Study of Small Insurer Competitiveness in the Terrorism Risk 

Insurance Marketplace

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

JUNE 2019
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 i 

Table of Contents

I. INTRODUCTION AND EXECUTIVE SUMMARY ........................................................ 1

II. BACKGROUND ................................................................................................................... 4

III. TERRORISM RISK INSURANCE PROGRAM .............................................................. 6

IV. DATA COLLECTION ....................................................................................................... 11

A. Data Collection Process ................................................................................................ 11

B. Responding Insurer Categories ..................................................................................... 12

C. Response Rate ............................................................................................................... 14

D. Data Quality Evaluation ................................................................................................ 14

V. STUDY OF SMALL INSURER COMPETITIVENESS IN THE TERRORISM RISK

INSURANCE MARKETPLACE ...................................................................................... 16

A. Analysis of Changes to Market Share, Premium Volume, and Policyholder Surplus .. 16

B. Market Differences between Small Insurers and Large Insurers in the Terrorism Risk

Insurance Marketplace and Comparison to Other Perils .............................................. 21

1. Embedded Policies .................................................................................................... 22

2. Standalone Terrorism Policies .................................................................................. 30

3. Cyber Risk ................................................................................................................ 31

4. Nuclear, Biological, Chemical, and Radiological Risk ............................................ 33

5. Comparison to Other Perils ....................................................................................... 34

C. Mandatory Availability Requirement ........................................................................... 35

D. Effect of Increasing the Program Trigger Amount ....................................................... 38

E. Availability and Cost of Private Reinsurance for Small Insurers ................................. 39

F. Impact of State Workers’ Compensation Laws ............................................................ 43

VI. CONCLUSION ................................................................................................................... 47

Appendix 1: 2018 Take-Up Rates by State ...............................................................................49

Appendix 2: 2018 Take-Up Rates by State and Line Groups ................................................ 51
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

ii

Glossary

2015 Reauthorization 

Act

.......... Terrorism Risk Insurance Program Reauthorization 

Act of 2015, Pub. L. 114-1, 129 Stat. 3

2016 Effectiveness 

Report

.......... FIO, Report on the Overall Effectiveness of the 

Terrorism Risk Insurance Program (June 2016)

2017 Small Insurer 

Study

........ FIO, Study of Small Insurer Competitiveness in the 

Terrorism Risk Insurance Marketplace (June 2017)

2018 Effectiveness 

Report

.......... FIO, Report on the Overall Effectiveness of the 

Terrorism Risk Insurance Program (June 2018)

Act of Terrorism .......... Under TRIA, an act certified as terrorism by the 

Secretary, in consultation with the Attorney General 

and the Secretary of Homeland Security

Alien Surplus Lines 

Insurer

.......... Non-U.S. insurer that is an eligible surplus lines 

insurer as listed on the National Association of 

Insurance Commissioners’ Quarterly Listing of 

Alien Surplus Lines Insurers

Captive Insurer .......... Insurer formed to insure the risk exposures of its 

policyholder owner(s), which is regulated by the 

captive insurance laws of a particular state 

jurisdiction

CMP .......... Commercial Multi-Peril

Co-Pay Share .......... The percentage of losses that an insurer is obligated 

to pay after meeting its deductible and the Program 

Trigger is satisfied. The federal government is 

responsible for the remaining percentage of losses 

above the insurer’s deductible. The co-pay share for 

CY 2018 was 18 percent

CY .......... Calendar year

DEP .......... Direct earned premium

Embedded Terrorism 

Insurance

.......... Terrorism insurance provided within a P&C policy 

that also covers other risks

Federal Share of 

Compensation 

.......... The percentage of an insurer’s losses that the federal 

government will pay after the insurer meets its 

deductible and the Program Trigger is satisfied. The 

insurer is responsible for the remaining percentage 

of losses above its deductible. The federal share of 

compensation for CY 2018 was 82 percent.
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

iii

FIO .......... Federal Insurance Office

Insurer Deductible .......... The amount an individual insurer must pay before 

receiving the federal share of compensation, after an 

event is certified as an act of terrorism and the 

Program Trigger is exceeded. An insurer’s 

deductible is 20 percent of its TRIP-eligible DEP in 

the prior year

NBCR .......... Nuclear, biological, chemical, or radiological

P&C .......... Property and casualty

PML .......... Probable maximum loss

Program .......... Terrorism Risk Insurance Program (also, TRIP)

Program Cap .......... Maximum aggregate exposure limit for the federal 

government and insurers under TRIP in any calendar 

year

Program Trigger .......... Minimum amount of insurance industry aggregate 

insured losses resulting from certified act(s) of 

terrorism that must occur in a calendar year before 

any federal payments can be made under TRIP

Standalone Policy .......... Insurance policy which provides coverage only for 

terrorism risk

Study .......... FIO, Study of Small Insurer Competitiveness in the 

Terrorism Risk Insurance Marketplace (June 2019)

Secretary .......... Secretary of the Treasury

September 11 Attacks .......... Terrorist attacks occurring on September 11, 2001

Small Insurer .......... An insurer as defined under 31 C.F.R. § 50.4(z)

Take-Up Rate .......... Extent to which terrorism risk insurance is 

purchased by policyholders

Treasury .......... U.S. Department of the Treasury

TRIA .......... Terrorism Risk Insurance Act of 2002, as amended

TRIP .......... Terrorism Risk Insurance Program (also, Program)

TRIP-Eligible Lines 

of Insurance

.......... Commercial P&C insurance subject to the TRIP 

pursuant to 31 C.F.R. § 50.4(w)

WC .......... Workers’ Compensation
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 1 

I. INTRODUCTION AND EXECUTIVE SUMMARY 

Under the Terrorism Risk Insurance Program Reauthorization Act of 2015 (2015 

Reauthorization Act),1 the Secretary of the Treasury (Secretary) is required to conduct a study of 

small insurers participating in the Terrorism Risk Insurance Program (TRIP or Program) and 

identify any competitive challenges small insurers face in the terrorism risk insurance 

marketplace. The study must identify: 

A. changes to the market share, premium volume, and policyholder surplus of small insurers 

relative to large insurers; 

B. how the property and casualty insurance market for terrorism risk differs between small 

and large insurers, and whether such a difference exists within other perils; 

C. the impact of the Program’s mandatory availability requirement on small insurers; 

D. the effect on small insurers of increasing the Program Trigger;

E. the availability and cost of private reinsurance for small insurers; and 

F. the impact that state workers’ compensation laws have on small insurers and workers’ 

compensation carriers in the terrorism risk insurance marketplace.

2

The findings and conclusions of the study must be submitted in a report to Congress no later than 

June 30, 2019 (Study).

3

The 2015 Reauthorization Act also requires the Secretary to collect Program data on an annual 

basis.4

 The Federal Insurance Office (FIO) assists the Secretary in Program administration.5 

 

1 Terrorism Risk Insurance Program Reauthorization Act, Pub. L. 114-1, 129 Stat. 3 (2015). The provisions of the 

Terrorism Risk Insurance Act of 2002 (TRIA), Pub. L. No. 107-297, 116 Stat. 2322 (2002), as amended (including 

the 2015 Reauthorization Act), appear in a note of the United States Code (15 U.S.C. § 6701 note), and, therefore, 

references to the provisions of TRIA or the 2015 Reauthorization Act are identified by the sections of the law [e.g., 

“TRIA § 102(1) (definition of an “act of terrorism”)”].

2 TRIA § 108(h).

3 The 2015 Reauthorization Act required the Secretary to submit a report on the findings and conclusions of the 

small insurer study to Congress no later than June 30, 2017, and every other June 30 thereafter through the 

Program’s expiration date of December 31, 2020. Treasury published a report on its first small insurer study on 

June 30, 2017. See Federal Insurance Office, U.S. Department of the Treasury, Study of Small Insurer 

Competitiveness in the Terrorism Risk Insurance Marketplace (2017), 

https://www.treasury.gov/initiatives/fio/reports-andnotices/Documents/Study_of_Small_Insurer_Competitiveness_in_the_Terrorism_Risk_Insurance_Marketplace_(Jun

e_2017).pdf. This report addresses Treasury’s findings and conclusions from its second small insurer study, 

described further in Section V.

4 TRIA § 104(h)(1).

5 Federal Insurance Office Act of 2010, 31 U.S.C. §313(c)(1)(D) (2012).
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 2 

Since the 2015 Reauthorization Act, the U.S. Department of the Treasury (Treasury) has 

conducted four data calls – a voluntary call in 2016 seeking calendar year (CY) 2015 data, and 

three mandatory calls in 2017, 2018, and 2019 requiring, respectively, the production of CY 

2016, 2017, and 2018 data. This Study addresses the six statutory considerations identified 

above, and uses information from the 2017, 2018, and 2019 TRIP data calls.

Based on analysis of the collected information and identified issues, Treasury has reached the 

following conclusions: 

A. Small insurer direct earned premium (DEP) in the TRIP-eligible lines of insurance 

and policyholder surplus has remained relatively constant over the past decade, but 

total market share within the TRIP-eligible lines of insurance has slightly declined 

relative to larger (non-small) insurers over the past decade. Refer to Section V.A.

B. Numerous market differences exist between small insurers and larger (non-small) 

insurers. Refer to Section V.B. 

1. Small insurers allocate a lower percentage of DEP for terrorism risk insurance 

than do non-small insurers, and small insurers are more likely than larger insurers 

to charge no premium for terrorism risk insurance. Small insurers tend to provide 

coverage in fewer states than do non-small insurers, and small insurers earn a 

higher percentage of DEP in the commercial multi-peril (CMP) and workers’ 

compensation lines than do non-small insurers.

2. Small insurers issue a very limited number of policies for standalone terrorism 

insurance. 

3. Small insurers are participating in the cyber insurance market covered under the 

TRIP-eligible lines of insurance, although at different premium levels and 

terrorism risk insurance take-up rates than other market participants. 

