TIA Section H

Question 1

Reasons for Government Participation in Insurance

Answer 1

1. Filling insurance needs unmet by private insurance
   -Provide insurance where market is underserved by private insurance (unavailability or affordability)
   -Government has the capacity to subsidize losses by directly taxing taxpayer or indirectly by using a government-provided fund to subsidize any losses
2. Compulsory Purchase of Insurance (individuals may be forced to buy insurance to meet social responsibilities, so the government may feel obliged to provide insurance)
3. Convenience
   -It may be easier for the government to quickly establish a program
4. Greater Efficiency
   -Based on the assumption that the government can provide insurance at a lower cost than the private market
5. Social Purposes

Question 2

Government can be involved in insurance in three levels:

Answer 2

Exclusive Insurer
Partner with Private Insurer
Competitor to Private Insurer

Question 3

Examples of Exclusive Insurer

Answer 3

Social Security (Federal)
Government-run workers compensation program (State)

Question 4

Examples of Partner with Private Insurer

Answer 4

Offers reinsurance coverage to private market
-NFIP, TRIA, Federal Crop Insurance (Federal)
-FAIR, WC, Windstorm Plans, Residual Auto Plan (State)

Question 5

Examples of Competitor to Private Insurer

Answer 5

WC

Question 6

Crop Insurance Overview

Answer 6

-Provides protection to farmers against losses to crops from natural disasters (drought, heat, cold, fire, wind, flood)

-Farmers can choose which crop they are buying insurance for. If the farmer chooses to insure a field, he must insure all fields in the country to avoid risk of adverse selection.

-Operated by the Federal Crop Insurance Corporation (FCIC) which is owned by the US Department of Agriculture (USDA). USDA created the Risk Management Agency (RMA) to operate and manage FCIC

-In 1980, congress authorized a subsidy of the premium (In 2014, farmers paid roughly 38% of the premium)

Question 7

Structure of crop insurance

Answer 7

-Public-private partnership
-Private insurer markets, writes & services policies (must sells coverage to any farmer)
-RMA sets rates, and determines which crops can be insured in different areas
-RMA acts as reinsurer
-Premiums are subsidized by the federal government
-Federal government reimburses insurers for operating & administrative costs

Question 8

Supporters of federally backed crop insurance believe

Answer 8

It is necessary to bring stability to a volatile sector of the economy.
-Private crop insurance may be much more expensive or unavailable due to the risk of catastrophic losses

Question 9

Opponents of federally backed crop insurance believe

Answer 9

It may encourage agricultural overproduction and encourage farming in disaster prone areas, harming the environment, and increasing disaster relief costs.

(If the farmer is not bearing risk, they will have the incentive to plant in areas that may be cheaper to get the reward of higher profits even though losses are more likely in these disaster prone areas).

Question 10

Federal Workers Compensation Programs

Answer 10

FECA - Benefits to non-military federal employees for employment related injuries and disease

Black Lung Benefits Act (BLBA) - Benefits for wage loss and medical provided to miners totally disabled from black lung disease, and eligible survivors. Established because state WC often didn’t provide coverage

Question 11

Conditional Payment

Answer 11

Many people begin incurring medical costs before eligibility to collect insurance is determined. During this time, Medicare will make conditional payments. If the insurer is determined to be primary, it will need to reimburse Medicare.

Question 12

Medical Set-Aside

Answer 12

Calls for all parties to a settlement to agree to set aside money to be primary over Medicare, for the period where the individual is eligible for Medicare

Question 13

In 2001, the Center for Medicare and Medicaid Services (CMS) established guidelines for the review and approval of MSA’s

Answer 13

-CMS can reject or revise the MSA proposals

-Many insurers use specialists to review their MSA proposals and guide them through the process, increasing administrative costs

After the MSA is approved, claimants must agree to:
-pay the workers compensation related medical bills using the MSA
-complete the reporting of payments

Question 14

Two Main Areas of Concern:

Answer 14

Pharmacy Costs:
-The MSAs originally priced the drugs at retail value, ignoring the negotiated price agreements of the insurer
-Many common pain management drugs are not covered by Medicare. Medicare issued language to indicate that the provision does not need to be made in the MSA for drugs not covered by Medicare.

