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Terrorism Risk Insurance Program Jeffrey S. Bragg

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Terrorism Risk Insurance Program Jeffrey S. Bragg

  1. 1. Terrorism Risk Insurance Program Jeffrey S. Bragg Executive Director
  2. 2. Terrorism Risk Insurance Program Purpose <ul><li>Address Insurance Market Disruptions </li></ul><ul><li>Ensure Availability and Affordability of Commercial P&C Terrorism Coverage </li></ul><ul><li>Provide Transition Period </li></ul><ul><li>Stabilize and Build Capacity in Private Market </li></ul><ul><li>Strengthen Overall Economy </li></ul>
  3. 3. Terrorism Risk Insurance Program Overview <ul><li>Certifies Act of Foreign Terrorism </li></ul><ul><li>Resulting in Damage > 5M </li></ul><ul><li>IN </li></ul><ul><li>United States </li></ul><ul><li>U.S. Missions </li></ul><ul><li>U.S. Air Carriers </li></ul><ul><li>U.S. Vessels </li></ul><ul><li>FOR </li></ul><ul><li>Commercial Lines P & C </li></ul><ul><li>Workers Compensation </li></ul>Secretary of State Secretary of Treasury Attorney General
  4. 4. Terrorism Risk Insurance Program Restrictions <ul><li>Temporary Program </li></ul><ul><li>Expires 2005 </li></ul><ul><li>Company Deductible </li></ul><ul><li>2005 15% + 10% Insured Loss </li></ul><ul><li>$100 Billion Annual Cap on Insured Losses </li></ul>
  5. 5. Terrorism Risk Insurance Program Goals <ul><li>Continued availability/affordability of insurance from Certified Acts of Terrorism </li></ul><ul><li>Transitional period for private markets to stabilize, build capacity </li></ul><ul><li>Preserving state insurance regulations </li></ul><ul><li>Equitable distribution of shared costs of recovery </li></ul>
  6. 6. Terrorism Risk Insurance Program Core Values <ul><li>Sense of Urgency and Purpose </li></ul><ul><li>Open and Transparent Operations </li></ul><ul><li>Efficient, Fair and Accurate Service </li></ul><ul><li>Fiscal Responsibility </li></ul><ul><li>Accountability </li></ul>
  7. 7. Terrorism Risk Insurance Program Regulations <ul><li>1st Final Rule </li></ul><ul><li>- Provides key definitions, such as “Act of Terrorism,” “Insurer,” and “Affiliate” </li></ul><ul><li>- Identifies lines of Commercial Property & Casualty Insurance included in the Program </li></ul><ul><li>2 nd Final Rule </li></ul><ul><li>- Make available requirements </li></ul><ul><li>- Disclosure requirements </li></ul><ul><li>3 rd Final Rule </li></ul><ul><li>- State residual market mechanisms </li></ul>
  8. 8. Terrorism Risk Insurance Program Claims Rule <ul><li>Speed with which TRIP will act on a request for reimbursement. </li></ul><ul><li>Payment of allocated loss adjustment expenses. </li></ul><ul><li>Level of documentation required to support a claim. </li></ul><ul><li>Unique data elements required in reporting. </li></ul><ul><li>Partial payments. </li></ul>
  9. 9. 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. <ul><li>Company Submits Certification of Loss with Bordereau </li></ul>2. Reviews COL for Accuracy Recommends Payment Request ASAP System Payment
  10. 10. Terrorism Risk Insurance Program Claims Forms <ul><li>Initial Notice of loss </li></ul><ul><li>Certification of loss </li></ul><ul><li>Schedule A – DEP & Insurer deductible </li></ul><ul><li>Schedule B – Certification of Compliance </li></ul><ul><li>Schedule C - Bordereau </li></ul>
  11. 11. Terrorism Risk Insurance Program Bordereau Formats <ul><li>Excel </li></ul><ul><li>Comma delimited text file </li></ul><ul><li>Pipe delimited text file </li></ul><ul><li>Online manual Completion </li></ul>
  12. 12. Terrorism Risk Insurance Program Claims Process <ul><li>www.treas.gov/trip </li></ul><ul><ul><ul><ul><li>- Links to: </li></ul></ul></ul></ul><ul><li>TRIP Claims Manager </li></ul><ul><li>ASAP </li></ul>
  13. 13. Terrorism Risk Insurance Program TRIP Service Contractors <ul><li>Paragon Claims Processing & Management </li></ul><ul><li>ISO Statistical Reporting </li></ul><ul><li>Deloitte Claims Auditing </li></ul>
  14. 14. Terrorism Risk Insurance Program Contracting Process <ul><li>Develop initial statement of work </li></ul><ul><li>Analyze requirements </li></ul><ul><li>Acquisition Office/TRIP Office development of Procurement Plan </li></ul><ul><li>Conduct market research-receive comments </li></ul><ul><li>Coordination of technical issues, e.g., systems, financial, accounting </li></ul><ul><li>Issue request for comments (optional)-receive and analyze comments </li></ul><ul><li>TRIP Office redraft of statement of work-develop independent cost estimate </li></ul><ul><li>Acquisition announce planned RFP release date on </li></ul><ul><li>TRIP/Acquisition development selection plan </li></ul><ul><li>Acquisition Office preparation and clearance of RFP </li></ul><ul><li>Release of RFP-Announce RFP FEDBIZOPPS.GOV </li></ul><ul><li>Receive and answer questions </li></ul><ul><li>Conduct pre-proposal conference </li></ul><ul><li>Amend solicitation (as required) </li></ul><ul><li>Receive and evaluate proposals </li></ul><ul><li>Establish a competitive range, obtain clarifications on conduction negotiations; obtain “Best and Final Offers” (as required) </li></ul><ul><li>Preparation of Report/Recommendation; Source Selection Authority decision </li></ul><ul><li>Acquisition Office prepare, clear and award contract </li></ul>