4. Small insurers are more likely than non-small insurers to exclude coverage for 

nuclear, biological, chemical, and radiological (NBCR) risks from their terrorism 

risk insurance coverage. However, their reported limits still indicate that they 

may have a significant aggregate exposure associated with such losses. 

5. The participation of small insurers in the lines of insurance covered by TRIP is 

slightly higher than their share in property and casualty (P&C) insurance lines not 

covered by TRIP. 

C. The mandatory availability requirement appears to affect small insurer participation 

in the terrorism risk insurance market by causing them to assume more terrorism risk 

exposure than they might otherwise provide absent the requirement. However, the 

Program’s backstop provisions address some of the potential risk posed by this

increased aggregate loss exposure. Refer to Section V.C. 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 3 

D. Small insurers could sustain significant terrorism losses without federal backstop 

support if their losses fail to satisfy the Program Trigger. This could have a negative 

effect on small insurers, potentially causing financial distress and ratings downgrades. 

Refer to Section V.D. 

E. Small insurers cede a higher percentage of their DEP to purchase reinsurance than do 

non-small insurers. Reinsurance purchases covering terrorism risk have increased, 

but some small insurers do not purchase enough private reinsurance to cover the 

potential gap between a small insurer’s individual deductible and the Program 

Trigger. In addition, small insurers purchase less reinsurance for NBCR-related 

terrorism risk than for conventional terrorism risk. Refer to Sections V.E and V.F. 

F. Workers’ compensation insurance cannot exclude coverage for either conventional or 

NBCR-related terrorism losses. Therefore, workers’ compensation remains a difficult 

exposure from a terrorism risk standpoint for the insurance market. Small insurers

face an elevated risk for workers’ compensation losses given that a higher percentage

of their TRIP-eligible DEP is from workers’ compensation policies. The limited 

availability of NBCR reinsurance further increases this risk. Refer to Section V.F. 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019)

______________________________________________________________________________

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

4

II. BACKGROUND

Prior to September 11, 2001, commercial P&C insurance policies generally did not exclude 

coverage for losses resulting from terrorism. The events of September 11, 2001 (September 11 

Attacks) resulted in approximately $46 billion of P&C insurance losses, more than two-thirds of 

which were reimbursed by reinsurers to insurers.6

 Following the September 11 attacks, insurers 

and reinsurers began to exclude coverage for terrorism risk from commercial P&C policies.

The Terrorism Risk Insurance Act of 2002 (TRIA) was enacted, in part, because the widespread 

unavailability of terrorism risk insurance “could seriously hamper ongoing and planned 

construction, property acquisition, and other business projects, generate a dramatic increase in 

rents, and otherwise suppress economic activity.”7 TRIA established the Program, which 

requires insurers to make terrorism risk coverage available within certain lines of commercial 

P&C insurance (TRIP-eligible lines of insurance).8 To assist insurers with the potential financial 

exposure resulting from this required offer of terrorism risk insurance, certain insurance losses 

resulting from an “act of terrorism” as defined by TRIA and certified as such by the Secretary 

are eligible for reimbursement through the Program.9

 The Program is housed in Treasury and 

administered by the Secretary with the assistance of FIO.10

TRIA originally authorized the Program for a three-year period ending December 31, 2005. The 

Program has since been reauthorized three times,11 most recently by the 2015 Reauthorization 

Act, which extended the Program through December 31, 2020.12 Changes enacted with each 

 6 Insured losses shown in 2018 dollars. See Willis Towers Watson, The Terrorism Pool Index: Review of Terrorism 

Insurance Programs in Selected Countries 2018/2019 (2019), 35, https://www.willistowerswatson.com/-

/media/WTW/PDF/Insights/2018/11/Terrorism-Pool-Index-Nov.pdf (as adjusted from 2016 to 2018 dollars).

7 TRIA § 101(a)(5).

8 See TRIA § 103(c). Treasury has implemented regulations defining the “TRIP-eligible lines of insurance” with 

reference to certain lines identified for state regulatory purposes as follows: Fire, Allied Lines, Commercial Multiple 

Peril (non-liability), Commercial Multiple Peril (liability), Ocean Marine, Inland Marine, Workers’ Compensation, 

Other Liability (but not including Professional Liability, which is otherwise within this line for state reporting 

purposes), Products Liability, Aircraft, and Boiler and Machinery. 31 C.F.R. § 50.4(w)(1) (2018). Some of these 

lines also contain personal P&C premium exposures that are not subject to the Program. There are also certain other 

defined exclusions within these lines. See 31 C.F.R. § 50.4(w)(2).

9 Further details on Program operation are provided in Section III of this Study.

10 Federal Insurance Office Act of 2010, 31 U.S.C. § 313(c)(1)(D) (2012).

11 See Terrorism Risk Insurance Extension Act of 2005, Pub. L. 109-144, 119 Stat. 2660 (2005); Terrorism Risk 

Insurance Program Reauthorization Act of 2007, Pub. L. 110-160, 121 Stat. 1839 (2007); 2015 Reauthorization Act.

12 Treasury issued rules in December 2016 to implement changes to TRIA under the 2015 Reauthorization Act, and 

for other purposes. See Terrorism Risk Insurance Program; Certification, 81 Fed. Reg. 88592 (December 7, 2016), 

https://www.govinfo.gov/content/pkg/FR-2016-12-07/pdf/2016-29313.pdf; Terrorism Risk Insurance Program, 81 

Fed. Reg. 93756 (December 21, 2016), https://www.govinfo.gov/content/pkg/FR-2016-12-21/pdf/2016-29987.pdf.
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 5 

Program renewal have generally reduced potential federal exposure to insured losses and 

increased private market exposure.
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 6 

III. TERRORISM RISK INSURANCE PROGRAM

The Program requires that each entity meeting the definition of an insurer make available 

coverage for insured losses resulting from acts of terrorism.13 This offer must “not differ 

materially from the terms, amounts, and other coverage limitations applicable to losses arising 

from events other than acts of terrorism.”14 The “make available” requirement applies only to 

TRIP-eligible lines of insurance.15 TRIA does not mandate that insurers offer terrorism risk 

insurance at a particular price,16 nor does TRIA require any policyholder to purchase insurance 

for terrorism risk.17 All commercial P&C insurers writing in TRIP-eligible lines and required to 

make terrorism risk insurance available under their policies are considered Program participants, 

regardless of whether their policyholders accept the offer to take up the coverage.

Insurers are eligible for federal payments under the Program only for losses resulting from “acts 

of terrorism.” An act of terrorism is defined under TRIA as an act certified by the Secretary in 

consultation with the Attorney General of the United States and the Secretary of Homeland 

Security:

• to be an act of terrorism;

• to be a violent act or an act that is dangerous to human life, property, or 

infrastructure; 

• to have resulted in damage within the United States;18 and

• to have been committed by an individual or individuals, as part of an effort to coerce 

the civilian population of the United States or to influence the policy or affect the 

conduct of the U.S. government by coercion.19

 

13 An insurer is defined under TRIA as any entity, including any affiliate thereof, which receives direct earned 

premiums for TRIP-eligible lines of insurance and is licensed or admitted to engage in the business of insurance in 

any state; an eligible surplus lines carrier; a federally-approved maritime, energy, or aircraft insurer; a state residual 

market insurance entity or workers’ compensation fund; or, to the extent provided in rules issued by the Secretary, a 

captive insurer or a self-insurance arrangement. TRIA § 102(6).

14 TRIA §103(c)(2).

15 Reinsurance is excluded from the TRIP-eligible lines of insurance. TRIA § 102(11)(B)(vii). Issues concerning 

the availability of private reinsurance for terrorism risk are discussed further below in Sections V.E and V.F. 

16 State insurance rating laws and regulations may affect the price that insurers can charge for terrorism risk 

insurance subject to TRIA.

17 In some circumstances, state law may require the purchase of (or limit the ability to exclude) coverage for 

terrorism risk, such as in the case of workers’ compensation insurance, discussed further below in Section V.F. 

18 TRIA also provides that an act of terrorism may occur outside the United States in the case of certain air carriers 

or vessels, or on the premises of a U.S. mission. TRIA § 102(1)(A)(iii).

19 TRIA § 102(1)(A).
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 7 

Additionally, the Secretary may not certify an act that results in P&C insurance losses totaling $5 

million or less,20 or that was committed as part of the course of a war declared by Congress.21

If the Secretary certifies an act of terrorism, participating insurers may submit claims to 

Treasury, and Treasury will determine whether, and in what amounts, insurers are eligible for 

payments under the Program.22 Treasury must then obtain reimbursement of certain payments of 

the federal share of compensation through a recoupment process, and may require

reimbursement of additional payments depending on the amount of total losses. 

A participating insurer’s recovery under the Program is based on a number of factors, including 

its individual insurer deductible, the Program Trigger, the federal share of compensation of an 

insurer’s losses, and the Program Cap. These factors are described in greater detail below.

Insurer Deductible

After the Secretary certifies one or more acts of terrorism, two prerequisites must be met before 

an insurer is eligible for Program payments from Treasury: (1) the insurer’s losses must exceed 

its deductible (as defined under the Program); and (2) the Program Trigger must be satisfied. 

TRIA defines an individual insurer’s deductible as 20 percent of the insurer’s DEP in the TRIPeligible lines for the prior calendar year.23

Program Trigger

The Program Trigger is the minimum amount of insurance industry aggregate insured losses 

resulting from a certified act (or acts) of terrorism that must occur in a particular calendar year 

before Treasury can make any federal payments. The Program Trigger was $160 million in CY 

2018 (the principal year addressed by this Report);24 it will continue to increase by $20 million 

per calendar year until it reaches $200 million in 2020.25 Once the Program Trigger has been 

 

20 TRIA § 102(1)(B)(ii).

21 This limiting clause regarding an act of war does not apply to coverage under the Program for workers’ 

compensation insurance. TRIA § 102(1)(B)(i).