Life Expectancy:
-MSAs were based on the claimant’s actual age, instead of the “rated age” (impaired age). (Not accounting for decreased life expectancy due to individual’s injury)

Question 15

New Reporting Requirements since 2007

Answer 15

Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) requires claim payers to report data to the CMS.
-Must determine the Medicare-enrollment status of all claimants and report certain information about those claims

Question 16

P&C Actuarial Implications of Recent Changes

Answer 16

-Between 2008 and 2010, in advance of the reporting deadline, there may have been an increase in:
-Claim Closings (to avoid new reporting deadlines)
-Lump sum payments

-The jump will distort paid and reported losses

-Since then, there may have been a slowdown in settlement rates due to the change in MSA procedures
-CMS approval of MSAs usually takes 60 to 90 days

-A portion of the increasing WC medical trends may be due to the new MSA requirements
-Historically, settlements may have been attributed fully to indemnity, instead of being separated into medical vs indemnity. MSAs will require a correct division into the two pieces.
-Insurers may have increased settlements to account for future medical considerations, due to the new MSA rules

Question 17

Nonstandard Insurance programs

Answer 17

Some insurers in the voluntary market insure high risk drivers in specialized risk programs called nonstandard insurance programs

Insurers usually impose certain restrictions to reduce the level of risk:

-Insurers will often limit coverage so it is just enough to comply with state’s compulsory insurance requirement. Some insurers may offer optional higher limits for more premium.

-Coverage for medical payments for the insured may be limited

-Collision insurance may have a higher deductible

-Premium would be significantly higher than it is for average drivers

-

Question 18

Safe Driver Insurance Plans (SDIPs)

Answer 18

Many insurers with nonstandard insurance programs have SDIPs which encourage insureds to drive safely by offering discounts to insureds who have no accidents or traffic convictions during a period (those that do have accidents/violations must pay a higher premium)

Question 19

Three groups of programs for insureds in the residual market:

Answer 19

-Automobile insurance plans (Assigned risk plans)
-Joint underwriting associations (JUA)
-Other programs (Reinsurance Facility and Maryland State Fund)

Question 20

Automobile Insurance Plan (AIP)

Answer 20

All auto insurers in the state are assigned a portion of the high risk drivers based on their market share of the auto insurance written in the state

Question 21

Characteristics of AIP

Answer 21

-Applicants need to demonstrate that they have been unable to obtain auto insurance within a certain number of days (usually 60)

-The minimum limits offered are at least equal to the compulsory insurance requirement

-Certain people may be ineligible for coverage, including those with no valid drivers’ license, convicted of a felony within the preceding 36 months, and that habitually violate the laws

-Premiums are usually higher than in the voluntary market

Question 22

Joint Underwriting Associations (JUAs)

Answer 22

A JUA is an organization that provides insurance to the residual market. There are also servicing insurers that perform services such as:
-Receive applications
-Issue policies
-Collect premiums
-Settle claims
-Other necessary services

Agents/brokers submit the applications of the high risk drivers to the JUA or the servicing insurer.

The JUA sets the rate and approves the policy form.

The auto insurers in the state will pay a share of the underwriting losses and expenses based on their share of the voluntary auto premium in the state. Some of this money will go toward compensating the servicing insurers.

Question 23

Difference between AIP and JUA

Answer 23

For AIP’s, insurers are assigned policyholders proportional to their market share, and are therefore responsible for receiving the premiums and paying the losses of these assigned policyholders. The losses may be significantly more or less than their market share based on the performance of these assigned policyholders.

For JUAs, the auto insurers in the state pay a share of the underwriting losses and expenses based on their share of the voluntary auto premium in the state.

Question 24

Reinsurance Facility

Answer 24

Insurers accept all applicants who have a valid driver’s license, issue policies, collect premium and settle claims. If the insurer does not wish to retain the policy, the insurer can assign the policy to the reinsurance facility while continuing to service it. All of the auto insurers in the state share the underwriting losses and expense in proportion to the auto insurance premium in the state.

(Insureds apply to the insurance companies like usual, the company then cedes the premium and losses to the facility. Company that ceded the risk still services the claims but it is reimbursed the loss amount by the facility).

Question 25

Maryland State Fund

Answer 25

Insures high risk drivers. The private insurers need to subsidize the losses. They will in turn charge a surcharge to their own insureds.

