market bulletin

Ref: Y4369

Title

US Terrorism Risk Insurance Act of 2002, as amended ("TRIPRA"): TRIA reporting

PurposeTo Advise the Market of the Annual Reporting to Calculate Syndicates' Deductibles

TypeScheduled

From

Leslie Redmond, Manager, Overseas Reporting, Market FinanceDirect Tel No: 020 7327 5490 Email: leslie.redmond@lloyds.com

Date

29 January 2010

Deadline

26 April 2010

Related links http://www.naic.org/committees_c_surplus_lines_iid_plan.htm

1. Purpose
To inform the market of requirements for reporting premiums to the US National Associationof Insurance Commissioners (“NAIC”) for the purpose of calculating the deductible underTRIA.
These reporting requirements relate to a syndicate’s entire US commercial property &casualty premiums (as defined in TRIA) and not just to premiums received in relation toTRIA.
You are reminded that, additionally, for syndicates with an IID listing the IID Filing
Requirements have the same deadline for completion, and are set out in market bulletin
Y4367 dated 26 January 2010 and entitled “Listing of Lloyd’s syndicates as eligible surplus
lines insurers in the United States annual filing requirements”.

2. Syndicate reporting procedures
All syndicates (with the exceptions noted below) are required to report their relevant premiumincome for 2009 on the form available from the NAIC website at the following address:

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Lloyd’s is authorised under the Financial Services and Markets Act 2000

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http://www.naic.org/committees_c_surplus_lines_iid_plan.htm [for access hold the cursor
over the address and press the ‘Ctrl’ key and left click with the mouse]. The return is entitled“TRIA Schedule” and is towards the bottom of the right-hand side of the web page.
The return is in the same format as last year and all instructions for this year are in line withwhat was previously issued. Historical market bulletins and information on TRIA can befound in CRYSTAL on lloyds.com (for help with CRYSTAL please contact LITA – see section
8 of this letter).
The basis on which syndicates should report their premiums is outlined in Appendix 1.

3. Syndicates who must make the TRIA deductible return
Every syndicate that was trading in 2009 must make a TRIA deductible return, whatever its
US trading status. The only exceptions are syndicates whose business is limited to life
insurance or to UK motor business. Syndicates with no relevant premium to report must
make a “nil” return to Market Finance.
Syndicates are not required to make a return in the year in which they commence trading.
Treasury Regulations have made provision for newly formed insurers and in the event of acertified event, it is likely that their deductible will be fixed in accordance with methodology
drawn up by the US Treasury.
A syndicate in run-off that ceased trading prior to 2009 may be required to make a return, if itis still party to ongoing business that could lead to a claim on the TRIA Federal programme.
Its return will report the relevant premium it received in the course of 2008. Every suchsyndicate should consider making a return – it should be noted that a failure to file a return
will make it impossible to calculate a syndicate deductible and cover under TRIA could thus
be jeopardised. A decision not to make a return should therefore follow a careful analysis of
the syndicate’s book of business.

4. Notarisation
Returns must be notarised. Even where the syndicate is required to make an IID filing theTRIA return will not be a part of that return. Accordingly, the separate Jurat page which has
been issued by the NAIC with the TRIA return must be used.
The TRIA return may be notarised at the same time as the IID. The notaries will advise youof the details of these arrangements closer to the deadline.

5. Timings
Returns must be submitted to Lloyd’s by Monday 26 April 2010. They will be collated andsupplied to NAIC by 15 May 2010.