22 Treasury makes all determinations pursuant to the Program regulations. See 31 C.F.R. Part 50. 

23 TRIA § 102(7).

24 TRIA § 103(e)(1)(B). The 2015 Reauthorization Act changed certain Program mechanics from the date of the 

2015 Reauthorization through the expiration date for the Program in 2020. This Study focuses upon the Program 

structure in place in 2018 because much of the FIO’s analysis is based on the 2019 TRIP data call, which collected 

year-end data for CY 2018.

25 TRIA § 103(e)(1)(B). TRIP did not originally have a Program Trigger. This requirement was introduced in the 

2005 Extension Act. It was initially set at $50 million (for losses occurring in 2006), and increased to $100 million 

for losses occurring in 2007. When TRIP was reauthorized through 2014 in the 2007 Reauthorization Act, no 

change was made to the Program Trigger, which remained at $100 million. The 2015 Reauthorization Act, 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 8 

satisfied, Treasury will make payments to individual insurers for the federal share of 

compensation above their respective deductibles. 

Federal Share of Compensation

After an insurer meets its deductible and the Program Trigger is satisfied, the federal government 

will pay a certain percentage of that insurer’s losses in excess of the insurer’s deductible. For 

CY 2018, the federal share of compensation was 82 percent of an insurer’s losses above its 

deductible, with the insurer responsible for the remaining 18 percent. The federal share of 

compensation will continue to decrease (and the insurer share will correspondingly increase) by 

one percentage point per year through 2020, at which time the federal share of compensation will 

be 80 percent and the insurer share will be 20 percent.26

Program Cap

TRIA limits the aggregate insured loss exposure of both insurers and the federal government 

arising from one or more acts of terrorism. Specifically, TRIA prohibits the Secretary from 

making payments for any portion of aggregate insured losses (including amounts paid by 

Program participants and the federal government) from acts of terrorism which exceed the 

Program Cap of $100 billion during any calendar year.27 If the Program Cap is reached, an 

insurer that has met its insurer deductible by making payments for insured losses subject to the 

Program is not liable for any portion of losses that exceeds the Program Cap.28 

Recoupment

The Secretary will collect “terrorism loss risk-spreading premiums” from insurers if federal 

payments are made to insurers. Under this mechanism, known as recoupment, Program 

participants may be required to collect funds from policyholders by placing a surcharge on 

insurance policies written in TRIP-eligible lines. The surcharges will be set based upon the 

amount that must be recovered by Treasury and the time within which they must be recovered, as 

required by TRIA. Insurers must then remit these surcharges to the Secretary.29 The 

requirement to collect, or recoup, terrorism loss risk-spreading premiums applies not only to 

insurers that received federal payments under the Program, but also to all insurers writing 

 

however, provided for an annual increase of $20 million in the Program Trigger beginning in 2016.

26 TRIA § 103(e)(1)(A).

27 TRIA § 103(e)(2)(A).

28 TRIA requires the Secretary to notify Congress if insured losses are projected to exceed the Program Cap, and to 

determine the pro rata share of insured losses to be paid by each affected insurer. TRIA §§ 103(e)(2)-(3).

29 TRIA §§ 103(e)(7)-(8).
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 9 

policies in TRIP-eligible lines of insurance. Surcharges are placed on all TRIP-eligible

insurance policies regardless of whether the policyholder purchased terrorism risk insurance.30

Small Insurer Definition 

The 2015 Reauthorization Act directed the Secretary to develop a regulatory definition of “small 

insurers” participating in TRIP for purposes of the biennial small insurer study.31 Treasury 

regulation defines small insurers in direct relation to the Program Trigger:

Small insurer means an insurer (or an affiliated group of insurers . . .) whose 

policyholder surplus for the immediately preceding year . . . is less than five times 

the Program Trigger amount for the current year and whose direct earned 

premium for the preceding year is also less than five times the Program Trigger 

amount for the current year. An insurer that has not had a full year of operations 

during the immediately preceding calendar year is a small insurer if its 

policyholder surplus in the current year is less than five times the Program 

Trigger amount for the current year. A captive insurer is not a small insurer, 

regardless of the size of its policyholder surplus or direct earned premium.32

For the purposes of the 2019 TRIP data call, small insurers were insurers with both a 2017 

policyholder surplus under $800 million and 2017 TRIP-eligible DEP under $800 million, each 

of which are equal to five times the 2018 Program Trigger of $160 million.

Significance of the Program Trigger for Small Insurers

The Program Trigger has no practical impact for insurers above the small insurer size threshold. 

This is because any “non-small” insurer that satisfies its own individual insurer deductible will 

also have sufficient losses to individually meet the Program Trigger. Under the Program, a nonsmall insurer will always be entitled to submit claims for the federal share of compensation once 

it meets its insurer deductible. 

However, the Program Trigger can pose a barrier to recovery of the federal share of 

compensation by small insurers. A small insurer may satisfy its individual insurer deductible, 

but still have total losses that are beneath the Program Trigger. For example, if a small insurer 

had a 2018 insurer deductible of $50 million, and experienced $100 million in total insured 

 

30 Depending on how any federal payments under TRIP compare with the total insured losses paid by participating 

insurers, TRIA provides that recoupment under the Program may be mandatory, or may be subject to the Secretary’s 

discretion. In connection with amounts subject to mandatory recoupment, Treasury must collect 140 percent of total 

amounts expended. See TRIA §§ 103(e)(7)-(8).

31 TRIA § 108(h)(1). Treasury’s small insurer definition should not be viewed as having relevance to any other 

definition of “small insurer” that may be used in other statutory and regulatory determinations, either at the federal 

or state levels. 

32 31 C.F.R. § 50.4(z).
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 10 

losses due to a certified act of terrorism, the insurer would only be able to receive payment of the 

federal share of compensation if aggregate insured losses among all Program participants 

exceeded the Program Trigger ($160 million in 2018). If this insurer was the only insurer to 

sustain insured losses in the act of terrorism (or if aggregate industry losses were under $160 

million), the Program Trigger would not be satisfied, and the insurer would not be able to submit 

a claim for the federal share of compensation, despite satisfying its individual insurer deductible. 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 11 

IV. DATA COLLECTION

A. Data Collection Process

The 2015 Reauthorization Act provides that, beginning in calendar year 2016, the Secretary shall 

require participating insurers to provide information and data for the Secretary to analyze the 

overall effectiveness of the Program.33 The information to be provided to the Secretary by 

participating insurers includes information regarding: 

(1) lines of insurance with exposure to terrorism losses; 

(2) premiums earned on coverage offered for terrorism losses;

(3) geographical location of exposures; 

(4) pricing of terrorism risk coverage offered;

(5) the take-up rate for terrorism risk coverage; 

(6) the amount of private reinsurance for acts of terrorism purchased; and 

(7) such other matters as the Secretary considers appropriate.34

This Study is based primarily on the results of Treasury’s 2017, 2018 and 2019 TRIP data calls. 

In addition, Treasury performed qualitative research and sought input from stakeholders, 

including small insurers, other Program participants, state insurance regulators, the National 

Association of Insurance Commissioners, and the general public, through a Federal Register 

Notice seeking comments.

35 When analyzing certain market changes over time for this Study, 

Treasury also considered information reported by insurers to state regulators. 

 

33 TRIA § 104(h)(1).

34 TRIA §§ 104(h)(1)(A)-(G).

35 See Comments in Aid of Analyses of the Terrorism Risk Insurance Program, 84 Fed. Reg. 14725 (April 11, 2019), 

https://www.govinfo.gov/content/pkg/FR-2019-04-11/pdf/2019-07216.pdf. In response to its notice seeking 

comments in connection with the 2019 Small Insurer Study, Treasury received four substantive comments from the 

National Association of Mutual Insurance Companies (NAMIC Comments), the American Property Casualty 

Insurance Association (APCIA Comments), the National Council on Compensation Insurance (NCCI Comments), 

and Atlantic Charter Insurance Companies (Atlantic Charter Comments). All comments are available at 

https://www.regulations.gov/docket?D=TREAS-TRIP-2019-0002. 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 12 

The 2017, 2018, and 2019 TRIP data calls were mandatory for participating insurers,36 subject to 

an exception for small insurers with less than $10 million in TRIP-eligible lines DEP in any 

individual reporting year.

37

Treasury collected data on a group basis because TRIP is generally administered on a group 

basis.38 Treasury collected data concerning DEP, policy exposures, policyholder take-up rates, 

and reinsurance.

Treasury collected data through a third-party insurance statistical aggregator, as required by the 

2015 Reauthorization Act.39 The statistical aggregator provided results to Treasury in an 

aggregated, anonymous format that did not identify any specific reporting groups or individual 

insurers. Treasury obtained most of the workers’ compensation insurance data from the National 

Council on Compensation Insurance (which provided data from the states in which it operates as 

well as on behalf of other independent state workers’ compensation rating bureaus), the 

California Workers’ Compensation Insurance Rating Bureau, and the New York Compensation 

Insurance Rating Board, thereby reducing the burden of the reporting requirements on the 

insurance industry. 

B. Responding Insurer Categories

Insurer groups were required to report in one of four insurer categories, based on the 

requirements of TRIA and its implementing regulations.40 These insurer categories included 

non-small and small domestic insurers that were “admitted” or licensed to write business in at 

least one U.S. jurisdiction,41 domestic and foreign insurers that were permitted as a matter of 

 

36 Insurers that are not small insurers were subject to different reporting templates that requested more data 

elements. 

37 Based on state reporting data, Treasury estimates that the approximately 400 insurers eligible for this reporting 

exception in the 2019 TRIP data call represented 0.5 percent of the TRIP-eligible lines premium market, and 3.7 

percent of the small insurer market segment. These amounts are similar to Treasury’s estimates for the 2017 and 

2018 TRIP data calls. State reporting data cited in this Study are as of December 31, 2018, as derived from S&P 

Global Market Intelligence (S&P Global) on April 9, 2019. 

