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Extending TRIA

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oren-ballard
14 diapositives · 282 Views · Nov 30, 2014

This seminar led by Joseph R. Lebens, FCAS, MAAA, discusses the potential extensions to the Terrorism Risk Insurance Act (TRIA) currently under consideration. Three primary bills, H.R. 4634, H.R. 4772, and S. 2764, propose modifications regarding the length of coverage, lines of business, mandatory availability, insurer deductibles, and other critical aspects of the legislation. Each bill aims to extend TRIA for at least two years and suggests a long-term solution, incorporating feedback from industry stakeholders and studies.

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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