(Requires insurers in the state to subsidize the cost of insurance for those in the fund and then can surcharge their own insureds to make up the difference)

Question 26

Similarity between JUA and Reinsurance Facility

Answer 26

For both, the sharing of profit or loss is done based on the voluntary market share of insurers.

Question 27

Government rate regulation of auto insurance helps resolve this conflict…

Answer 27

Since it is mandatory for drivers to have auto insurance, the public perceives purchasing insurance to be a right, as opposed to a privilege. The desire of insurers to make a profit could conflict with this perceived right of the public to purchase insurance.

Question 28

FAIR Plans

Answer 28

Lenders require that property owners obtain property insurance in order to obtain a mortgage. FAIR (Fair Access to Insurance Requirements) plans provide coverage when insurers in the voluntary market can not offer coverage at a reasonable rate.

Question 29

How do FAIR Plans Operate

Answer 29

Policies are issued and serviced by private companies who collect premium and pay
losses. Policies are assigned to insurers based on their market share.

Question 30

Eligibility for FAIR Plan

Answer 30

-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

Question 31

Main candidates for FAIR Plans

Answer 31

-*Those in urban areas who are susceptible to damage caused by riots and civil commotion.

-Coastal properties exposed to windstorm damage.

-Homes located in hazardous brush areas exposed to wildfire risk.

Question 32

Qualifications for FAIR Plan coverage

Answer 32

-The property must be ineligible in the voluntary market

-The property must have been inspected by a FAIR plan administrator. If it does not meet FAIR plan inspection criteria, the owners may be required to make improvements.

Question 33

Under most plans, the following five types of properties are considered uninsurable

Answer 33

-Vacant or open to trespass
-Poorly maintained or has unrepaired fire damage
-Subject to unacceptable physical hazards (poor housekeeping, storage of flammable materials, etc.)
-Violates law of public building (e.g. a condemned building: one that is unfit for human habitation)
-Not built in accordance with the building and safety codes
-

Question 34

Most FAIR plans only provide coverage for:

Answer 34

Fire and a limited number of perils (including vandalism, riot, and windstorm)

Question 35

Exposures that are uninsurable by FAIR Plans

Answer 35

Vacant properties
Poorly maintained properties
Properties with building code violations

Question 36

DIC (Difference in condition policy)

Answer 36

If a policyholder wants more coverage than what the FAIR plan offers, a specialty insurer may offer DIC. Since fire is the main loss exposure for these types of insureds, insurers would often be willing to assume the other exposures.

Question 37

Beachfront and Windstorm Plans

Answer 37

Properties located along the Atlantic and Gulf coasts are vulnerable to windstorm losses. Just like with FAIR plans, Beachfront and Windstorm plans are offered to at risk insureds to provide protection, which will enable them to obtain a mortgage. Note that losses from tidal water are usually excluded, and would need to be covered by a flood insurance policy.

Question 38

To be eligible for Beachfront and Windstorm plans, properties must:

Answer 38

-be ineligible for voluntary coverage
-be located in designated coastal areas
-some states require that the property be located within a certain distance from the shoreline
-properties constructed or rebuilt after a certain date must conform to applicable building codes

Question 39

Most plans would not accept applications for new coverage…

Answer 39

When a hurricane has formed within a certain distance of where property is located

Question 40

Purpose of Guaranty Funds

Answer 40

To protect policyholders from inability of an insolvent insurer to pay claims. Operated at the state level.

Guaranty funds provide claim coverage and partial refund of unearned premiums when an insurer becomes insolvent.

Question 41

How are Guaranty Funds Funded?

Answer 41

-Makes assessments to insurers in the state. Most popular type is post-insolvency assessments, usually capped at 2% of WP for each insurer each year. It may take a few years to fully fund due to the cap on the assessment that can be collected each year.

-The funding mechanism, is to assess other solvent insurers in the market to pay claims. This happens in proportion to the company’s premium in the market.

-In most states, funded by post-insolvency mechanism, where regulator assess remaining insurers in marketplace for costs of administering fund and paying out claims. Done by market share proportion.