38 An “affiliate” under TRIP is “any entity that controls, is controlled by, or is under common control with the 

insurer.” 31 C.F.R. § 50.4(c). Calculation of the deductible and the submission of claims under TRIP is on a group 

basis, in light of the “affiliate” definition in the regulations. Recoupment surcharges, however, are assessed and 

collected on an individual company basis. See 31 C.F.R. § 50.96. Insurer groups may include both domestic 

insurers as well as foreign insurers writing business in the United States on a surplus lines basis.

39 TRIA § 104(h)(3). Insurance Services Office, Inc. was the data aggregator for the 2017, 2018, and 2019 TRIP 

data calls.

40 Each insurer category was provided with a different reporting template that was tailored to that category.

41 An admitted company is “an insurance company licensed to do business in a state(s), domiciled in an alternative 

state or country.” “Glossary of Insurance Terms,” National Association of Insurance Commissioners, 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 13 

state law to write U.S. business on a surplus lines basis, and captive insurers admitted or licensed 

to write TRIP-eligible lines of insurance in at least one U.S. jurisdiction. 42

For 2019, the four insurer categories required to report information were as follows: 

(1) Small Insurers: Domestic insurers or groups (including affiliated alien surplus lines 

insurers) with both 2017 DEP in TRIP-eligible lines of insurance of less than $800 

million and a 2017 policyholder surplus of less than $800 million. The small insurer 

threshold is calculated annually in relation to the Program Trigger amount.43

(2) Non-Small Insurers: Domestic insurers or groups (including affiliated alien surplus 

lines insurers) with either DEP in TRIP-eligible lines of insurance above the small 

insurer threshold or a policyholder surplus above the small insurer threshold. 

(3) Captive Insurers: Insurers formed to insure the risk exposures of their policyholder 

owners and regulated by the captive insurance laws of a particular state jurisdiction.44 

Captive insurers are explicitly excluded from the regulatory definition of small 

insurers, and therefore were not subject to this Study’s analysis of small insurers. 

(4) Alien Surplus Lines Insurers: Alien surplus lines insurers not affiliated with either 

a domestic non-small or small insurer.45 Alien surplus lines insurers were not subject 

to this Study’s analysis of small insurers (unless affiliated with an admitted small 

insurer group).46

 

http://www.naic.org/consumer_glossary.htm. 

42 Non-admitted insurers can write insurance on a surplus lines basis when the desired coverage cannot be obtained 

from admitted insurers in the jurisdiction in question. See 31 C.F.R. § 50.4(o)(1)(i)(B). See also “Glossary of 

Insurance Terms.”

43 See FIO, 2017 Small Insurer Study, 6-7, 21-23.

44 See 31 C.F.R. § 50.4(g).

45 Alien surplus lines insurers are non-U.S. insurers qualified by state regulators to participate in U.S. insurance 

markets on a surplus lines basis. They are allowed to write insurance for risks that cannot be placed with domestic 

licensed insurers in the admitted market. See 31 C.F.R. § 50.4(o)(1)(i)(B).

46 Although most alien surplus lines insurers are below the “small insurer” size threshold, the coverages and 

policyholders in the surplus market may differ significantly from risks placed in the admitted market. In addition, 

although admitted small insurers may write insurance in the surplus market, only 9.8 percent of the individual 

insurers within the small insurer groups that reported in the 2019 TRIP data call identified as surplus lines insurers.
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 14 

C. Response Rate

Treasury estimates that the response rate for admitted insurers in the 2019 TRIP data call 

(measured by TRIP-eligible DEP) was at least 99.8 percent for non-small insurers, and at least

87.3 percent for small insurers.47

D. Data Quality Evaluation

This Study analyzes data for CY 2009 through 2018. For CY 2016 through 2018, Treasury 

relied primarily on the results of the 2017, 2018, and 2019 TRIP data calls.48 In addition, 

Treasury reviewed state reporting data to draw conclusions for the period from CY 2009 

through 2015 (prior to Treasury’s first mandatory data call).49 Treasury also compared the 

results of its 2017, 2018, and 2019 TRIP data calls with state reporting data for the same period 

to further validate the accuracy of reported data. 

The comparison between the TRIP data calls and state reporting data is relevant because

TRIP-eligible lines are defined by regulation with general reference to state insurance reporting 

lines. State insurance regulators collect P&C insurance information from insurers licensed in 

their respective jurisdictions, and although the collection has not historically included 

information specific to the terrorism risk insurance component of P&C insurance policies, the 

information collected does identify DEP collected by lines of insurance.

47 The small insurer response rate could be higher because the non-responder category could include some small 

insurers that were not subject to the data call. Determining the response rate for alien surplus lines and captive 

insurers under TRIP is more difficult because those insurers typically do not submit publicly available information 

that Treasury can use to independently evaluate response rates. Based upon prior evaluations and coordination with 

relevant state insurance regulators, Treasury estimates that the significant majority of alien surplus lines and captive 

insurers participating in the Program responded to the 2019 TRIP data call.

48 Some of the figures reported in this Study relating to the 2017 and 2018 TRIP data calls may not be identical to 

similar information previously reported by Treasury because of late-reported or corrected data that was submitted 

after prior report publication.

49 Treasury performed its first data collection in 2016. However, because it was the first year of data collection 

under the 2015 Reauthorization Act, Treasury made participation in the collection voluntary to reduce the 

imposition of undue burdens on insurers. See Request for Data and Information, 81 Fed. Reg. 11649 (March 4, 

2016), https://www.govinfo.gov/content/pkg/FR-2016-03-04/pdf/2016-04821.pdf. Insurers representing 

approximately 41 percent of the entire terrorism risk insurance market (by DEP) responded to the 2016 voluntary 

data call. Because of the limited response to the 2016 TRIP data call, the Study does not compare results from the 

2016 voluntary data call to the 2017, 2018 and 2019 mandatory data calls. For more information about the 

voluntary 2016 TRIP data call, see Federal Insurance Office, U.S. Department of the Treasury, Report on the 

Overall Effectiveness of the Terrorism Risk Insurance Program (2016), 7,

https://www.treasury.gov/initiatives/fio/reports-andnotices/Documents/2016_TRIP_Effectiveness_%20Report_FINAL.pdf. 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 15 

The Program uses the existing state-defined insurance lines and reporting data standards to 

determine the insurance that is subject to the Program, which promotes efficient Program 

administration. It also enables Treasury to determine whether the data reported by non-small

insurers and small insurers under TRIP data calls is generally consistent with similar data 

reported for state regulatory purposes. 

The use of the state reporting data in this Study permits analysis of the entire period from 2009 to 

2018.50 However, the nature of the state reporting data results in some variations between the 

state data and the TRIP data collected by Treasury. There are some differences between the 

TRIP-eligible lines of insurance and the same lines when used for state reporting purposes. This 

difference is caused by state reporting lines including certain premium that is not subject to the 

Program.51 Treasury has adjusted the state data to account for the premium differential between 

the TRIP-eligible lines of insurance and the state reporting lines from 2009 to 2018 by assuming 

that similar amounts of premium in the state reporting lines were not subject to the Program but 

still reported for state purposes. In addition, the state reporting data used in this analysis relates 

to the TRIP-eligible lines and is not specific to terrorism risk. For purposes of this analysis, 

Treasury considers the data, as adjusted, to be instructive and generally consistent with the 

information generated by the TRIP data calls.

The relationship between the small insurer definition and the Program Trigger also affects the 

analysis of market changes from 2009 to 2018. The Program Trigger increased in 2016, 2017, 

and 2018, which affected the number of insurers defined as small insurers in each of these 

years.52 Specifically, the number of insurers classified as small insurers increased because a 

greater number of insurers were below both the small insurer DEP threshold and the policyholder 

surplus threshold. This change in the Program Trigger results in an increase in the market share 

of small insurers, assuming all other considerations remain the same. Treasury discussed this 

issue in its 2017 Small Insurer Study.53

 

50 All reported state data includes data for the District of Columbia in addition to the 50 U.S. states.

51 The principal differences between state reporting lines and TRIP-eligible lines are: (1) certain lines of insurance 

(principally Fire and Allied Lines, but also other lines) encompass policies written to cover personal, and not 

commercial, exposures, which are not subject to TRIP; and (2) Professional Liability insurance is not subject to 

TRIP, even though it is reported for state purposes under the Other Liability line of insurance, which is otherwise a 

TRIP-eligible line of insurance. See 31 C.F.R. § 50.4(w). 

52 The annual Program Trigger adjustment is described above in note 25.

53 See FIO, 2017 Small Insurer Study, 11-12.
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 16 

V. STUDY OF SMALL INSURER COMPETITIVENESS IN THE TERRORISM 

RISK INSURANCE MARKETPLACE

As noted above, TRIA requires each small insurer study to include an analysis of the following 

six areas: 

A. Changes to market share, premium volume, and policyholder surplus of small 

insurers relative to large insurers;

How the P&C insurance market for terrorism risk differs between small and large 

insurers and whether such a difference exists within other perils; 

The impact of the Program’s mandatory availability requirement on small insurers;

The effect on small insurers of increasing the Program Trigger;

The availability and cost of private reinsurance for small insurers; and 

The impact that state workers’ compensation laws have on small insurers and 

workers’ compensation carriers in the terrorism risk insurance marketplace.

F.

E.

D.

C.

B.

This Study analyzes each of these areas.

A. Analysis of Changes to Market Share, Premium Volume, and Policyholder 

Surplus

Figure 1 sets forth summary information from the 2017, 2018, and 2019 TRIP data calls 

concerning the insurer categories participating in TRIP, as indicated by reported TRIP-eligible 

DEP.

