Terrorism Insurance Implementation (C) Working Group - New York, New York Sunday, August 4, 2019 - Terrorism Insurance Implementation (C) Working ...
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2019 Summer National Meeting
Terrorism Insurance Implementation
(C) Working Group
New York, New York
Sunday, August 4, 2019
© 2019 National Association of Insurance CommissionersDate: 8/3/19
2019 Summer National Meeting
New York, New York
TERRORISM INSURANCE IMPLEMENTATION (C) WORKING GROUP
Sunday, August 4, 2019
8:00 – 9:00 a.m.
New York Hilton Midtown—Mercury Ballroom—3rd Level
ROLL CALL
Martha Lees, Chair New York Angela Nelson Missouri
Joanne Bennet Alaska Carl Sornson New Jersey
Susan Stapp California Tim Johnson North Carolina
Paul Lombardo/George Bradner Connecticut Glen Mulready/Cuc Nguyen Oklahoma
Stephen C. Taylor/Angela King District of Columbia Beth Vollucci Rhode Island
David Altmaier Florida Kent Sullivan/Mark Worman Texas
Reid McClintock Illinois David Provost Vermont
Heather Droge Kansas Rebecca Nichols Virginia
Gary Anderson/Christopher Joyce Massachusetts
NAIC Support Staff: Aaron Brandenburg
AGENDA
1. Consider Adoption of its Spring National Meeting Minutes—Martha Lees (NY) Attachment One
2. Hear an Update on Federal Activities Related to Reauthorization of the Terrorism Risk Insurance Act
(TRIA)—Brooke Stringer (NAIC)
3. Hear a Presentation on the AON Report on TRIA Reauthorization—Aaron Davis (Aon Risk Solutions) Attachment Two
4. Hear an Update on the 2019 Terrorism Risk Insurance Data Call—Martha Lees (NY)
5. Hear a Report on the Terrorism Insurance Data Findings—Aaron Brandenburg (NAIC)
6. Discuss Any Other Matters Brought Before the Working Group—Martha Lees (NY)
7. Adjournment
W:\National Meetings\2019\Summer\Cmte\C\TerrorInsImplementationWG\TerrorismWG Agenda.docx
© 2019 National Association of Insurance Commissioners 1Attachment One
Consider Adoption of its Spring National
Meeting Minutes
© 2019 National Association of Insurance CommissionersDraft Pending Adoption
Attachment One
Draft: 4/15/19
Terrorism Insurance Implementation (C) Working Group
Orlando, Florida
April 7, 2019
The Terrorism Insurance Implementation (C) Working Group of the Property and Casualty Insurance (C) Committee met in
Orlando, FL, April 7, 2019. The following Working Group members participated: Stephen Doody, Chair (NY);
Michael Ricker (AK); Ken Allen and Susan Stapp (CA); George Bradner (CT); Sean O’Donnell (DC); Virginia Christy (FL);
Judy Mottar (IL); Heather Droge (KS); Angela Nelson (MO); Fred Fuller (NC); Mark McGill (NJ); Cuc Nguyen (OK);
Rachel Chester (RI); J’ne Byckovski and Mark Worman (TX); Rebecca Nichols (VA); and David Provost (VT).
Also participating was: Michael McKenney (PA).
1. Discussed Reauthorization of TRIA
Brooke Stringer (NAIC) said the federal Terrorism Risk Insurance Act (TRIA) is set to expire Dec. 31, 2020, and the
U.S. Congress will begin work on a reauthorization/reform bill in the 2019 session. She said although TRIA was created as a
temporary program in 2002, it has been reauthorized on a bipartisan basis three times and is likely to be extended again. She
said the NAIC has supported TRIA since its inception, as well as its subsequent reauthorizations, and the industry also views
this as a key legislative priority.
Ms. Stringer said congressional hearings are expected over the next year evaluating how TRIA has worked, how it has
affected various stakeholders, and what the private market’s current capacity is to provide terrorism insurance. She noted that
each reauthorization has made some changes, and there will likely be a push to have more risk assumed by private insurers
and reinsurers. She also said U.S. Rep. Maxine Waters (D-CA), the current chair of the U.S. House of Representatives’
Committee on Financial Services, is supportive of an extension of TRIA, which makes passage in the House easier than
previous Congresses. The U.S. Senate has also been supportive of TRIA and will likely consider potential reforms.