Question 42

Limitations on Fund Coverage

Answer 42

-Lines covered: Most direct P/C policies if issued by insurers LICENSED to transact insurance in the state. Excludes: Title, credit, mortgage, ocean marine, reinsurance, and surplus lines

-Refunds of unearned premium, often within stated limit

-Maximum covered claim, except WC which is unlimited

-Claim deductible in addition to policy deductible

-Large net worth deductible

-Trigger of coverage: Most state fund coverage only available for insurer after a court has found it to be insolvent and placed in liquidation

Question 43

Guaranty Fund effect on consumers

Answer 43

-Consumers with claims benefit

-Indirect cost of funds on consumers is hidden, but real. Passed partly back to consumers in form of higher insurance rates.

-May have less incentive to seek strong insurers if they know Guaranty Fund exists

Question 44

National Flood Insurance Program (NFIP)

Answer 44

Main provider of residential flood insurance in the U.S. insuring about $1.42 trillion in residential coverage (over 5 million residential properties). Annual premium revenue is roughly $3.5 billion

Question 45

The private market had been previously reluctant to provide flood insurance coverage, but interest has picked up in recent years due to:

Answer 45

-Advance in analytics and data used to quantify the flood risk

-Increases in capital market capacity

Question 46

NFIP has 2 main policy goals:

Answer 46

1. Provide access to primary flood insurance (to transfer some risk from property owners to federal government)
2. Mitigate flood risk via the development and implementation of floodplain management standards

In addition to the above, there is a longer term objective to reduce federal expenditure on disaster assistance after floods

Question 47

NFIP social goals

Answer 47

-Provide flood insurance in flood prone areas to property owners who would otherwise be unable to obtain it

-Reduce government’s costs after floods

Question 48

NFIP has been expected to achieve many objectives, some of which are conflicting:

Answer 48

-Ensure premiums are reasonable

-Charge risk based premiums in order to inform property owners about their true exposure, and bear the cost of their choice to live in a floodplain location.

-Encourage widespread participation in NFIP

-Earn premium and fee income that would cover the losses and expenses over a longer period

Question 49

Flood Insurance is mandatory for:

Answer 49

property owners located in a Special Flood Hazard Area (SFHA) if they have a mortgage that is backed by the federal government.

The mortgage providers are responsible to enforce coverage: lenders are subject to fines of up to $2000 for each failure to require flood insurance. In addition, property owners who do not obtain flood insurance when required may become ineligible for various forms of disaster assistance following a flood.

Question 50

Property owners can comply with the flood insurance requirement by purchasing it from:

Answer 50

NFIP: The NFIP flood insurance policies are only sold in participating communities

Private Insurers: As long as coverage is “at least as broad” as the NFIP coverage (in addition to meeting other conditions)

Question 51

Why someone may prefer to purchase flood insurance from a private insurer:

Answer 51

NFIP coverage limits are relatively low, especially for non-residential properties and properties located in high cost areas.

Question 52

NFIP Flood Rates/Result

Answer 52

NFIP flood rates are technically directed to be “based on consideration of the risk involved and accepted actuarial principles”, which would suggest rates should be based on the true flood risk. However, Congress has instructed FEMA not to charge actuarial rates for certain classes, although it did not provide FEMA with money to fund the subsidies/discounts.

As a result, FEMA has needed to borrow money from the U.S. Treasury to pay claims.

Question 53

Three main categories of properties that do not pay actuarial rates

Answer 53

Pre-FIRM: Properties built or substantially improved before the later of 12/31/74 or the date in which FEMA published FIRM for their community

Newly-mapped: Properties mapped into a SFHA on or after 4/1/15 where the applicant purchases coverage effective within 12 months of being placed in SFHA

Grandfathered: Properties built in compliance with the FIRM that was in effect at the time of construction can maintain their original flood insurance rate class if the property is mapped into a new class

Question 54

Ways in which private insurers can become involved in flood insurance market:

Answer 54

-Helping administer the NFIP
-Sharing risk with the NFIP as a reinsurer
-Assuming the risk as a primary insurer

Question 55

Two structures in which private insurers provide administration services (marketing, selling & servicing policies, claim management):

Answer 55

-Direct Servicing Agent (DSA)

-Write-Your-Own (WYO)

In both cases, NFIP retains the risk.

