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T errorism R isk I nsurance P rogram

T errorism R isk I nsurance P rogram. Terrorism Risk Insurance Program Purpose. Address Insurance Market Disruptions Ensure Availability and Affordability of Commercial P&C Terrorism Coverage Provide Transition Period Stabilize and Build Capacity in Private Market

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T errorism R isk I nsurance P rogram

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  1. Terrorism RiskInsurance Program

  2. Terrorism Risk Insurance Program Purpose • Address Insurance Market Disruptions • Ensure Availability and Affordability of Commercial P&C Terrorism Coverage • Provide Transition Period • Stabilize and Build Capacity in Private Market • Strengthen Overall Economy

  3. Terrorism Risk Insurance ProgramOverview Certifies Act of Terrorism Resulting in Damage > 5M* IN United States U.S. Missions U.S. Air Carriers U.S. Vessels FOR Specified Commercial Lines Workers Compensation Secretary of Treasury Secretary of State Attorney General *Program Trigger $100M

  4. Terrorism Risk Insurance ProgramLines Excluded • • Medical Malpractice • Commercial Auto • •Reinsurance • Burglary & Theft • • Life & Health • Surety • • Crop • Farm Owners Multi Peril • Financial Guaranty • Professional Liability* • Flood *NAIC SERFF Uniform P&C Matrix: Professional E + O Liability

  5. Terrorism Risk Insurance ProgramAs Amended • All Acts of Terrorism Covered • Extended 2014 • Insurer Deductible 20% • Insurer “Co Pay” 15% • Program Trigger $100M • $100B “HARD” Cap on losses • 3% Cap Surcharge Mandatory Recoupment Eliminated

  6. Terrorism Risk Insurance Program Regulations • 1st Final Rule - Provides key definitions, such as “Act of Terrorism,” “Insurer,” and “Affiliate” - Identifies lines of Commercial Property & Casualty Insurance included in the Program • 2nd Final Rule - Make available requirements - Disclosure requirements • 3rd Final Rule - State residual market mechanisms

  7. Terrorism Risk Insurance ProgramRegulations • 4th Final Rule – Claims - Speed with which TRIP will act on a request for reimbursement. - Payment of allocated loss adjustment expenses. - Level of documentation required to support a claim. - Unique data elements required in reporting. - Advanced payments.

  8. Terrorism Risk Insurance ProgramRegulations • 5th Final Rule - Litigation Management Follows Requirements of Act - Exclusive Federal cause of action - Preserves government subrogation rights - Federal funds not used to pay punitive damages Presidential Memorandum* - Advance approval of Secretary of Treasury for proposed settlements of Federal causes of action > $ 2M personal injury or death > $ 10M property damage • *2005 Extension Act reaffirms Presidential Memorandum

  9. Terrorism Risk Insurance ProgramRegulations • 6th Final Rule - Affiliation Determination - Affiliations frozen after first trigger event - Recall: Certified Event –vs- Trigger Event

  10. Terrorism Risk Insurance ProgramRegulations • 7th Final Rule - Implements 2005 changes mandated by Congress - Clarifies multiple events not cumulative to reach trigger event - NAIC Model Forms: Safe Harbor

  11. Terrorism Risk Insurance ProgramRegulations • 8th Final Rule (Interim Guidance) - Implements 2007 Extension Act Changes - Mandatory Make Available Requirement (foreign and domestic)-Any offers made on or after 12/26/07* - Disclosure of CAP on Insured losses by first offer, purchase or renewal for policies issued after 12/26/2007 - Disclosure of Premium Amount - Offer, Purchase, Renewal of Policy - Must Match the Offer *Insurer 90 day compliance window (March 31, 2008)

  12. Terrorism Risk Insurance ProgramRegulations • 9th Final Rule - $100B Cap Proration • 10th Final Rule - Recoupment of Federal Payments

  13. Terrorism Risk Insurance ProgramClaims Process/Forms • Initial Notice of loss/Registration • Certification of loss • Schedule A – DEP & Insurer deductible • Schedule B – Certification of Compliance • Schedule C - Bordereau

  14. Terrorism Risk Insurance ProgramBordereau Formats • Excel • Comma delimited text file • Pipe delimited text file • Online manual completion

  15. Terrorism Risk Insurance ProgramClaims Process • www.treas.gov/trip - Links to: • TRIP Claims Manager • Register Treasury Payments

  16. Claims Facility utilizes well proven security architecture tools and protocols Security Accreditation issued by Treasury in October 2004 after extensive review by Booz Allen Hamilton 2005 Deloitte audit concluded plans and procedures “support the operation of an effective and efficient TRIP Claims Facility.” Terrorism Risk Insurance Program Security & Best Practices Review

  17. Terrorism Risk Insurance ProgramClaims Payments TRIP Claims Contractor • Company Submits Certification of Loss with Bordereau 2. Reviews COL for Accuracy/Recommends Payment 4. TRIP Office Approves Payment Insurance Co. Reg. Acct # 5. Treasury Issues Funds 3. Co. Establishes Segregated Account Payment

  18. Terrorism Risk Insurance Program Aggregate Industry Retention 2003 $10.0B 2004 $12.5B 2005 $15.0B 2006 $25.0B 2007 $27.5B

  19. Terrorism Risk Insurance ProgramRecoupment Example $40B Insured Loss Assumptions Loss occurs 2008 100 Insurers Impacted $27.5B TRIA covered DEP 100 Industry Aggregate Retention Insurers = $30B Trip Pays $28.9B 20% Deductible = $6.0B 15% Coinsurance = $5.1B 100 Companies Pay $11.1B $11.1B Paid by 100 companies Program Trigger Event $100M * 16.4B plus 33% (5.4B) = 21.8B Total Recoupment – PAYGO Discretionary Recoupment $12.5B Mandatory Recoupment $16.4B*

  20. Terrorism Risk Insurance ProgramAcceleratedRecoupment – Pay Go Event DateCollections Completed Prior 12/31/2010 9/30/2012 1/1/2011 – 12/31/2011 35% 9/30/2012 9/30/2017 After 1/1/2012 9/30/17

  21. Terrorism Risk Insurance Program Terrorism Premium as Percentage of Property Premium, by industry Marsh, Inc.

  22. Terrorism Risk Insurance Program Take-Up Rate Rising 2006 Marsh Marketwatch Report; Insurance Information Institute

  23. Terrorism Risk Insurance STUDIES WHOWHATWHEN PWG Availability/Affordability 9/30 2010/2013 Financial Markets Terrorism Insurance Comptroller Availability/Affordability General Insurer NBCR Losses 12/26/08 Comptroller Specific 6/26/08 General Market Capacity Constraints Availability/Affordability Insurance/Reinsurance

  24. Terrorism Risk Insurance Program TRIP 2008 Objectives • Interim Guidance Jan 1, 2008 • Report Proration Procedures May 1, 2008 • Recoupment Regulations Jul 1, 2008 • Final Proration Regulation Sep 1, 2008 • Recompete Contracts: Claims Audit Statistical Reporting • Regulation: Final Netting

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