Webel2.TRIA

TRIA, originally passed in 2002 (and extended in 2005 & 2007) has been updated and extended as of Jan 12, 2015. You are responsible for the nature of these extensions.   Forum

Pop Quiz

Is terrorism considered an insurable risk? (See Webel1.TRIA)

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Based on past exams, the main things you need to know (in rough order of importance) are:

• there are currently no old exam problems from this reading

reference	part (a)	part (b)	part (c)	part (d)
none

In Plain English!

This reading is easy to cover. It's worth reading the source paper - it will only take 10 minutes.

The first page of the reading provides a very nice summary of TRIA, along with its 2005 & 2007 extensions, and the critical extension & update of Jan 12, 2015.

The 2015 legislation of the 114th Congress extended TRIA almost 6 years, to the end of 2020

Side note: The 2007 extension provided coverage for all terrorism (including domestic) whereas the 2002 version covered only foreign terrorism.

The only things you have to know are the differences between the 2015 version of TRIA versus the 2002 version.

• decrease federal loss-sharing gradually from 85% to 80% (also called co-insurance)
• increase program trigger by $20 million/year from $100 million to $200 million
• increase the mandatory recoupment from $27.5 billion to $37.5 billion

That's it! (There are actually 4 more items in the list of differences on page 2, but it's very unlikely you'd be asked for all of them.)

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BattleCodes

Memorize:

• the difference between the 2007 extension of TRIA and the original 2002 version (the 2007 extension covered domestic terrorism as well as foreign terrorism.)
• extension and differences for the 2015 version of TRIA versus the original 2002 version

Conceptual:

• Here is an excellent Bloom's Taxonomy question:
  • TRIA was originally intended to be temporary, but terrorism is still considered uninsurable. The private market is stronger (prices are down & penetration is up) but there is concern that if TRIA does eventually expire, there will be a subsequent lack of AA (Availability & Affordability). Discuss the implications of ending TRIA after 2020.
• Actually, this would be more like a PhD dissertation than a question on an actuarial exam! Interesting to think about nonetheless.

Calculational:

• A question the CBO (Congressional Budget Office in the U.S.) probably considered is the impact of the 2015 changes to TRIA. Could you calculate reimbursement under the original TRIA versus the 2015 version. You already have the basic formula from the Webel1.TRIA.
• (Obviously the reimbursement under the 2015 version would be lower, so the federal government would save money. Or would it? What if private insurers became insolvent after a big terrorist attack, either foreign or domestic? The government would likely need to step in, and any savings may disappear.)

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POP QUIZ ANSWERS

No, terrorism is not considered insurable. According to Webel1.TRIA, terrorism fails to satisfy the 4 criteria for insurability: C-MAC

C: Credibility need a large number of customers

M: Measurable: losses must be definite & measurable

A: Accidental: losses must be accidental

C: not Catastrophic: losses must not be catastrophic