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Extending TRIA

Extending TRIA. CARe Special Interest Seminar. Currently there are three extensions to TRIA under consideration. H.R. 4634 sponsored by Pete Sessions (R-Texas), et al. H.R. 4772 sponsored by Michael Capuano (D-Massachusetts), Steve Israel (D-New York), et al. S. 2764

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Extending TRIA

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  1. Extending TRIA CARe Special Interest Seminar Joseph R. Lebens, FCAS, MAAA

  2. Currently there are three extensions to TRIA under consideration • H.R. 4634 • sponsored by Pete Sessions (R-Texas), et al. • H.R. 4772 • sponsored by Michael Capuano (D-Massachusetts), Steve Israel (D-New York), et al. • S. 2764 • sponsored by Christopher Dodd (D-Connecticut), Bob Bennett (R-Utah), et al.

  3. Each of the extension billsmodifies the existing TRIA in several areas • Length of extension • Lines covered • Mandatory availability • Individual insurer deductibles • Recoupment trigger of mandatory surcharge on commercial policyholders • Long-term solution study

  4. Each bill seeks to extend TRIA for at least two years beyond the current expiration date H.R. 4634 H.R. 4772 Policy Run-off S. 2764 2008 2007 2006 TRIA expires 12/31/2005

  5. Each of the three bills addresswhich lines of business should be covered • H.R. 4634 – Identical to TRIA with a new group life study due by June 1, 2005 • H.R. 4772 – Adds group life insurance to the commercial P/C lines already covered • S. 2764 – Directs Treasury to issue rule within 90 days of enactment of how to include group life insurance • Separate retention amounts may be considered

  6. Insurers are required to continuethe “make available” requirement of TRIA • H.R. 4634 – For policies written in 2006 and 2007 • H.R. 4772 – For policies written in 2006 and 2007, including the run-off of those policies during 2008 • S. 2764 – For policies written in 2006 and 2007, including the run-off of those policies during 2008

  7. Individual insurer deductibles continueto be a percentage of the prior year’s DEP 20% 15% 10% 5% ‘03 ‘04 ‘05 ‘06 ‘07 ‘06 ‘07 ‘08 ‘06 ‘07 ‘08 H.R. 4634 H.R. 4772 S. 2764 TRIA

  8. The aggregate retention amounts forthe insured loss compensation section vary $20B $15B $10B ? for 2008 ‘03 ‘04 ‘05 ‘06 ‘07 ‘06 ‘07 ‘08 ‘06 ‘07 ‘08 H.R. 4634 H.R. 4772 S. 2764 TRIA

  9. Each bill requires some study andrecommendation for a long-term solution • H.R. 4634 – By June 1, 2005, the Secretary shall conduct a study and submit a report to Congress alternatives that “do not involve a Federal financial backstop.” • H.R. 4772 – The Comptroller General shall submit a report to Congress by June 30, 2007 • S. 2764 – The Presidential Working Group on Financial markets shall consult with the NAIC, insurance industry reps, and policyholders and submit recommendations for a long term solution to Congress by June 30, 2006

  10. Under TRIA, insurers bore the brunt of smallerlosses and paid a lesser percentage of large events Source: Tillinghast Industry Terrorism Pricing Model

  11. With H.R. 4634, insurers bear the bruntof the losses while policyholders bear little Source: Tillinghast Industry Terrorism Pricing Model

  12. With H.R. 4772, policyholders receive even more of a break at a cost to the government Source: Tillinghast Industry Terrorism Pricing Model

  13. Like TRIA, S. 2764 has policyholders picking up a moderate share of losses less than $30B Source: Tillinghast Industry Terrorism Pricing Model

  14. Projected CBO scorings1 of the bills implies that insurers pay the most under H.R. 4634 TRIA 2002 $2,689m H.R. 4634 $1,133m H.R. 4772 $1,359m S. 2764 $1,224m Source: Tillinghast Industry Terrorism Pricing Model

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