurer that has provided coverage for catastrophes since 1954
U.K.: privately owned mutual insurance company with government backing (Pool Re)
Germany: private insurer with government backing
Canada: considered, but rejected, creating a government program following September 11, 2001
Webel
Identify 1 way of addressing the lack of credible data for pricing terrorism risks
Terrorism is a low-frequency, high-severity risk. That means there is a lack of credible data for pricing.
use a terrorism model (this is done with other low-frequency, high-severity events like hurricanes)
Webel
Identify 4 elements of an insurable risk
Credible - need a large number of customers and events to make losses predictable
-
Measurable - losses must be definite & measurable
Accidental - losses must be fortuitous & accidental
Catastrophic - losses must not be catastrophic
Webel
Evaluate the insurability of terrorism using C-MAC
Measureable → pass → a terrorism event is certified and can be measured in dollars
Accidental → fail → terrorism attacks are planned
Catastrophic → depends → insurer can control their concentration of risk through underwriting and avoid catastrophic losses
Webel