  15. 15. Terrorism Risk Insurance Program Litigation Management Rule <ul><li>Follows Requirements of Act </li></ul><ul><ul><li>Exclusive Federal cause of action </li></ul></ul><ul><ul><li>Preempts state causes of action (Not workers comp) </li></ul></ul><ul><ul><li>Preserves government subrogation rights </li></ul></ul><ul><ul><li>Federal funds not used to pay punitive damages </li></ul></ul><ul><li>Presidential Memorandum </li></ul><ul><ul><li>Advance approval of Secretary of Treasury for proposed settlements of Federal causes of action </li></ul></ul><ul><ul><li>> $ 2M personal injury or death </li></ul></ul><ul><ul><li>> $ 10M property damage </li></ul></ul>
  16. 16. Terrorism Risk Insurance Program 6 th Rule Affiliation Determination <ul><li>Final 30 to 60 Days </li></ul><ul><li>Timing Affiliation Determination </li></ul>
  17. 17. Terrorism Risk Insurance Program Recoupment Example <ul><li>$20 B Insured Loss 100 Insurers Impacted </li></ul><ul><li>DEP 100 Insures = $20 B </li></ul><ul><li> $15 B 3 rd Year 15% deductible = $3 B </li></ul><ul><li>Trip Industry Aggregate Retention </li></ul><ul><li>Pays $15.3 B 10% quota share = $1.7 B </li></ul><ul><li> </li></ul><ul><li>100 Companies Pay $4.7 B </li></ul><ul><li> </li></ul><ul><li>$4.7 B Paid by 100 companies </li></ul>Discretionary Recoupment $5 B Mandatory Recoupment $10.3 B
  18. 18. Terrorism Risk Insurance Program 7 th Proposed Rule - Recoupment <ul><li>Published 30 – 60 Days </li></ul><ul><li>Standards for Treasury Notification (6 Months Notice) </li></ul><ul><li>Establishes Electronic Payment System </li></ul><ul><li>Assessments in Full Year Increments (Minimum 1 Year) </li></ul><ul><li>Annual Reconciliation/Audit </li></ul>
  19. 19. Terrorism Risk Insurance Program Rule Making Process <ul><li>Preliminary determination of regulatory content (vs. business procedures) </li></ul><ul><li>Develop draft regs </li></ul><ul><li>TRIP Review draft regs </li></ul><ul><li>Reinsurer site visit </li></ul><ul><li>Determine reg vs business process division and incorporate changes to draft reg </li></ul><ul><li>6. Departmental review and possible meeting with OMB </li></ul><ul><li>7. OMB review </li></ul><ul><li>8. Publish in Federal Register (proposed rule) </li></ul><ul><li>9. Formal public comment </li></ul><ul><li>10. Paperwork Reduction Review - concurrent with public comment period </li></ul><ul><li>Review comments </li></ul><ul><li>Revise regs </li></ul><ul><li>13. Departmental review </li></ul><ul><li>14. OMB review </li></ul><ul><li>15. Publish final regs in Federal Register </li></ul>
  20. 20. Terrorism Risk Insurance Program Program Issues <ul><li>State Exemptions (NBC) </li></ul><ul><li>Losses in Excess $100B </li></ul><ul><li>Foreign -vs- Domestic Terrorism </li></ul><ul><li>Program Extension </li></ul>
  21. 21. Terrorism Risk Insurance Program Program Alternatives Privatize TRIP TRIP Not Extended Pool Substitute TRIP Extended Deductibles and/or Market Retention TRIP Extended with Group Life Higher Deductibles No Exclusion RNBC TRIP Not Extended No Substitute Program TRIP Extended with Group Life TRIP Extended but only if RNBC or >25M Threshold TRIP Extended Group Life Deductibles and/or Retention TRIP Extended Minor Changes
  22. 22. Terrorism Risk Insurance Program Treasury Offices <ul><li>Financial Institutions Office of Economic Policy </li></ul><ul><li>TRIP Studies </li></ul><ul><li>Implementation Group Life </li></ul><ul><li>Program Management Make Available </li></ul><ul><li>Program Operations Program Alternatives </li></ul><ul><li>Effectiveness </li></ul><ul><li>Claims Management/Processing </li></ul><ul><li>Financial Integrity </li></ul><ul><li>Operational Efficiency </li></ul>
  23. 23. Terrorism Risk Insurance Program Market Corrections <ul><li>Property Insurance take up % rate </li></ul><ul><li>2003 1 st Quarter 2004 3 rd Quarter </li></ul><ul><li> 24% 57% </li></ul><ul><li>Cost of coverage - % of premium </li></ul><ul><li>2003 1 st Quarter 2004 3 rd Quarter </li></ul><ul><li> 10% - 50% 4.2 % </li></ul>

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