The US Department of the Treasury has issued proposed rules to implement technical changes, including the participation of captives, to the Terrorism Risk Insurance Program (TRIP) required by the Terrorism Risk Insurance Program Reauthorization Act of 2019.

The proposed rules include clarification on how the treasury will calculate property and casualty insurance losses for purposes of considering certification of an act of terrorism and insured losses when administering the financial sharing mechanisms under the program.

…it will be incumbent on service providers and captive owners who participate in the program to provide examples of the impact a change to the program will have on their ability to access terrorism insurance, as well as the risks related to providing too much information about the companies and their specific programs.”

The Captive Insurance Companies Association (CICA) the Captive Insurance Council – DC, (CIC-DC) and the Vermont Captive Insurance Association (VCIA) are coordinating a response to the Treasury on behalf of the captive insurance industry regarding these changes. Organizations, including captive owners, captive service providers or other captive associations interested in joining the industry response or providing information in response to questions being addressed can contact CICA President Dan Towle [email protected].

The Treasury seeks a response to a set of questions (see below) by January 11, 2021. The industry has addressed many of these concerns in previous comments to the Treasury’s Federal Insurance Office (FIO) for its annual report on the TRIA program. However, it will be incumbent on service providers and captive owners who participate in the program to provide examples of the impact a change to the program will have on their ability to access terrorism insurance, as well as the risks related to providing too much information about the companies and their specific programs. The information provided on specific company situations will be most powerful, however, even examples not attributed to any one company would be helpful.

The FIO requests comment on the following:

1. With respect to captive insurers:

  • Whether, in light of the size and operation of captive insurers and the current structure of TRIP, captive insurers are likely to obtain larger payments under the Program in a large loss event as compared to traditional insurers that assume similar risk exposures;
  • Whether there are administrative rule changes that could be made to the Program rules and administration for captive insurers that would result in recovery percentages for captive insurers that may be more consistent with those indicated in modeled loss analyses for other industry segments;
  • Whether the Program should attribute some amount of captive parent revenues to captive insurers for TRIP deductible calculation purposes; and
  • Whether changes to the Program structure for captive insurers could prevent policyholders (who may be unable to obtain terrorism risk insurance in the conventional market for a reasonable price) from obtaining such insurance from captive insurers.

2. Whether the FIO should make public financial information regarding participating captive insurers taking into account whether this additional transparency would be beneficial to the terrorism risk insurance market and the administration of TRIP.

We request comment on:

  • The information that should and should not be made available to the public;
  • The reasons for making (or not making) this type of information available to the public;
  • Whether the publication of information on an individual company basis is consistent with the provisions of TRIA stating that Treasury should only obtain information from participating insurers in an anonymized fashion, and otherwise providing for the confidentiality of the information submitted; and
  • How making information publicly available concerning captive insurers could address, if at all, the issues presented by potentially disproportionate recoveries by captive insurers under TRIP, or otherwise assist FIO in the administration of the Program.
  • Any other issues regarding the participation of captive insurers in TRIP.

To join the captive industry response or provide comments for these questions contact CICA President Dan Towle [email protected].