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6. Classification of business
The detailed instructions set out in market bulletin Y3110 (1 August 2003) remain current.
Syndicates should be careful to ensure that the return is completed correctly and that thepremiums reported as “business covered by TRIA requirements” are properly identified.
Appendix 3, “Risk code mapping”, to market bulletin Y3110, has been updated to reflect
those lines of business no longer covered by TRIA (please refer to market bulletin Y3719 forfurther details) following the program’s extension. This is attached as Appendix 2 to thisbulletin. Instructions issued by US Treasury concerning the lines of business covered by
TRIA refer to US NAIC line of business definitions. Appendix 3 sets out how the classes ofbusiness in the TRIA return match up with US lines of business.
Appendix 2 and Appendix 3 should be regarded as a general guide only. In particular, thelines of business covered on the TRIA return are wide and some types of business fallingunder them are in fact excluded by TRIA. Premiums relating to such excluded classes should
not be reported as “business covered by TRIA requirements”.
Syndicates should ensure all premiums for lines of business covered by TRIA, including thatwhich may be incidental to the main policy coverage(s), or part of combined coverages, arereported for TRIA deductible calculation purposes. In general, if the insurance coverage isprovided within the geographic and other statutory parameters of the definition of “insuredloss” for TRIA, then such losses will be covered by the Program, subject to the conditions forpayment and other requirements of the Act. For further guidance, please refer to previous
Lloyd’s market bulletins covering TRIA on CRYSTAL.

7. Action Required
The notarised form must be hand delivered to the Tenants and Couriers on the Lower
Concourse of the Lloyd’s 1986 building by 4 p.m. 26 April 2010, so that they can be filedwith the IID in Kansas City by 15 May 2010. If MF does not receive the notarised packs bythat deadline, it cannot guarantee to meet the filing date.
Please note that three originals of the filing forms must be notarised, using the Jurat page.
There are a number of qualified notary firms based around the City, and although a notarywill be in attendance as noted in (4) above, agents are free to use whichever firm theychoose to effect the notarisation. Please send us two paper original versions of the notarised
form: one will be forwarded to the IID; the second will be retained by Market Finance. The
third copy should be kept for your own records. To avoid confusion, managing agents arereminded that all documents in the two versions filed with us must be originals.
An electronic version of the financial filing format must be submitted at the same time as thenotarised pack (the excel file should be named TRIA [4 digit syndicate number] 2009.xls”).
This will be collected via the Market Reporting web-site.

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8. Queries and circulation
If you have queries on the completion of the spreadsheet please contact me, on theextension number above or email
For queries regarding class definitions please contact the LMA – Neil Smith on Lloyd’s
extension 8333 email neil.smith@lmalloyds.com
For queries on the use of coded data and USM's, contact Ins-sure Enquire team on+44(0)1634 887 889
For other general enquiries relating to TRIA please contact LITA on Lloyd’s extension 6677
LITA@lloyds.com

Leslie RedmondManager, Overseas Reporting
Market Financey4369.doc

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Appendix 1
Details of premium reporting procedures
Syndicates are required to report their relevant premium for the previous calendar year as follows:¾Where possible, syndicates should report premiums on an earned basis.

¾If syndicates are unable to report and complete the spreadsheet on an earned basis, thenthey may report premiums on a signed basis. Signed premiums must be grossed up for
brokerage and commissions. To avoid the possibility of premiums being under-reported,
Lloyd’s has agreed to certain safeguards. The percentages below therefore relate to thecomparison of whole account all years of account combined level signed premiums
with earned premiums (grossed up for brokerage and commission) for the previous
calendar year.
The safeguard provisions are as follows:-If the syndicate’s signed premiums are 100% or more of earned premiums – it cansubmit signed figures with no adjustment. This will mean a syndicate potentially reportinga higher premium figure than if it had made the calculation on an earned basis.

-If the syndicate’s signed premiums are 90% to 99.99% of earned premiums – if it
submits signed premiums, its submission will be adjusted upwards in proportion with thedifference at whole account level between signed and earned premiums.
ExampleWhole Account
TRIA
10095(Earned)(Signed)
TRIA premium for the deductible-20(Signed)= 100/95 x20=21If the syndicate’s signed premiums are less than 90% of earned premiums – if it submits
signed premiums, its submission will be adjusted upwards in proportion with thedifference at whole account level between signed premiums and earned premiums plus
10%.
ExampleWhole AccountTRIA
10080(Earned)(Signed)
TRIA premium for the deductible20(Signed)= 110/80 x20= 27.5The additional loading is added to take into account the uncertainties of the assumptionthat characteristics of the TRIA account will track the whole account / book of business.