Ms. Stringer said the NAIC has approved the following policy statement concerning TRIA reauthorization:
NAIC Policy for Terrorism Risk Insurance Act (TRIA) Reauthorization
The NAIC supports a long-term reauthorization of the Terrorism Risk Insurance Program of seven to 10 years as
state insurance regulators have not seen evidence to suggest that the insurance marketplace is capable of voluntarily
taking on a substantial portion of the risk of terrorist attacks. We believe the presence of a federal partnership with
private insurers has provided a measure of security and certainty to the broader economy, and it has ensured
widespread availability of property and casualty insurance for terrorism risks.
Robert W. Woody (American Property Casualty Insurance Association—APCIA) agreed with the political prospects
mentioned by Ms. Stringer. He said the APCIA has been meeting with congressional committees on their priorities. He said
the APCIA has stressed that a lapse in the program, such as what happened in 2014, would result in chaos. Insurers will begin
to issue renewals later this year that do not expire until after 2020. The APCIA desires as long of a reauthorization as
possible, preferably at least seven to 10 years. Mr. Woody also said the APCIA does not want to see a change to co-pays,
deductibles or the program trigger. The federal mandate to make coverage available is acceptable to the industry due to the
backstop, but the backstop becomes more remote when the numbers have moved up.
Mr. Woody said workers’ compensation insurers worry that they could experience an event that is big for the industry but not
big enough to trigger the program. He said if the triggers were to continue to rise, there is a chance that insurers could begin
to pull out of the market, but that has not occurred in the past. He said state insurance regulators should look at the terrorism
data to see if changes to the triggers would affect insolvency.
Mr. Woody said cyber will be an important issue in reauthorization, such as whether the current program covers cyber
terrorism adequately. He said many cyber policies are written under professional liability, and this is not a TRIA-covered line
of business. He also noted that the definition for “act of terrorism” in TRIA may not currently cover cyber. He said the
current method of a post-funding mechanism is preferred over a pre-funding mechanism.
© 2019 National Association of Insurance Commissioners 1Draft Pending Adoption
Attachment One
Mr. Woody said the APCIA may raise issues over the certification process due to the U.S. Department of the Treasury
(Treasury Department) not making a determination on the Boston Marathon bombing. He said policies that have exclusions
for certified acts of terrorism are dependent on whether the Treasury Department certifies the act. He said insurers would like
to see a timeline and certainty when it comes to the certification of acts of terrorism.
Mr. Woody urged state insurance regulators to their contact congressional delegations to express support for the
reauthorization of TRIA. He also said the U.S. Government Accountability Office (GAO) is beginning work on a study
looking at the need for TRIA.
Mr. Doody noted that state insurance regulators will be meeting with their congressional delegations at the upcoming NAIC
All Commissioners DC Fly-in, where they will discuss TRIA issues. He also said consumers are burdened when a
determination is not made on the possible certification of events. Consumers are then waiting for insurers to know if their
claim will be paid. Mr. Doody said insurers should pay the claim on the policy and then later seek to recoup if certification is
obtained in the future. Mr. Woody said he wants Treasury to provide information more quickly on whether an event is
certified so that insurers can then move forward.
Mr. Woody said the APCIA would like the Treasury Department to provide information more quickly on whether an event is
certified, so insurers can then move forward.
Jonathan Bergner (National Association of Mutual Insurance Companies—NAMIC) said certification has to do with contract
language, which affects whether policyholders are covered. Mr. Doody said consumers are the ones who ultimately suffer.
Mr. Bergner agreed with the APCIA’s comments with respect to prospects for congressional reauthorization. He said some of
the Senate pushback is institutional, and there is an automatic tendency to change the numbers in the program because they
have been changed in the past. He said the current numbers in the program are about where they should be because taxpayers
are protected, and the market is robust and working well.
Mr. Bergner said Congress cares about where state insurance regulators stand on the issue of reauthorization. He said
NAMIC recently released a white paper on the program that will be distributed to state insurance regulators. He also noted
that the cyber question will remain, but certification is hard enough already, so it is unlikely that there will be a definitive
issue related to cyber coverages.
