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Átirat

Terrorism Insurance (TRIA)

Structure of Assistance

Eligibility of Insurers

Covered Lines

Terrorism Risk Insurance Act (TRIA) - 2002

An eligible insurer is any entity or affiliate that:

Terrorism Insurance Outside of Individual Countries

Commercial, plus war coverage for workers’ compensation; excludes reinsurance. Secretary of the Treasury has discretion to add group life insurance and other personal lines.

1) Is a recipient of direct earned premiums for any type of commercial property and casualty insurance coverage

2) Is licensed to provide insurance in any state, approved for the purpose of offering property and casualty insurance by a federal agency in connection with maritime, energy, or aviation activity, or is a state residual market insurance entity or state workers’ compensation fund

3) And meets any other criteria that the Secretary may reasonably prescribe

  • There is global terrorism insurance offered by some private insurers
  • The biggest global insurer is AXIS Capital
  • Global terrorism insurance is in its infantile stage because of the difficulty to standardize a catastrophic risk

History (U.S.) and Government-backed TRIA

4 Key Characteristics:

  • It must be a violent act or an act that is dangerous to human life, property, or infrastructure.
  • It must have resulted in damage within the United States, or to an air carrier as defined in the United States code, or to a U.S. flag vessel or other vessel based principally in the United States and insured under U.S. regulation, or on the premises of any U.S. mission (e.g., an embassy or consulate).
  • It must have been committed by someone acting on behalf of a "foreign person or foreign interest, as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the U.S. Government by coercion."
  • It must produce property and casualty insurance losses in excess of $5 million.

Mandatory Insurance Coverage

Thank you!

For the first two years, insurers must offer terrorism insurance in all commercial policies. Coverage must be available on terms identical to terms, amounts, and other coverage limitations applicable to losses incurred from events other than acts of terrorism.

MOST COSTLY TERRORIST ACTS BY INSURED PROPERTY LOSSES

Before the September 11, 2001 attack:

  • Commercial policies either included terrorism for no additional cost or omitted terrorism from the policy altogether
  • Terrorism was written mostly through reinsurance
  • Inadequate premiums were often charged due to a small sample size and number of losses

1 Sept. 11, 2001

U.S. Hijacked airliners crash into World Trade Center and Pentagon $24,721

2 April 24, 1993

U.K Bomb explodes near NatWest tower in the financial district $1,193

3 July 24, 2001

Sri Lanka Rebels destroy 3 airliners, 8 military aircraft and heavily damage 3 civilian aircraft $525

4 Nov. 26 2008

India Attack on two hotels; Jewish center $111

5 Dec. 30 2006

Spain Bomb explodes in car garage at Barajas Airport $76

6 July 7 2005

U.K. Bomb explodes on board of a PanAm Boeing 747 $74

WTC Attack

TRIA 2002- Regulations

– The attack resulted in insured losses of nearly $40 billion total including property, liability and life insurance claims.

– Property losses which included businesses interruption was approximately $25 billion

– Insurance industry paid for about 51% of the $40 billion claims, government programs made up 42% and charities provided 7%

– This event led to the creation of a government backstop to assist in losses arising from terrorist attacks. (TRIA)

– Silverstein won the trial against insurers for $4.5billion on the grounds that there were two separate occurrences (two planes striking at different times)

  • Feds share in an insured loss is 90% of the amount in excess of the insurance companies’ deductible
  • Insurer’s deductible is calculated by a certain percentage multiplied by the earned premiums of the prior year
  • For 2003, 7% of 2002 premiums; For 2004, 10% of 2003 premiums; For 2005, 15% of 2004 premiums

Mumbai Hotel Attack

Common Policy Structure

International Terrorism Insurance

  • Most Common Coverages: Acts of Terrorism that result in direct property damage and many cover business interruption due to acts of terrorism
  • Most Common Exclusions: Acts of War, Biological and Nuclear Attacks, Health and Life Liabilities
  • Implementation: Many countries have a reinsurance pool. Insurers charge a premium, a percentage of covered property. If an act of terrorism occurs then the reinsurance funds provide coverage and if the losses exceed that the government will step in and provide funds

  • Spain (1941)
  • South Africa (1979)
  • United Kingdom (1993)
  • Rest of the World (Post 9/11)

2005 TRIA Revisions

TRIA Loss Example

Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) 2007

– The locations targeted were: Chhatrapati Shivaji Terminus railway station, Leopold Café, Taj Mahal Palace & Tower Hotel, Oberoi Trident Hotel, Metro Cinema, Cama and Albless Hospital and Nariman House.

– The direct and indirect property losses were approximately $111million. The proximate cause were explosions from terrorist bombings.

– Terrorism coverage is an additional coverage provided under property insurance policies by an endorsement (Optional)

– Capacity is provided by the Indian Market Terrorism Risk Insurance Pool (IMTRP)

– Facultative Reinsurance Support

London Attack

  • Trigger for Government assistance is 100 million for 2007 to 2014
  • The percentage of deductible would remain at 20% for the seven years
  • The percentage of losses paid by the government would remain at 85%
  • The aggregate cap per year for losses would be $100 billion

Loss = $30 billion (much like 9/11)

Insurer Earned premiums 2003: $200 billion

10% or .10 x $200 billion = $20 billion

$20 billion is Insurers responsibility to loss

$10 billion is Feds responsibility to loss

  • The trigger for Government assistance would increase from $5 million to $50 million in 2006 and $100 million in 2007
  • The percentage of deductibles would increase to 17.5% and 20% respectively for 2006 and 2007
  • The percentage of losses paid by the government will decrease from 90% to 85% in 2007

– A series of bombings on London’s transit system.

– Property losses are approximately $74million

– The losses incurred by Transport for London (TfL) where indemnified by its parent company London Underground (captive-self-insurance)

– Claims would not be paid out by the U.K. terrorism backstop PoolRE

– Surrounding buildings and businesses had claims on their policies for Property, Business Interruption, and Ordinance or Law which were not indemnified by PoolRe because the members of PoolRe must share in the retention $132 million for one event or $265 million for the year before PoolRe comes into play

UK Terrorism Insurance

2015 TRIA Revisions

  • Private Insurers incorporate terrorism insurance into commercial policies
  • Terrorism policies are put into a reinsurance pool
  • This pool is a separate entity known as Pool Re
  • Pool Re is backstopped by the UK government funds

  • Trigger for Government assistance is raised from $100 million by $20 million a year until it reaches $200 million n 2020
  • The percentage of losses paid by the government (85%) will be reduced by 1% each year until 80% in 2020

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