Webel

Question 1

3 goals of TRIA:

Answer 1

1. Create a temporary federal program of shared public & 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 2

Describe the structure of the TRIA program:

Answer 2

• 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 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 & measurable
3. Losses must be fortuitous or accidental
4. Losses must not be catastrophic