terrorism risk insurance program
DESCRIPTION
Terrorism Risk Insurance Program. Jeffrey S. Bragg Executive Director. Terrorism Risk Insurance Program Purpose. Address Insurance Market Disruptions Ensure Availability and Affordability of Commercial P&C Terrorism Coverage Provide Transition Period - PowerPoint PPT PresentationTRANSCRIPT
Terrorism Risk Insurance Program
Jeffrey S. BraggExecutive Director
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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 Foreign TerrorismResulting in Damage > 5M
INUnited StatesU.S. MissionsU.S. Air CarriersU.S. Vessels
FORCommercial Lines P & CWorkers Compensation
Secretary of
State
Secretary of
Treasury
AttorneyGeneral
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Terrorism Risk Insurance Program
Restrictions
• Temporary ProgramExpires 2005
• Company Deductible 2005 15% + 10% Insured Loss
• $100 Billion Annual Cap on Insured Losses
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Terrorism Risk Insurance Program
Goals
• Continued availability/affordability of insurance from Certified Acts of Terrorism
• Transitional period for private markets to stabilize, build capacity
• Preserving state insurance regulations
• Equitable distribution of shared costs of recovery
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Terrorism Risk Insurance Program
Core Values
• Sense of Urgency and Purpose
• Open and Transparent Operations
• Efficient, Fair and Accurate Service
• Fiscal Responsibility
• Accountability
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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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Terrorism Risk Insurance Program
Claims Rule
• 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.
• Partial payments.
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Terrorism Risk Insurance Program
Advance Payments
TRIP Claims Management
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
Request ASAP System
Payment
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Terrorism Risk Insurance Program
Claims Forms
1. Initial Notice of loss
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
• ASAP
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Terrorism Risk Insurance Program
TRIP Service Contractors
•Paragon Claims Processing & Management
•ISO Statistical Reporting
•Deloitte Claims Auditing
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Terrorism Risk Insurance Program
Contracting Process
1. Develop initial statement of work2. Analyze requirements3. Acquisition Office/TRIP Office development of Procurement Plan4. Conduct market research-receive comments5. Coordination of technical issues, e.g., systems, financial, accounting6. Issue request for comments (optional)-receive and analyze comments7. TRIP Office redraft of statement of work-develop independent cost estimate8. Acquisition announce planned RFP release date on 9. TRIP/Acquisition development selection plan10. Acquisition Office preparation and clearance of RFP11. Release of RFP-Announce RFP FEDBIZOPPS.GOV12. Receive and answer questions13. Conduct pre-proposal conference14. Amend solicitation (as required)15. Receive and evaluate proposals16. Establish a competitive range, obtain clarifications on conduction negotiations; obtain “Best and Final
Offers” (as required)17. Preparation of Report/Recommendation; Source Selection Authority decision18. Acquisition Office prepare, clear and award contract
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Terrorism Risk Insurance Program
Litigation Management Rule
1. Follows Requirements of Act• Exclusive Federal cause of action• Preempts state causes of action (Not workers comp)• Preserves government subrogation rights• Federal funds not used to pay punitive damages
2. Presidential Memorandum• Advance approval of Secretary of Treasury for proposed
settlements of Federal causes of action > $ 2M personal injury or death> $ 10M property damage
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Terrorism Risk Insurance Program
6th Rule Affiliation Determination
1. Final 30 to 60 Days
2. Timing Affiliation Determination
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Terrorism Risk Insurance Program
Recoupment Example
DiscretionaryRecoupment
$5 B
MandatoryRecoupment
$10.3 B
$20 B Insured Loss100 Insurers Impacted
DEP 100 Insures = $20 B
$15 B 3rd Year 15% deductible = $3 BTrip Industry Aggregate Retention Pays $15.3 B 10% quota share = $1.7 B
100 Companies Pay $4.7 B
$4.7 B Paid by 100 companies
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Terrorism Risk Insurance Program
7th Proposed Rule - Recoupment
Published 30 – 60 Days
Standards for Treasury Notification (6 Months Notice)
Establishes Electronic Payment System
Assessments in Full Year Increments (Minimum 1 Year)
Annual Reconciliation/Audit
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Terrorism Risk Insurance Program
Rule Making Process
1. Preliminary determination of regulatory content (vs. business procedures)2. Develop draft regs3. TRIP Review draft regs4. Reinsurer site visit5. Determine reg vs business process division and incorporate changes to draft reg6. Departmental review and possible meeting with OMB7. OMB review8. Publish in Federal Register (proposed rule)9. Formal public comment10. Paperwork Reduction Review - concurrent with public comment period11. Review comments12. Revise regs13. Departmental review14. OMB review15. Publish final regs in Federal Register
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Terrorism Risk Insurance Program
Program Issues
• State Exemptions (NBC)
• Losses in Excess $100B
• Foreign -vs- Domestic Terrorism
• Program Extension
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Terrorism Risk Insurance Program
Program Alternatives
TRIP ExtendedMinor Changes
TRIP ExtendedGroup Life
Deductibles and/orRetention
TRIP Extended but only if RNBC or >25M
Threshold
TRIP Extended withGroup Life
TRIP Not Extended No Substitute Program
TRIP Extended with Group Life
Higher DeductiblesNo Exclusion RNBC
TRIP ExtendedDeductibles and/or Market Retention
TRIP Not Extended Pool Substitute
Privatize TRIP
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Terrorism Risk Insurance Program
Treasury Offices
Financial InstitutionsOffice of Economic Policy TRIP Studies
Implementation Group LifeProgram Management Make Available Program Operations Program AlternativesEffectivenessClaims Management/ProcessingFinancial IntegrityOperational Efficiency
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Terrorism Risk Insurance Program
Market Corrections
• Property Insurance take up % rate
2003 1st Quarter 2004 3rd Quarter 24% 57%
• Cost of coverage - % of premium
2003 1st Quarter 2004 3rd Quarter 10% - 50% 4.2%