H7. Webel

Question 1

Describe the structure of the TRIA program:

Answer 1

-Only applies to commercial lines
-A single terrorist act must be certified by the Secretary of
Treasury, Secretary of State and Attorney General. Losses must exceed $5M to be eligible for TRIA coverage.
-Aggregate industry certified losses must exceed $100M for government coverage to begin
-Each insurer has a deductible equal to 20% of its annual premium
-After the above thresholds are passed, the government will cover 85% of insured losses. -If aggregate industry losses do not exceed $27.5B, the Secretary of the Treasury will recoup 133% of coverage
via surcharges.
-If aggregate industry losses do exceed $27.5B, it has the discretion to apply surcharges to recoup the money paid.
-The government will only cover up to $100B of losses. After that-point, there is no federal coverage, nor is there a requirement that the private market provide coverage.

Question 2

3 goals of TRIA:

Answer 2

1. Create a temporary federal program of shared public and private compensation for terrorism losses, while the private market stabilizes after 9/11
2. Protect consumers, by ensuring the availability and affordability of terrorism insurance.
3. Preserve state regulation of insurance

Question 3

4 elements of an insurable risk:

Answer 3

1. There must be a sufficiently large number of insureds to make the losses reasonably predictable
2. Losses must be definite and measurable
3. Losses must be fortuitous or accidental
4. Losses must not be catastrophic