Post on 27-Dec-2015
transcript
TTerrorism errorism RRiskisk
IInsurance nsurance PProgramrogram
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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
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Terrorism Risk Insurance Program
Overview
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
State
Secretary ofTreasury
AttorneyGeneral
*Program Trigger $100M
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Terrorism Risk Insurance Program
Lines 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
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Terrorism Risk Insurance Program
As 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
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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
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• 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.
Terrorism Risk Insurance Program
Regulations
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• 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
Terrorism Risk Insurance Program
Regulations
*2005 Extension Act reaffirms Presidential Memorandum
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Terrorism Risk Insurance Program
Regulations
• 6th Final Rule - Affiliation Determination
- Affiliations frozen after first trigger event
- Recall: Certified Event –vs- Trigger Event
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Terrorism Risk Insurance Program
Regulations
• 7th Final Rule
- Implements 2005 changes mandated by Congress
- Clarifies multiple events not cumulative to reach trigger event
- NAIC Model Forms: Safe Harbor
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Terrorism Risk Insurance Program
Regulations
• 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)
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Terrorism Risk Insurance Program
Regulations
• 9th Final Rule - $100B Cap Proration
• 10th Final Rule - Recoupment of Federal Payments
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Terrorism Risk Insurance Program
Claims Process/Forms
1. Initial Notice of loss/Registration
2. Certification of loss
3. Schedule A – DEP & Insurer deductible
4. Schedule B – Certification of Compliance
5. Schedule C - Bordereau
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Terrorism Risk Insurance Program
Bordereau Formats
• Excel
• Comma delimited text file
• Pipe delimited text file
• Online manual completion
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Terrorism Risk Insurance Program
Claims Process
• www.treas.gov/trip
- Links to:
• TRIP Claims Manager
• Register Treasury Payments
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Terrorism Risk Insurance Program
Security & Best Practices Review
• 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.”
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Terrorism Risk Insurance Program
Claims Payments
TRIP Claims Contractor
4. TRIP Office Approves Payment
5. Treasury Issues Funds
3. Co. Establishes Segregated
Account
Insurance Co.
1. Company Submits
Certification of Loss with Bordereau
2. Reviews COL for Accuracy/Recommends
Payment
Reg. Acct #
Payment
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Terrorism Risk Insurance Program
Aggregate Industry Retention
2003 $10.0B
2004 $12.5B
2005 $15.0B
2006 $25.0B
2007 $27.5B
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$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
Terrorism Risk Insurance Program
Recoupment Example
DiscretionaryRecoupment
$12.5B
MandatoryRecoupment
$16.4B*
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Terrorism Risk Insurance Program
Accelerated Recoupment – Pay Go
Event Date Collections 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
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2.36%
3.10%
3.31%
3.56%
3.75%
4.02%
4.20%
4.69%
4.76%
4.76%
4.94%
5.09%
6.07%
7.65%
8.03%
0% 1% 2% 3% 4% 5% 6% 7% 8% 9%
Construction
Manufacturing
Healthcare
Financial Institutions
Retail
Technology/Telecom
Public Entity
Food & Beverage
Transportation
Education
Utility
Real Estate
Media
Habitational/Hospitality
Energy
Terrorism Risk Insurance Program
Terrorism Premium as Percentage of Property Premium, by industry
Marsh, Inc.
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23.5%
32.70%
44.20%46.20%
44.00%
48.00%
58.00% 59.00%
2003:II 2003:IV 2004:I 2004:II 2004:III 2004:IV 2005 2006
Terrorism Risk Insurance Program
Take-Up Rate Rising
2006 Marsh Marketwatch Report; Insurance Information Institute
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Terrorism Risk Insurance
STUDIES
WHO WHAT WHEN
PWG Availability/Affordability 9/30 2010/2013
Financial Markets Terrorism Insurance
Comptroller Availability/AffordabilityGeneral Insurer NBCR Losses
12/26/08
Comptroller Specific 6/26/08General Market Capacity Constraints
Availability/AffordabilityInsurance/Reinsurance
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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:ClaimsAuditStatistical Reporting
• Regulation: Final Netting