Question 56

Direct Servicing Agent (DSA) definition

Answer 56

Sells NFIP policies on behalf of FEMA for property owners that want to purchase insurance directly from the NFIP. DSA issued policies make up about 14% of the policies NFIP retains the risk.

Question 57

Write-Your-Own (WYO) definition

Answer 57

Private insurers issue & service NFIP policies. WYO policies make up about 87% of the policies. WYO insurers are compensated for their services, although compensation isn’t directly based on the costs incurred by the WYO’s. NFIP retains the risk.

Question 58

Benefits of FEMA purchasing reinsurance

Answer 58

-Purchasing reinsurance from the private market would reduce the chance that FEMA would need to borrow money from the Treasury

-This would allow FEMA to price some of the flood risk up front via the premiums paid to reinsurers, rather than having to wait to borrow from the Treasury following a flood event

-This would help the government reduce the volatility of its losses over time

Question 59

The private market offered flood insurance between 1895 and 1927, but stopped offering policies following large losses from the 1927 Mississippi River floods, as well as additional floods in 1928. At this point, flood was considered uninsurable for these reasons:

Answer 59

-Catastrophic nature of flooding (low frequency, high severity)

-Difficulty of determining accurate rates

-Risk of adverse selection

-Concern that carriers would not be able to profitably provide flood coverage at an affordable price

Question 60

Issues & Barriers related to private sector involvement in the flood insurance market:

Answer 60

-Requirement that flood coverage be “at least as broad” as NFIP (subjective)

-Continuous Coverage (the requirement to maintain continuous coverage states that if a policyholder’s coverage lapses, any subsidies received will be eliminated immediately. Legislation was proposed in 2019 that allows the private insurance to qualify for the continuous coverage)

-Non-Compete Clause (Before the 2019 fiscal year, a “Non-Compete” clause restricted WYO carriers from selling their own flood insurance policies. This clause potentially limited the size of the private market. In 2019, this restriction was removed, although the WYO carriers were required to keep such private lines business entirely separate from the WYO NFIP business. Note that FEMA could elect to reinstate the clause in the future).

-NFIP subsidized rates (FEMA offers subsidized rates. But this is not the private market’s only disadvantage: NFIP rates just need to account for expected losses and operating costs, but the private market’s must also include a profitable return on capital. As a result, a policy priced at the actuarially sound rate by the NFIP could still be considered underpriced from the perspective of the private market. NFIP would need to reform rate structure to charge full-risk based rates that would be more in line with what would be charged by the private market in order to encourage private insurers to provide flood insurance. One disadvantage of this change is that it would result in higher rates for policyholders).

-Regulatory Uncertainty (state regulators would become more involved if the private sector was to offer coverage, and insurers that operate in multiple states would need to deal with several regulators, increasing complexity and cost).

-Ability to assess flood risk accurately (Lack of access to NFIP data on flood losses. Granting access to private insurers would allow them to better estimate losses and underwrite. The NFIP would need to address privacy concerns. In addition to accessing data, the private market would want better flood risk assessment tools like improved flood maps and inland & storm surge models).

-Adequate consumer participation (Insurers require sufficient consumer participation in order to properly manage and diversify their exposure, as well as reduce adverse selection. An issue with the current structure is although a mandatory purchase requirement applies, not all covered mortgages actually purchase the insurance. Escrowing of insurance premiums (which began in 2016) should increase the compliance level).

Question 61

Risk Rating 2.0

Answer 61

FEMA is currently introducing a redesigned risk rating program for NFIP, Risk Rating 2.0. This new rating plan will better reflect an individual’s property risk and will also reflect more types of flood risk in the rating.

Change include:
-Premiums will be based on features of the individual policy (e.g. foundation type of structure, height of lowest floor relative to base flood elevation, replacement cost value of structure).
-In addition to reflecting more types of flood risk, it will consider geographic factors such as distance to water, type & size of nearest bodies of water, and the elevation of the property relative to the flooding source.

Risk Rating 2.0 will continue to phase out the NFIP subsidies, but rates will be constrained by statute based limitations. Ultimately Risk Rating 2.0 is expected to reduce cross-subsidies between the NFIP policyholders, and will eventually bring all policyholders to full actuarial rate. This should increase competition as NFIP premiums will be closer to that of the market.