Mr. McKenney said he has heard from reinsurers that they do not want the program reauthorized, as there is capacity for
reinsurers to provide the backstop.
Mr. Bergner said NAMIC represents a lot of smaller insurers, and adjustments to the numbers provide difficulties to those
companies in writing the business. He said the industry can cover another 9/11 with current capital, but covering additional
events after that would be difficult.
Scott Williamson (Reinsurance Association of America—RAA) said the RAA supports the reauthorization of TRIA for the
reasons already described by the APCIA and NAMIC. He said there is a growing appetite for terrorism risk in the reinsurance
community and there is robust capacity, but it is within the current structure of the existing program. The RAA continues to
support a long-term reauthorization of TRIA. He said the current program cap of $100 billion has not changed with inflation,
so the industry continues to take on a greater share of risk.
2. Discussed Workers’ Compensation Data Related to Terrorism Risk Insurance
Aaron Brandenburg (NAIC) reported on terrorism risk insurance data concerning workers’ compensation. He said data for
the workers’ compensation portion of the data call was received from the National Council on Compensation Insurance
(NCCI) and independent bureaus for the 47 non-monopolistic states. Data for 2016 was due to state insurance regulators by
March 1, 2019.
The percentage of workers’ compensation policies that have an explicit terrorism charge has fallen slightly, from a little more
than 84% in 2011 to about 82.6% in 2016. Delaware, Minnesota, New Jersey, New York, Pennsylvania and Wisconsin had
© 2019 National Association of Insurance Commissioners 2Draft Pending Adoption
Attachment One
more than 90% of the policies with a terrorism charge. Overall, the Northeast Zone had the highest percentage of workers’
compensation policies with an explicit charge for terrorism risk.
The analysis next looked at the percentage of the terrorism premium as compared to the total earned premium for policies
indicating an explicit terrorism charge. This percentage fell slightly, from about 1.4% in 2011 to 1.2% in 2016. The District
of Columbia had the highest percentage, with more than 9% of the premium being a terrorism charge. This percentage has
fallen slightly since 2015. The Northeast Zone had the highest percentage of terrorism premium compared to the total earned
premium for policies indicating an explicit terrorism charge.
The average terrorism premium per policy has risen slightly, from $171 in 2011 to $184 in 2016. The average terrorism
premium when there is an explicit charge rose from $210 in 2011 to $222 in 2016. The highest average terrorism premium
was in the District of Columbia, followed by New York, Illinois, Maryland, New Jersey, Virginia and Texas. The Northeast
Zone had the highest average terrorism premium in the time period 2011–2016.
When looking at payroll categories, only the lowest payroll category had fewer than 89% of policies with an explicit
terrorism charge. The terrorism premium moved up substantially as the payroll category grew higher. Terrorism premium for
insureds with a payroll category greater than $5 million experienced a drop in average premium of nearly 10% from 2011
to 2016.
Ms. Nelson asked whether the states could receive the underlying data within the report. Mr. Brandenburg said the data could
be provided to the states.
Ms. Byckovski asked for a listing of which states belong in which zones within the report. Mr. Brandenburg said he would
supply this list.
3. Heard a Report on the 2019 Terrorism Risk Insurance Data Call
Mr. Doody reported that the state insurance regulator and Treasury Department/Federal Insurance Office (FIO) joint data call
was officially announced and posted on the respective websites on April 1. He said the same data set is due to both entities
May 15, and additional information can be found on the NAIC and FIO websites.
Mr. Doody said ZIP code-level data was required to be submitted on the State Property Supplement (Supplement) by
Sept. 30, 2018. He said the states have not been able to use that data due to its poor quality, and the industry has
communicated the difficulty in gathering and reporting that data. Mr. Doody said state insurance regulators have held a
conference call with interested parties in order to understand whether a pared-down version of the data template would be
able to be submitted. He said the states hope to formulate a final version of the template soon and will communicate
additional information on the Supplement soon.
Having no further business, the Terrorism Insurance Implementation (C) Working Group adjourned.