Figure 1: TRIP-Eligible DEP by Insurer Category54

2017 TRIP Data Call 2018 TRIP Data Call 2019 TRIP Data Call

2016 DEP in TRIPEligible Lines% of

Total 

2017 DEP in TRIPEligible Lines% of

Total 

2018 DEP in TRIPEligible Lines% of

Total 

Alien Surplus Lines Ins. $ 7,421,060,583 4% $ 9,492,933,571 5% $ 7,618,548,358 4%

Captive Insurers 7,930,646,027 4% 9,052,630,571 4% 8,937,119,082 4%

Non-Small Insurers 168,238,219,882 83% 163,891,791,592 80% 166,188,192,378 81%

Small Insurers 20,085,947,637 10% 21,806,195,201 11% 22,516,178,612 11%

Total $ 203,675,874,129 100% $ 204,243,550,936 100% $ 205,260,038,430 100%

Source: 2017-2019 TRIP Data Calls

Treasury concluded in its 2018 Effectiveness Report that the market for terrorism risk insurance 

in the United States was relatively stable; that insurance was both available and affordable to 

 

54 Some figures may not add to 100 percent due to rounding.
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 17 

U.S. policyholders; and that the Program has been effective in promoting this market stability.55 

Although not the focus of this Study, Treasury’s analysis of the 2019 TRIP data call is consistent 

with Treasury’s findings in the 2018 Effectiveness Report. Treasury will continue to evaluate 

the market in its effectiveness report to be issued in June 2020. Within the terrorism risk 

insurance market, small insurers represented approximately 11 percent of the entire TRIPeligible lines insurance market between 2016 and 2018. However, the increase in the Program 

Trigger during this period brought more insurers within the small insurer category, so these 

market share figures may not be based upon the same population of insurers. 

This part of the Study examines changes to the market share, premium volume, and policyholder 

surplus of small insurers as compared to large (or non-small) insurers between 2009 and 2018. 

This analysis does not include the market shares of alien surplus lines insurers and captive 

insurers, given the lack of comparable data. Therefore, the current overall market share of small 

insurers when measured only against non-small insurers is slightly higher than the 11 percent 

figure noted above for the market as a whole. 

Treasury performed multiple analyses to evaluate the changes discussed in this section. First, 

Treasury examined the market share of small insurers, using the regulatory definition of small 

insurer that directly relates to the Program Trigger. Although the small insurer definition was 

not adopted until 2016, Treasury analyzed 2009-2018 data based on the number of insurers that 

would have been considered small insurers under the Program if the small insurer definition had 

been in effect since 2009.56 Figure 2 uses the state reporting data for the entire 2009-2018 

period, as well as the more specific results from Treasury’s 2016-2018 TRIP data calls, arrayed 

next to the corresponding years of state data from those years. 

 

55 Federal Insurance Office, U.S. Department of Treasury, Report on the Overall Effectiveness of the Terrorism Risk 

Insurance Program (2018), 16, https://www.treasury.gov/initiatives/fio/reports-andnotices/Documents/2018_TRIP_Effectiveness_Report.pdf. 

56 Thus, Treasury’s analysis assumes that small insurers in 2014 and before had less than $500 million in DEP and 

policyholder surplus, because the Program Trigger was $100 million in those years. 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 18 

Figure 2: 2009-2018 Market Share by DEP of Small Insurers in TRIP-Eligible Lines based 

upon Application of Small Insurer Definition in Each Year

14.9%

13.2%

12.3% 12.3% 11.9% 11.5%

10.7%

11.9%

13.2%

12.6%

10.7%

11.7% 11.9%

0%

2%

4%

6%

8%

10%

12%

14%

16%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Market Share (%)

Year

S&P Global TRIP Data Call

Source: S&P Global and 2017-2019 TRIP Data Calls

Figure 2 reflects some fluctuation in market shares of small insurers based, in part, upon the 

change in the number of small insurers in the market during each year on account of application 

of Treasury’s small insurer definition and changes in the Program Trigger. During the 2016-

2018 period, the increase in the Program Trigger brought more insurers within the small insurer 

category.

Second, in order to account for the impact the change in the Program Trigger has on the number 

of insurers, Treasury applied a fixed small insurer threshold between the years of 2009 and 2018. 

This was done by identifying all insurers meeting the 2018 definition of small insurer – that is, 

all insurers with less than $800 million in TRIP-eligible lines premium and policyholder surplus. 

Using this approach, Figure 3 shows the same market share analysis from 2009 to 2018, again 

using both the state reporting data as well as data from the TRIP data calls.
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 19 

Figure 3: 2009-2018 Market Share by DEP of Small Insurers in TRIP-Eligible Lines based 

upon 2018 Application of Small Insurer Definition 

Source: S&P Global and 2017-2019 TRIP Data Calls

After accounting for the change in the small insurer threshold, Figure 3 generally shows a 

decrease in small insurer market share, particularly from 2012 through 2018 (although the trend 

is flat for the 2016-2018 period if only the TRIP data call information is considered).57 

Figure 4 compares the premium volume for TRIP-eligible lines for small insurers and non-small 

insurers from 2009 to 2018. It uses the 2018 small insurer threshold to evaluate the experience 

of small and non-small insurers over time, and uses state data for the 2009 to 2015 period, and 

the TRIP data call information for the 2016 to 2018 period. 

 

18.6% 17.9%

17.1%

18.2%

16.7% 16.6%

15.4% 14.8%

13.9%

12.6%

11.6% 11.7% 11.9%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Market Share (%)

Year

SNL Data TRIP Data Call

57 In its analysis for the 2017 Small Insurer Study, Treasury also observed a small decline in the TRIP-eligible lines 

market share of small insurers between 2006 and 2016. See FIO, 2017 Small Insurer Study, 12.
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

Figure 4: 2009-2018 Premium Volume Comparison for TRIP-Eligible Lines

Small Insurers vs. Non-Small Insurers

$30 $29 $27 $27 $30 $29 $31 $30 $20 $22 $23 

$134 $125 $122 $127 $134

$145 $153 $161 $168 $164 $166

 -

 $20

 $40

 $60

 $80

 $100

 $120

 $140

 $160

 $180

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

TRIP-Eligible DEP ($billions)

Year

Small Insurer Non-Small Insurer

Source: S&P Global (2009-2015) and 2017-2019 TRIP Data Calls (2016-2018)

As shown in Figure 4, small insurer DEP has remained relatively constant from 2009 to 2018.58 

In comparison, the premium of non-small insurers increased during this period, which has

resulted in the gradual market share decline for small insurers. 

Figure 5 compares policyholder surplus for small insurers and non-small insurers between 2009 

and 2018, again applying the 2018 small insurer threshold for each year. Policyholder surplus is 

an indicator of an insurer’s financial health, and its ability to pay claims and write new 

business.59

58 After accounting for the change in the data used beginning in 2016, where TRIP data call information is used 

instead of adjusted state data.

59 Policyholder surplus is the measurement of an insurer’s “assets in excess of the liabilities of a company or net 

income above any monies indebted to legal obligation.” “Glossary of Insurance Terms.” The policyholder surplus 

of a P&C insurer is not limited to supporting its terrorism insurance exposure; rather, it “backs all property and 

casualty insurance policies in the United States and is subject to depletion in a wide variety of events. For example, 

extreme weather losses could particularly draw capital away from the terrorism insurance market, because events 

such as hurricanes share some characteristics – low frequency and the possibility of catastrophic levels of loss – with 

terrorism risk.” Congressional Research Service, Terrorism Risk Insurance: Overview and Issue Analysis for the 

116th Congress (2019), 11, https://crsreports.congress.gov/product/pdf/R/R45707.

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

20 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 21 

Figure 5: 2009-2018 Policyholder Surplus Comparison

Small Insurers vs. Non-Small Insurers

$42 $37 $37 $37 $37 $42 $37 $45 $53 $52

$519

$569 $572

$615

$676 $700 $706 $737

$689 $688

 -

$ 100

$ 200

$ 300

$ 400

$ 500

$ 600

$ 700

$ 800

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Policyholder Surplus ($ billions)

Year

Small Insurer Non-Small Insurer

Source: S&P Global 

Between 2009 and 2018, the aggregate policyholder surplus for all small insurers ranged from 

$53 billion in 2017 to $37 billion from 2010 to 2013, and in 2015. The policyholder surplus of 

non-small insurers generally increased from 2009 through 2016, although it has declined since 

the high figure recorded in 2016. 

In the absence of terrorism risk insurance-specific data from 2009 to 2015, this Study’s use of 

the state-reported TRIP-eligible lines data for the 2009 to 2015 period is only a proxy for market 

share information during this period. Based upon this information, however, the market share of 

small insurers (measured by TRIP-eligible lines premium, and adjusting for the small insurer size 

threshold over time) experienced a decline relative to the market share of non-small insurers

between 2009 and 2018. During this timeframe, the small insurer DEP remained relatively 

constant, while the DEP of non-small insurers increased. Similarly, policyholder surplus for 

small insurers also remained relatively constant, and the policyholder surplus of non-small

insurers increased (except for the noted decline over the past two years).

B. Market Differences between Small Insurers and Large Insurers in the Terrorism

Risk Insurance Marketplace and Comparison to Other Perils

Based upon information collected through Treasury’s TRIP data calls, this section analyzes 

premiums, take-up rates, geographic scope of writings, and the lines of insurance in which small 

insurers are more heavily concentrated and comprise a larger share of the overall market. 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 22 

Terrorism risk coverage provided under TRIP is generally “embedded” in policies that also cover 

other risks. Approximately 80 percent of the U.S. terrorism risk insurance market (as measured 

by terrorism risk insurance DEP) is comprised of embedded policies.

The remaining 20 percent of the U.S. terrorism risk insurance market is comprised of policies 

provided on a “standalone” basis, where the policy provides coverage only for terrorism risk. 

This section separately examines coverage provided on a standalone basis, as well as the 

additional specialized areas of cyber terrorism, and terrorism risk insurance for NBCR terrorism 

events.

1. Embedded Policies

Embedded terrorism risk insurance is provided within P&C policies that also cover other risks. 

Under the Program, insurers must disclose to policyholders the amount of premium charged for 

embedded terrorism risk insurance.60 The premium can be expressed to the policyholder as a 

percentage of the total premium charged for the policy. Similarly, analyses of terrorism risk 

insurance also typically express the cost of terrorism risk insurance as a percentage of total 

premiums charged. In many cases, terrorism risk insurance is provided at a disclosed premium 

of $0, meaning it is provided by insurers at no additional charge.

