Webel Flashcards
1
Q
Purpose of the Terrorism Risk Insurance Act of 2002
A
Give the insurance industry time to gather the data and create the structure & capacity to be able to offer terrorism coverage.
2
Q
Briefly describe the changes implemented when TRIA was extended in 2005 and 2007
A
- 2005: focused on reducing the governments up front financial exposure
- 2007: accelerated the post event recoupment provisions It also expanded the coverage to include domestic acts of terrorism
3
Q
3 goals of TRIA
A
- Create a temporary federal program of shared public & private compensation for terrorism losses, while the private market stabilizes after 9/11
- Protect consumers, by ensuring the availability and affordability of terrorism insurance.
- Preserve state regulation of insurance
4
Q
List examples of lines excluded by TRIA
A
- any non commercial line
- Federal crop insurance
- Private crop or livestock insurance
- Private mortgage insurance
- Title insurance
- Financial guaranty insurance
- Medical malpractice
- Flood insurance
- Reinsurance
- All Life insurance
5
Q
Describe the structure of the TRIA program
A
- 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 $100M for government coverage to begin
- Each insurer has a deductible equal to 20% of its direct annual earned premium
6
Q
Describe how much of the loss that the government covers
A
- the government will cover 85% of insured losses (that exceed the deductible)
- if aggregate industry losses do not exceed $27.5B, the Secretary of the Treasury will recoup 133% of coverage via surcharges
- if 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.
7
Q
Impacts of the Terrorism Risk Insurance Program Reauthorization Act of 2015
A
- extend TRIA till the end of 2020
- decrease the federal sharing gradually from 85% to 80%
- increase the program trigger by $20M a year from $100M (in 2015) until it reaches $200M
- increase the insurer aggregate retention by $2B a year from $27.5B until it reaches $37.5B
- extend the date for mandatory recoupment by 7 years
- increased the mandatory recoupment provision so that 140% will be recouped
- require the Treasury to study the certification process, and issue rules governing the process (which would include a timeline)
- require the Treasury collect additional data on the terrorism insurance market, and include that in its annual report
- require a GAO study the possible effects of instituting insurer premiums for TRIA coverage, and requiring capital reserve funds for terrorism
8
Q
4 elements of an insurable risk
A
- There must be a sufficiently large number of insureds to make the losses reasonably predictable
- Losses must be definite & measurable
- Losses must be fortuitous or accidental
- Losses must not be catastrophic