W:\National Meetings\2019\Spring\Cmte\C\TerrorInsImplementationWG\TerrWG-4.docx
© 2019 National Association of Insurance Commissioners 3Attachment Two
Presentation on the AON Report on
TRIA Reauthorization
© 2019 National Association of Insurance CommissionersReauthorization of the
Terrorism Risk Insurance Act
The attacks of 9/11 marked a new era, with terrorism shaping much of the global dialogue.
There were more than 135,500 terrorist attacks worldwide between 2006 - 2017 and, while
none approached the scale of 9/11, it’s clear that terrorism remains a tangible risk.
In the United States there remains a need for “Lone wolf” attacks are more likely
a financial backstop for catastrophic terrorist Terrorism as a political tool has evolved from
attacks. Adjusted for inflation, “insured losses efforts to pull off highly sophisticated, coordinated
across all insurance lines from the September attacks similar to 9/11 to much smaller operations
11 attacks exceeded $45 billion.” The original conducted by so-called “lone wolves.” Examples
federal Terrorism Risk Insurance Act (TRIA) and its include the 2013 Boston Marathon bombings, the
subsequent reauthorizations provides the necessary 2016 Orlando nightclub massacre, the 2017 New
safeguard against significant loss of life and property York City truck ramming and, in June 2019, the
caused by acts of terrorism. disruption of an alleged plot by a Syrian refugee to
bomb an African-American church in Pittsburgh.
Current climate
Lone wolves are more likely to target businesses
The threat posed by terrorism remains potent
than political targets. In the first half of 2019, five
and “extraordinarily high compared to historical
people were killed in a SunTrust Bank in Florida;
trends.” According to the 2018 Global Terrorism
12 people were killed at a municipal office in
Index, “Every region in the world recorded a higher
Virginia; and five people were killed at an industrial
average impact of terrorism in 2017 than in 2002.”
warehouse in Illinois. Some attacks are motivated
In addition, Aon sees continued political instability by personal grievances, but others are driven by
in every region of the world. The resurgence of ideological motives. The 2015 massacre of 14
authoritarianism and nationalism has widened people at a Department of Public Health event in
fault lines between allies, fueled geopolitical California is one such incident.
competition and has increased regime instability as
more governments adopt less inclusive policies and Cyber-terrorism a growing threat
systems of governance. Cyber-attacks have become a significant threat
and have the potential to create loss on a massive
Attacks from the far-right are increasing
scale. For instance, Yahoo, the former Internet giant,
In the West, far-right terrorist attacks and plots suffered the largest breach in history when all three
have almost doubled in frequency since 2016. Aon billion user accounts were compromised. The theft
recorded 27 in 2018, compared with 14 in 2016. of names, dates of birth, email addresses, passwords,
This trend has remained evident in 2019, with the security questions and answers knocked an estimated
attack by a far-right extremist on two mosques in $350 million off Yahoo’s eventual sale price to Verizon.
New Zealand that killed 50 people.
U.S. healthcare providers, government services,
In the U.S., according to one assessment, “jihadists entertainment companies, financial institutions and
are not the only threat … Far-right extremists have energy suppliers are all targets of attackers. Between
killed 73 people since 9/11 and have conducted 2015 and 2017, the U.S. was the country most
six deadly attacks since the beginning of the affected by targeted cyber-attacks with 303 known
Trump administration alone.” Violent right-wing large-scale attacks.
extremists broadly target ethnic, religious and
While no events since the 9/11 attacks have created
LGBT+ minorities, as well as politicians and other
insured or economic loss in the US the scale of
public figures. Attacks are most frequently directed
what we saw in 2001, the possibility of an even
at mosques, synagogues, refugee centers, and other
larger loss remains. The perils of nuclear, biological,
symbols of multiculturalism and immigration.