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Syndicates are expected to complete the IID spreadsheet using data relating to premium processed
during the previous calendar year, provided in USMs by Xchanging In-sure Services to syndicates.
Required breakdown of data will include information split by risk codes, FIL codes and trust code
information. Syndicates should ensure that this information is retained for premium processed in theprevious year.
De minimis provision: All syndicates are encouraged to report on an earned basis if they are able
to do so. However, a syndicate may report its premiums on signed basis, without applying thesafeguard provision adjustments mentioned above, if the amount of relevant premium income it isreporting is below specified “de minimis” levels. This applies whatever the relationship of its signed toits earned premiums at a whole account level.
For reporting purposes, the NAIC agrees with Lloyd’s that an adjustment in the level of a deductibleof $100,000 or less is “de minimis” under the agreed safeguard provisions and therefore does notneed to be made. This means that in absolute terms there are premium levels below which
syndicates are not required to make any adjustments to their signed figures under the above
safeguard provisions. These have been set as follows:
Program Year 1 (i.e.: 2002 reported in 2003) - Relevant income for the calculation of thedeductible (calendar year signed, gross of all deductions) is $1.4m or less;
Program Year 2 (i.e.: 2003 reported in 2004) - Relevant income for the calculation of thedeductible (calendar year signed, gross of all deductions) is $1m or less;
Program Year 3 – (i.e.: 2004 reported in 2005) - Relevant income for the calculation of thedeductible (calendar year signed, gross of all deductions) is $700,000 or less.
Program Year 4 – (i.e.: 2005 reported in 2006) - Relevant income for the calculation of thedeductible (calendar year signed, gross of all deductions) is $600,000 or less.
Program Year 5 – (i.e.: 2006 reported in 2007) - Relevant income for the calculation of thedeductible (calendar year signed, gross of all deductions) is $500,000 or less.
Program Year 6 – (i.e.: 2007 reported in 2008) - Relevant income for the calculation of thedeductible (calendar year signed, gross of all deductions) is $500,000 or less.
Program Year 7 – (i.e.: 2008 reported in 2009) - Relevant income for the calculation of thedeductible (calendar year signed, gross of all deductions) is $500,000 or less.
Program Year 8 – (i.e.: 2009 reported in 2010) - Relevant income for the calculation of thedeductible (calendar year signed, gross of all deductions) is $500,000 or less.

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Year-on-year consistency
Over time many syndicates have moved from reporting on a signed to an earned premium basis. A
syndicate may not change mid-year and having switched to reporting on an earned basis thesyndicate may not subsequently change back to a signed reporting basis.

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Appendix 2y4369.doc

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Appendix 2 should be regarded as a general guide only. In particular, the lines of business coveredon the NAIC TRIA return are wide and some types of business falling under them are in fact
excluded by TRIA. Premiums relating to such excluded classes should not be reported as “businesscovered by TRIA requirements”.
Not all risk codes shown under Appendix 2 are subject to TRIA. However, syndicates should ensure
all premiums for lines of business covered by TRIA, including that which may be incidental to themain policy coverage(s), or part of combined coverages, are reported for TRIA deductible calculation
purposes. Some of the risk codes in their application are not precise enough to exclude completely.

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Appendix 3

Misc. &,US Line ofbusiness
Fire
Allied lines
Ocean marine
Inland marine
Workers'
compensation
Other liability(1)Products liability
Aircraft (all perils)
Boiler and machinery

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Accident

Pec.

Third&Financial

party

healthAviation

Marineloss

Property

liability

Transportx
xxx
xxxxxxxxx

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