Figure 6 compares the percentage of total policy DEP allocated to terrorism risk by small

insurers and non-small insurers on a line-by-line basis. This Figure does not include commercial 

P&C policies where the insurer did not charge for terrorism risk coverage. 

60 See 31 C.F.R. §§ 50.10, 50.12.
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 23 

Figure 6: 2018 Percentage of Total Policy DEP Allocated to Terrorism Risk 

(By Line of Insurance and Insurer Category)

2.5%

2.3%

1.1%

2.3%

1.3%

2.4%

4.1%

2.2%

3.5%

1.6%

1.5%

4.5%

3.7%

1.5%

1.0%

0.5%

2.7%

19.3%

3.0%

2.3%

1.0%

2.5%

2.1%

0.2%

4.2%

2.7%

0% 5% 10% 15% 20% 25%

Total

Workers' Compensation

Products Liability

Other Liability

Ocean Marine

Inland Marine

Fire

Excess Workers' Compensation

Commercial Multiple Peril (non-liability)

Commercial Multiple Peril (liability)

Boiler and Machinery

Allied Lines

Aircraft (all perils)

Percentage of Insurer Category Premium

Line of Insurance

Small Insurer Non-Small Insurer

Source: 2019 TRIP Data Call
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 24 

Figure 7 identifies where the coverage was provided for no additional charge, measured by 

percentage of total policy DEP where terrorism risk insurance is provided. 

Figure 7: 2018 Percentage of DEP Where Policies Include Terrorism Coverage

At No Additional Cost (By Line of Insurance and Insurer Category)

27%

19%

30%

35%

26%

64%

31%

6%

26%

24%

30%

32%

43%

34%

21%

69%

62%

94%

77%

61%

25%

42%

43%

43%

68%

25%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%

Total

Workers' Compensation

Products Liability

Other Liability

Ocean Marine

Inland Marine

Fire

Excess Workers' Compensation

Commercial Multiple Peril (non-liability)

Commercial Multiple Peril (liability)

Boiler and Machinery

Allied Lines

Aircraft (all perils)

Percentage of Insurer Category Premium

Line of Insurance

Small Insurer Non-Small Insurer

Source: 2019 TRIP Data Call

Figures 6 and 7 illustrate that small insurers generally charge proportionally less premium for 

terrorism risk insurance than do non-small insurers. When insurers charge a premium for 

terrorism risk insurance, the percentage of the total policy premium relating to terrorism risk for 

small insurers is smaller than the percentage charged by large insurers. This applies for most 

individual lines, as well as the overall market. In addition, small insurers are more likely than 

non-small insurers to charge no premium for terrorism risk insurance. 

The amounts that insurers charge for terrorism risk coverage vary not only by line of insurance 

but also by geographic area. Figures 8 and 9 present maps illustrating the percentage of total 

premiums charged for terrorism risk by small insurers (Figure 8) and non-small insurers (Figure 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 25 

9) in each of the 50 states and the District of Columbia. The percentages in Figures 8 and 9 only

account for policies in which a charge was made, and do not include those policies in which no

charge was made.

Figure 8: 2018 Percentage of Total Policy DEP Allocated to Terrorism Risk 

By Small Insurers (By State)

Legend

Percentage of Total 

Policy Premiums

2.0% or more

1.5 to 2.0%

1.0 to 1.5%

0.5 to 1.0%

Less than 0.5%

Source: 2019 TRIP Data Call

Figure 9: 2018 Percentage of Total Policy DEP Allocated to Terrorism Risk 

By Non-Small Insurers (By State)

Legend

Percentage of Insurer 

Category Premium

2.0% or more

1.5 to 2.0%

1.0 to 1.5%

0.5 to 1.0%

Less than 0.5%

Source: 2019 TRIP Data Call

Figures 8 and 9 show that the same trends in the amount of premium charged are observed when 

evaluating the data on a state-by-state basis. The lighter shading in Figure 8 as compared to 

Figure 9 illustrates that small insurers charge less than non-small insurers in most states. 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 26 

However, when evaluating what an insurer charges for terrorism risk insurance, it should be 

noted that the available data does not provide any information concerning the nature of the 

particular risks being insured by a given policy or insurer, which will affect the premium being 

charged.

Figure 10 compares the take-up rates for terrorism risk insurance of small insurers and non-small 

insurers on a line-by-line basis.
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

Figure 10: 2018 Terrorism Risk Insurance Take-Up Rates

(By Line of Insurance and Insurer Category)61

65%

46%

59%

50%

59%

64%

79%

82%

80%

83%

57%

49%

56%

59%

36%

27%

59%

61%

99%

67%

69%

69%

36%

87%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%

Total

Products Liability

Other Liability

Ocean Marine

Inland Marine

Fire

Excess Workers' Compensation

Commercial Multiple Peril (non-liability)

Commercial Multiple Peril (liability)

Boiler and Machinery

Allied Lines

Aircraft (all perils)

Percentage of Insurer Category Premium

Line of Insurance

Small Insurer Non-Small Insurer

Source: 2019 TRIP Data Call

When measured by DEP, policyholder take-up rates for policies written by small insurers were

generally lower than those of non-small insurers, both within most individual lines and across the 

overall market. 

61 As a matter of state law, primary workers’ compensation policies must provide coverage for terrorism risk, and 

thus the effective take-up rate for this line is 100 percent. By contrast, excess workers’ compensation insurance is 

purchased by companies that otherwise self-insure for workers’ compensation liability. The excess policy will 

provide coverage in excess of the obligations to the policyholder as defined in the policy. Because state law permits 

excess workers’ compensation insurance to exclude or limit certain risks, the take-up rate for terrorism risk 

insurance under excess workers’ compensation insurance is less than 100 percent (although the self-insured 

policyholder will remain liable for any excluded exposure). See also Section V.F (discussing workers’ 

compensation insurance).

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY 

27 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 28 

Figures 11 and 12 illustrate take-up rates on a state-by-state basis. These figures include 

policyholder take-up rates for all lines except workers’ compensation.62

Figure 11: 2018 Terrorism Risk Insurance Take-Up Rates

for Small Insurers (By State)

Legend

Percentage of Total 

Policy Premiums

70% or more

65 to 70%

60 to 65%

55 to 60%

Less than 55%

Source: 2019 TRIP Data Call

Figure 12: 2018 Terrorism Risk Insurance Take-Up Rates

for Non-Small Insurers (By State)

Legend

Percentage of Insurer 

Category Premium

70% or more

65 to 70%

60 to 65%

55 to 60%

Less than 55%

Source: 2019 TRIP Data Call

 

62 Workers’ compensation is not included because policyholders must obtain terrorism risk insurance under such 

policies and the take up rate is thus effectively 100 percent. Excess workers’ compensation is included, however,

because policyholders can decline terrorism risk insurance in connection with such insurance. See note 61, above. 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 29 

Appendix 1 to this Study contains a table setting forth the specific 2018 take-up rates presented 

in Figures 11 and 12 by state for both small and non-small insurers. Appendix 2 to this Study 

provides more detailed take-up information for small and non-small insurers, by state and by 

groups of TRIP-eligible lines of insurance. The Appendices provide further detail on how takeup may vary by state, type of insurance, and small versus non-small insurers.

Figure 13 compares the geographic footprints of small insurers and non-small insurers by 

examining the number of states in which each insurer writes coverage, as measured by DEP.

Figure 13: 2018 Geographic Scope of DEP (By Insurer Category)

Source: S&P Global

Figure 13 demonstrates that small insurers typically insure risks within a smaller geographic 

footprint than larger insurers. Small insurers tend to operate on a regional basis in a smaller 

number of states than do non-small insurers, which may result in small insurers having a 

significant presence in individual local markets.

63

Figure 14 compares the DEP written by small insurers and non-small insurers in selected lines of 

insurance. Specifically, this Figure examines TRIP-eligible lines DEP written within the CMP 

 

63 As noted by one commenter, “many of these smaller regional carriers play an important role in ensuring there is 

available coverage across lines of insurance. If they were forced to exit a market because of their terrorism exposure 

this means they would also no longer be offering the other coverages in other lines as well.” NAMIC Comments, 2. 

# of 

Groups: 

161 55 21 13 7 7 5 13 12 29 82

0%

20%

40%

60%

80%

100%

120%

1-5

6-10

11-1516-2021-2526-3031-3536-4041-4546-50

50+

Market Share (%)

Total Number of States Where Insurer

Actively Writes TRIP-Eligible DEP

Small Insurer Non-Small Insurer
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 30 

and workers’ compensation lines. CMP products provide coverage for multiple lines of 

insurance within a single policy, and tend to be marketed towards small- to medium-sized 

businesses.64 Workers’ compensation insurance, which is discussed in greater detail in Section 

V.F. below, provides insurance for workplace injury benefits available under state workers’ 

compensation systems.

Figure 14: 2018 Percentage of DEP in the 

CMP and Workers’ Compensation Lines (By Insurer Category)

9%

20%

29%

40%

7%

12%

19%

34%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Commercial

Multiple Peril

(liability)

Commercial

Multiple Peril

(non-liability)

Total

Commercial

Multiple Peril

Workers'

Compensation

Percentage of Line

TRIP-Eligible Line of Insurance

Small Insurer Non-Small Insurer

Source: 2019 TRIP Data Call

Figure 14 shows that the TRIP-eligible DEP of small insurers is more heavily concentrated in the 

CMP and workers’ compensation lines of insurance than is the case for non-small insurers. As a 

result, such small insurers have a larger share of the CMP and workers’ compensation lines of 

insurance than they have of other TRIP-eligible lines. 

2. Standalone Terrorism Policies 

Data collected during the 2019 TRIP data call reflects other differences between small insurers 

and other insurers participating in TRIP with regard to certain types of terrorism risk insurance. 