Question 62

Potential effects of increased private sector involvement in the flood market:

Answer 62

-Increased consumer choice (competition)

-Cheaper flood insurance (for some)

-Variable consumer protections (It is possible that in a given state, a private policy that is less expensive than a NFIP policy actually offers less coverage, which the policyholder may only discover after a flood event. In addition to this, the language in private flood policies is not standardized and has not been tested in court, which means there may be greater variability in claims outcomes in the early years of private coverage).

-Adverse selection (Competition from the private market will likely increase financial exposure and volatility of the NFIP, especially since private carriers will target policies that are expected to be the most profitable. NFIP could be left with a higher concentration of actuarially unsound policies).

-Issues for NFIP flood mapping & floodplain management

Question 63

FEMA has considered solutions to address the barriers to entry for the private market:

Answer 63

One has been introduced already:
-The purchase of reinsurance

Two are currently in progress:
-Reporting of premium subsidies for some properties
-Reporting to make the subsidies more transparent

Question 64

Current discussions are focused on sharing the risk, as it has been acknowledged that neither NFIP nor the private market is able to cover all the risk.

Answer 64

FEMA believes both the NFIP and an expanded private market are required to reduce the uninsured flood losses. However, as discussed, the private market is unlikely to significantly expand coverage without congressional action.

Question 65

Goals of TRIA:

Answer 65

-Create a temporary federal program of shared public and private compensation for terrorism losses while the private market stabilizes after 9/11

-Protect consumers, by ensuring availability and affordability of terrorism insurance

-Preserve state regulation of insurance (policymakers confirmed there will be no changes to the state regulator’s authority. However, the federal definition of an “act of terrorism” would apply, instead of the state definition.

Question 66

TRIA only covers commercial insurance, and excludes several lines:

Answer 66

-Federal or private crop insurance
-Private mortgage or title insurance
-Financial guaranty insurance (issued by monoline insurers)
-Medical malpractice
-Health or life insurance
-Flood insurance
-Reinsurance or rerocessional insurance
-Commercial auto
-Burglary and Theft
-Surety
-Professional Liability insurance
-Farm owners multiple peril insurance

Question 67

Structure of TRIA program

Answer 67

-A single terrorist act must be CERTIFIED by the Secretary of Treasury, Secretary of State, and Attorney General. Industry insured losses must exceed $5M to be certified for TRIA coverage

-Aggregate industry certified losses in a year must exceed $200M for government coverage to begin

-Each insurer has a deductible equal to 20% of its direct annual earned premium (commercial premium of the lines covered by TRIA)

Question 68

After the above thresholds are passed:

Answer 68

-The government will cover 80% of insured losses that exceed the deductible

-If aggregate industry losses do not exceed $37.5B the Secretary of the Treasury will recoup 140% of coverage via surcharges. The surcharges should be a percentage of premiums paid on TRIA-eligible policies, but the Secretary can adjust the amount to reflect differences between rural and urban areas, as well as the terrorism exposure of different lines of business.

-If losses do exceed $37.5B, 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. **Contradiction in text on if this means ground up losses or government portion of losses exceeding $100B

Question 69

Elements of insurable risks related to terrorism

Answer 69

-There must be a sufficiently large number of insureds to make the losses reasonably predictable:
Terrorism fails this requirement

-Losses must be definite and measurable:
Terrorism meets this requirement

-Losses must be fortuitous or accidental:
Terrorism fails this, as it is caused by deliberate human action

-Losses must not be catastrophic (impacting a large portion of the insureds simultaneously):
This would depend on the insurer’s underwriting actions

Question 70

The TRIA statute does not explicitly include or exclude nonconventional terrorist attacks such as:

Answer 70

Nuclear, chemical, biological, radiological, as well as cyberterrorism risks.

Question 71

Roles of federal government, state government, and private insurers for TRIA

Answer 71

Federal Government:
Provides funds for losses in excess of set amounts of loss resulting from terror attack (Acts as reinsurer to insurer for terrorism losses)

State Government:
Not involved, does not have a role other than regulating insurer as normal. (approves terrorism rates and forms)

Private Insurers:
-Writes TRIA and provides primary coverage
-Partnership with federal government. Writes the insurance and cedes to federal government the high layers of the coverage it cannot retain.