chemical and radiological detonation, concentration
of employees in major metropolitan areas and the
exposure to a massive cyberattack present the
potential for loss that the insurance industry cannot
sustain. With a threat that has not reduced, the need
for a federal backstop remains.The Future of TRIP Aon’s recommendations We’re here to
Without an extension, TRIP will expire on December TRIP remains untested for actual losses but given empower results
31, 2020. In its 2018 Report on the Effectiveness its important role in the insurance industry, Aaron Davis
of the Terrorism Risk Insurance Program, the U.S. its expiration would likely produce conditions Managing Director
Department of the Treasury found that “[t]he similar to those that led to the original creation of Aon Property Broking
Program has made terrorism risk insurance available TRIP. Removing the incentive for insurers to offer
212.441.1144
and affordable in the United States, and the market terrorism coverage that comes with TRIP also means
aaron.davis@aon.com
for terrorism risk insurance has been relatively stable exposing the U.S. economy to a threat that has not
for the past decade. While the purchase of terrorism abated since 9/11. Edward Ryan
risk insurance is not mandated by the Program, a Senior Managing Director
We’re already seeing some uncertainty in the
significant proportion of commercial policyholders Aon Reinsurance Solutions
insurance and reinsurance industries, as insurers
nationwide have elected to obtain such insurance, 973.966.3554
seek clarity on the fate of TRIP. If not reauthorized,
and take-up may be even higher in metropolitan edward.ryan@aonbenfield.com
we believe Property & Casualty Insurers will not
areas at greater risk of terrorism.” write policies that protect clients from highly
Underscoring TRIPRA’s success is Aon’s Data & destructive terrorist events and pricing will spike as aon.com
Analytics Group pricing data since TRIA’s inception many terrorism insurance carriers exit the market,
for commercial, complex Property accounts (one leaving policyholders facing the possibility of no
of the most stressed areas of capacity following terrorism coverage. The private market for U.S.
the events of 9/11), which has seen property based terrorism insurance risk exists because of
terrorism premiums decline by more than 80 TRIP and its catastrophic loss backstop. The loss of
percent since 2003, when the full impact of the TRIP has the potential to turn the private market
original Act’s passage began to take effect. Since away from terrorism risk without the catastrophic
the Act’s inception, Aon has seen varying take-up reinsurance benefit of TRIP.
for terrorism coverage across industry subsectors, An early and extended reauthorization would keep
with some subsectors averaging over 90% take-up the market stable and avoid increased costs to the
– such as Real Estate, Healthcare and Entertainment system. We recommend a minimum extension of
subsectors – to as low as 30 to 50% for less ten years, with no changes in either the deductible
risk exposed subsectors, which include industries and co-participation features, or in the trigger point.
like Manufacturing. Doing so would quiet any turmoil created in the
Across the Aon portfolio, TRIP has raised take-up run-up to renewal and create long-term stability in
rates for terrorism coverage from lows of 30% the terrorism insurance market.
when it was passed in 2003 to an average of over
70% for Property clients and closer to 90 to 100% About Aon
for Casualty clients. This latter group, Casualty, Aon is the leading global professional services
has become an area of increasing importance firm providing a broad range of risk, retirement
as Worker’s Compensation mandates terrorism and health solutions. Our 50,000 colleagues in
coverage for so called “Nuclear, Biological, 120 countries empower results for clients by using
Chemical and Radiological” attacks. This exposure, proprietary data and analytics to deliver insights
in and off itself, presents the insurance industry with that reduce volatility and improve performance.
little or no choice but to withdraw capacity from
areas with high Worker’s Compensation exposures
in the absence of TRIP. Cyber risk has only just
begun to be addressed by the insurance industry
with nascent Cyber specialty insurance, equally
reliant on TRIP in the event of a cyber terrorism
event, beginning to emerge on a much-needed
basis in the commercial Property & Casualty market.Property Terrorism Key Metrics Analysis – Q2 2019 Prepared by Aon U.S. Broking
Take-Up and Pricing
Commercial Risk Solutions | Property Terrorism Key Metrics Analysis | Q2 2019
2Take-Up
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3Limit
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7Pricing
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8Take-Up
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9Disclaimer
© 2019 Aon plc or its affiliates (“Aon”). All rights reserved.
Aon does not provide or express an opinion or recommendation regarding any company or matter mentioned herein. The recipient
understands that Aon has endeavored to include information known to it which it believes to be relevant to the recipient. The
recipient further understands that neither Aon nor its employees shall make any representation or warranty as to the accuracy or
completeness of this information. Aon shall not have any liability to the recipient or any other party resulting from the use of this
information by the recipient or such other party. May not be reproduced in any way or disseminated to any third party without the
prior written consent of Aon.
Commercial Risk Solutions | Property Terrorism Key Metrics Analysis | Q2 2019
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