Standalone policies provide coverage only for terrorism risk, and they are generally used when 

properties or operations present heightened exposure to terrorism risk. Standalone terrorism 

coverage can be provided either through “certified” standalone terrorism risk policies, which are 

 

64 See generally “Understanding Business Owners Policies (BOPs),” Insurance Information Institute, 

http://www.iii.org/article/understanding-business-owners-policies-bops. 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 31 

written subject to the terms and conditions of TRIP, or through “non-certified” standalone 

terrorism policies, which do not meet the terms and conditions of TRIP. Non-certified 

standalone terrorism policies therefore cover terrorism-related losses (as defined in the specific 

policy) regardless of whether the Secretary has certified an act of terrorism under TRIA.65

Figure 15 illustrates that small insurers issue a very limited number of standalone terrorism risk 

insurance policies.

Figure 15: 2018 Certified Standalone Policies versus Non-Certified Standalone Policies

(By Policy Count and DEP) 

Certified Standalone Policies Non-Certified Standalone Policies

# of 

Policies Total DEP

Average 

Policy Cost

# of 

Policies Total DEP

Average 

Policy Cost

Alien Surplus Lines Insurers 1,963 $132,429,337 $ 67,463 5,201 $93,081,756 $ 17,897

Captive Insurers 345 477,665,747 1,384,538 6 36,708,352 6,118,059

Non-Small Insurers 1,508 40,374,452 26,774 3,382 93,641,098 27,688

Small Insurers 4 6,519 1,630 18 103,490 5,749

Total 3,820 $650,476,055 $1,480,404 8,607 $223,534,696 $6,169,393

Source: 2019 TRIP Data Call

3. Cyber Risk

Cyber insurance is insurance for risks arising “from the use of electronic data and its 

transmission, including technology tools such as the internet and telecommunications networks,” 

as well as “physical damage that can be caused by cyber attack, fraud committed by misuse of 

data, any liability arising from data storage, and the availability, integrity and confidentiality of 

electronic information.”66

Depending on the circumstances, malicious cyber activity could constitute an act of terrorism 

under TRIA. As a result, to the extent cyber insurance is written under an embedded or 

standalone policy that is within the TRIP-eligible lines of insurance, the provisions of TRIA 

apply to such policies.67

Figure 16 shows the market participation for cyber policies within TRIP-eligible lines.

 

65 “Non-certified standalone terrorism” policies, in addition to insuring losses for an “act of terrorism” definition that 

can be broader than the TRIA definition, can also be used to cover international locations outside the scope of TRIP, 

or provide coverage that may not be available on an embedded basis under other policies. See Neil Silverblatt, “7 

Reasons to Consider a Stand-Alone Policy,” PropertyCasualty360, January 31, 2017, 

https://www.propertycasualty360.com/2017/01/31/7-reasons-to-consider-a-stand-alone-terrorism-poli. 

66 FIO, 2018 Effectiveness Report, 53, note 110. 

67 See Guidance Concerning Stand-Alone Cyber Liability Insurance Policies Under the Terrorism Risk Insurance 

Program, 81 Fed. Reg. 95312 (December 27, 2016), https://www.govinfo.gov/content/pkg/FR-2016-12-27/pdf/2016-

31244.pdf. 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 32 

Figure 16: 2018 TRIP-Eligible DEP for Cyber Policies

Standalone Cyber Policies Package Cyber Policies All Cyber Policies

Cyber DEP

% of Total 

TRIPEligible DEP Cyber DEP

% of Total 

TRIPEligible DEP Cyber DEP

% of Total 

TRIPEligible DEP

Alien Surplus Lines Insurers $ 271,043,782 23.0% $ 229,050,798 16.6% $ 500,094,778 19.6%

Captive Insurers 31,859,621 2.7% 81,523,378 5.9% 113,295,633 4.4%

Non-Small Insurers 854,606,675 72.6% 955,050,926 69.2% 1,808,746,723 70.8%

Small Insurers 19,866,915 1.7% 114,186,636 8.3% 134,053,551 5.2%

Total $1,177,376,993 100% $1,379,811,738 100% $2,556,190,685 100%

Source: 2019 TRIP Data Call

Figure 16 indicates that small insurers participate in the market for cyber insurance in the TRIPeligible lines of insurance, although their market share is somewhat less than it is in the TRIPeligible lines of insurance overall. The 2018 TRIP data call indicated very similar participation 

percentages for 2017.68

Figure 17 shows the 2018 industry percentages for policyholders that obtained terrorism risk 

insurance in connection with purchased cyber coverage.

Figure 17: 2018 Take-Up Rates for Terrorism Risk Insurance under Cyber Policies

(By TRIP-Eligible DEP)

69%

18%

77%

59%

48%

63%

79%

68%

92%

18%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Total

Small Insurers

Non-Small Insurers

Captive Insurers

Alien Surplus Lines Insurers

Percentage of Category Premium

Insurer Category

Package Standalone

Source: 2019 TRIP Data Call

 

68 FIO, 2018 Effectiveness Report, 54.
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 33 

The total 2018 terrorism take-up rates for cyber terrorism risk insurance are slightly higher than 

the 2017 figures indicated during the 2018 data collection.

69 The small insurer take-up rate for 

terrorism risk insurance under standalone cyber policies, however, has dropped significantly. 

Nevertheless, it appears that small insurer policyholders, for the most part, obtain terrorism risk

insurance as part of the cyber package policies that they purchase. Treasury will continue to 

evaluate the terrorism risk insurance market for cyber coverage in future reports. 

4. Nuclear, Biological, Chemical, and Radiological Risk 

TRIA requires participating insurers to offer insurance for terrorism risk on the same basis as 

insurance offered for other perils. Insurer are not, however, required to offer terrorism risk 

insurance in the case of perils for which non-terrorism coverage is generally not provided or is 

specifically excluded.70 In the 2019 TRIP data call, Treasury began to request information on 

NBCR coverage provided by insurers, in order to determine the extent to which NBCR coverage 

may be available under P&C policies.71 

 

69 FIO, 2018 Effectiveness Report, 55, Figure 38.

70 See 31 C.F.R. § 50.22(b).

71 Treasury collected information on both property and liability policy limits where terrorism risk insurance was 

provided and coverage for all NBCR events was not entirely excluded. This approach results in an analysis of the 

policy limit levels where at least some terrorism coverage for NBCR-related events is provided. The data is not a 

measurement of the limits insured for any particular type of NBCR event (e.g., nuclear). The figures will tend to 

overstate the total amount of NBCR coverage available, particularly on a per peril basis. Treasury did not seek 

further information concerning workers’ compensation policies because such policies must cover all perils, 

including NBCR risks.
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 34 

Figure 18: 2018 Percentage of Terrorism Risk Insurance Policy Limits

Where NBCR Exposures are not Entirely Excluded 

49.8%

71.0%

64.8%

29.7%

76.7%

30.9%

56.8%

43.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Alien Surplus Lines

Insurers

Captive Insurers Non-Small Insurers Small Insurers

Percentage of Total Policy Limits

Insurer Category

Property Liability

Source: 2019 TRIP Data Call

The extent of coverage for NBCR terrorism events is an important consideration because such 

losses may pose the greatest risk of aggregation of catastrophic terrorism losses, given the 

potential size of losses caused by nuclear, biological, chemical, and radiological agents.72 The 

reported information indicates that small insurers are more likely to exclude all NBCR-related 

exposures when they are providing coverage for terrorism risk than other insurers. In addition, 

the data reflects that each industry segment has a significant amount of terrorism risk exposure 

that is not subject to a complete exclusion of NBCR-related exposures. However, because of 

such exclusions, a large NBCR event, depending on the circumstances, could result in significant 

uninsured losses without necessarily triggering support from the Program. 

5. Comparison to Other Perils

The information collected in connection with the 2017, 2018, and 2019 TRIP data calls shows 

differences between the participation of small insurers and non-small insurers in the terrorism 

risk insurance marketplace. The TRIP data calls did not indicate any differences between 

coverage for terrorism risk as compared to other perils covered by small P&C insurers under 

 

72 The President’s Working Group on Financial Markets cited modeled NBCR event exposures estimates of up to 

$158 billion in property losses and $484 billion in workers’ compensation losses. See, e.g., President’s Working 

Group on Financial Markets, Terrorism Risk Insurance: Report of the President’s Working Group on Financial 

Markets (2006), 72-73, https://www.treasury.gov/resource-center/fin-mkts/Documents/report.pdf. RAND estimated

potential losses arising from explosion of 10-kiloton nuclear bomb in a shipping container as exceeding $1 trillion. 

Charles Meade and Roger C. Molander, RAND Corporation, Considering the Effects of a Catastrophic Terrorist 

Attack (2006), 6-7, http://www.rand.org/content/dam/rand/pubs/technical_reports/2006/RAND_TR391.pdf. 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 35 

lines of insurance not subject to TRIP. However, for purposes of this analysis, Treasury

examined market share information for small insurers in the P&C lines of insurance that are not 

subject to the Program. 

Figure 19 provides the market share by DEP of small insurers and non-small insurers in P&C

lines not subject to TRIP. DEP is calculated using the 2018 small insurer threshold.

Figure 19: 2009-2018 Small Insurer DEP Market Share in 

P&C Lines of Insurance Not Subject to TRIP

10.6% 10.3% 10.6% 10.8%

10.2% 10.3%

14.4%

8.6% 8.3% 8.7%

0%

2%

4%

6%

8%

10%

12%

14%

16%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Market Share (%)

Year

Source: S&P Global

Based on the state regulatory reporting data, Figure 19 illustrates that the market share of small 

insurers measured by DEP in the P&C lines of insurance not subject to the Program has slightly 

declined since 2009. The market shares generally ranged between 8 percent and 10 percent 

(which is slightly less than the market share for the TRIP-eligible lines of insurance).

C. Mandatory Availability Requirement

TRIA requires insurers to make terrorism risk coverage available within the TRIP-eligible lines 

of insurance on terms that do not materially differ from the terms, amounts, and coverage 

limitations applicable to losses arising from events other than acts of terrorism.73 This 

 

73 TRIA § 103(c); 31 C.F.R. §§ 50.20(a), 50.22(a). If the prospective policyholder does not accept the mandatory 

offer, the parties may negotiate a different arrangement for terrorism risk coverage which is not on the same terms as 

provided for other risks. 31 C.F.R. § 50.21(c). 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 36 

mandatory availability requirement does not include any pricing restrictions,74 although state law 

rating requirements may define or limit the amounts that an insurer may charge for terrorism 

insurance. As described above in Section III, the mandatory availability requirement does not 

require an insurer to offer terrorism coverage for particular risks that an insurer regularly 

excludes or for which it does not offer coverage (such as losses arising from NBCR events).75 

As a condition for receiving federal payments under the Program, participants must meet certain 

documentation requirements to demonstrate compliance with the mandatory availability 

requirement.76

Because insurers must offer terrorism risk insurance in TRIP-eligible lines for the risks that they 

are otherwise providing coverage, the mandatory availability requirement affects the manner in 

which insurers underwrite P&C insurance, primarily because of the aggregation risk presented 

by acts of terrorism. A large-scale terrorist attack can result in significant losses affecting 

multiple lines of insurance and may be highly concentrated within a limited geographic area. 

Furthermore, insurers have identified difficulties “in accurately determining the frequency, 

severity, and loss costs for acts of terrorism,” and stated they “would likely choose to avoid” 

terrorism risk altogether except for the mandatory availability requirement.77

Market participants do not have the option to offer a TRIP-eligible lines policy without the 

terrorism risk insurance component. Insurers therefore underwrite to manage potential 

aggregation risks within a particular geographic area or proximity to locations considered 

potential targets for terrorist activity. Insurers of all sizes may employ this analysis when 

deciding whether to write policies that are subject to terrorism risk.

78 

Some commenters characterized the Program’s financial support as the “quid pro quo” justifying 

TRIA’s mandatory availability requirement.79 Similarly, other commenters noted that the 

74 See 31 C.F.R. § 50.22(a).

75 TRIA § 103(c)(2); 31 C.F.R. § 50.22(b).

76 TRIA § 103(b); 31 C.F.R. Part 50, Subpart B.

77 National Association of Insurance Commissioners, Government Relations Issue Brief: Terrorism Risk Insurance

(May 2019), https://www.naic.org/documents/government_relations_terrorism_risk_insurance.pdf. The 

Congressional Research Service stated that the lack of comprehensive catastrophe loss history makes it difficult for 

an insurer “to determine which terrorism risks it can take on without putting the company at risk of failure,” and 

added that the terrorism models, which “are still relatively new compared with hurricane models,” can only partly 

replace the lack of data. Congressional Research Service, Terrorism Risk Insurance: Overview and Issue Analysis, 

7-8.

78 See U.S. Government Accountability Office, Terrorism Risk Insurance: Market Challenges May Exist for Current 

Structure and Alternative Approaches (January 2017), 18-19, http://www.gao.gov/assets/690/682064.pdf.

79 APCIA Comments, 2. 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 37 

mandatory availability requirement, if unaccompanied by an appropriate level of federal support, 

could lead to small insurers not providing any TRIP-eligible lines insurance in certain markets: 

If [smaller insurers] were forced to exit a market because of their terrorism

exposure . . . they would also no longer be offering the other coverages in other 

lines as well. Because it is not at all clear that remaining companies could or 

would provide this missing coverage, the probable effect . . . would be to reduce 

the amount of total private capital allocated to all risks in certain areas.

80

The mandatory availability requirement is not the only factor that may be causing companies to 

provide terrorism risk insurance that they might otherwise prefer not to write. First, in a number 

of lines of insurance and jurisdictions, terrorism risk insurance must be provided under state 

law.

81 In these situations, an insurer must offer terrorism risk insurance irrespective of the 

mandatory availability requirement. As stated above in Section V.B., small insurers receive a 

higher percentage of their DEP than non-small insurers from the workers’ compensation line of 

insurance. However, the effects in the market after the September 11 Attacks and prior to the 

passage of TRIA suggests that continued small insurer participation in this market may be highly 

dependent upon the existence of the backstop.82 The unique issues presented by workers’ 

compensation insurance are discussed further in Section V.F.

Second, the ability to offer terrorism risk insurance may be necessary for insurers to compete in 

certain U.S. markets, particularly large metropolitan areas. Take-up rates for terrorism risk 

insurance vary by jurisdiction and locality, and the take-up rate of terrorism risk insurance tends 

to be higher in major metropolitan areas.

83 The TRIP data indicates that the Program promotes 

policyholder access to a variety of carriers, which might be more limited in the absence of a 

backstop. 

80 NAMIC Comments, 2 (emphasis in original).

81 The principal example here is the workers’ compensation line of insurance. See Section V.F. for further 

discussion regarding workers’ compensation. “Fire following” states also require terrorism coverage in some 

circumstances. See FIO, 2018 Effectiveness Report, 32, note 84.

82 See below at Section V.F. for a discussion of how the September 11 attacks affected the workers’ compensation 

residual market.

83 Marsh & McLennan has stated that “[t]he federal backstop created by TRIA remains crucial to the continued 

stability of the property terrorism risk insurance market.” Its recent report on terrorism risk insurance also noted that 

take-up rates are highest in major metropolitan areas, and provided location-specific analysis. Marsh & McLennan 

Companies, 2019 Terrorism Risk Insurance Report (2019), 11, https://www.marsh.com/us/insights/research/2019-

terrorism-risk-insurance-report.html. 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 38 

D. Effect of Increasing the Program Trigger Amount

This section considers the effect on small insurers of increasing the Program Trigger over time. 

As described in Section III, even if an insurer satisfies its individual insurer deductible, total 

aggregate insured industry losses must exceed the Program Trigger before the federal share of 

compensation can be paid. Therefore, an insurer with a deductible lower than the Program 

Trigger could satisfy its insurer deductible, but still find that its terrorism losses – even combined 

with those of other insurers (if any) – fall short of satisfying the Program Trigger. The Program 

Trigger requirement therefore could preclude recovery by a small insurer under TRIP, and 

require it to take additional steps to manage this exposure. This risk is not faced by larger 

insurers, because they have individual insurer deductibles under the Program that are greater than 

the Program Trigger. 

More than 200 domestic U.S. insurance groups have TRIP deductibles that are less than the 

Program Trigger. Depending upon the magnitude of the terrorism losses experienced by other 

insurers, they could face a gap between their insurer deductible and the Program Trigger.84 This 

potential gap will likely increase for small insurers as the Program Trigger increases in 

accordance with the 2015 Reauthorization Act, particularly for those insurers at the lower end of 

the small insurer size category.

A number of commenters addressed the effects that the Program Trigger has on small insurers. 

These commenters stated that the Program Trigger should not be increased in the future because 

of these potential effects, and that it should potentially even be lowered in any future Program 

reauthorizations.85

84 This analysis does not include small insurers that wrote TRIP-eligible lines DEP of less than $10 million and were 

excused from reporting. This subset of insurers also could be affected.

85 One commenter stated that “[t]he increase in the program trigger can have a particularly negative impact on small 

insurers. As the program trigger increases, so does the potential that a small insurer may suffer a loss that has a 

significant impact on that insurer but yet is not large enough to hit the aggregate industry program trigger. In that 

event, a small insurer could suffer a very significant loss and yet be unable to call upon the federal backstop.” 

APCIA Comments, 1. Another commenter said “[i]t is critical that lawmakers not raise the program trigger as they 

work to reauthorize the Terrorism Risk Insurance Act by the end of the 116th Congress.” NAMIC Comments, 1. A 

third commenter stated that “[r]aising the program trigger could threaten the solvency of small insurers in the wake 

of a major terrorism event,” and advocated for a reduction in the Program Trigger as it might apply to workers’ 

compensation claims, because the exposure cannot be excluded. The commenter observed that “[t]he greatest risk to 

our surplus is a substantial regional event that does not reach the ever escalating TRIA trigger of $200 million. 

Given the more recent examples of terror events in the United States, there is a great risk that a terror event that 

impacts one of our hospitals could fail to trigger TRIA but could exhaust both our reinsurance layers and our capital 

and surplus.” Atlantic Charter Comments, 1.
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 39 

Rating agencies account for the Program’s mechanics when assessing the financial condition of 

insurers that must offer terrorism risk insurance. Prior to the 2015 Reauthorization Act, rating

agencies determined that a number of insurers would fail stress tests for terrorism risk in the 

Program’s absence and would be subject to negative rating action in the event of Program nonrenewal or material changes in protection. Significantly, the companies falling into this category 

were more heavily concentrated among smaller insurers, particularly those in the workers’ 

compensation sector.86

Treasury does not experience any significant reduction in its financial exposure because of 

increases in the Program Trigger. Treasury recovers any federal payments for an act of terrorism 

with total insured losses above the Program Trigger at a rate of 140 percent under the mandatory 

recoupment provisions of TRIA. Any Program Trigger adjustment should take into 

consideration a variety of factors, including: other changes to Program mechanics; the market 

share of small insurers; the extent to which the Program’s objectives can be satisfied by 

adjustments to the Program Trigger; and the availability and cost of private reinsurance to 

mitigate the impact that a significant terrorism loss may have upon a small insurer that is unable 

to access Program support solely on account of the Program Trigger.87 The use of private 

reinsurance for this purpose is described further in Section V.E.

E. Availability and Cost of Private Reinsurance for Small Insurers

This section considers the availability and cost of private reinsurance for small insurers. 

It is difficult to assess the availability and cost of private terrorism risk reinsurance for small 

insurers. First, reinsurers are not Program participants, and thus are not subject to Treasury’s 

TRIP data calls. Second, reinsurance is neither subject to standard terms and rates, nor to the 

range of state-level reporting requirements applicable to direct insurers in the admitted market. 

Finally, reinsurance arrangements are generally highly complex, with many factors affecting 

price and availability – such as limits, the price of the underlying risk, the amount of available 

information concerning that underlying risk, the prior claims history between an insurer and its 

reinsurers, and general market conditions when the reinsurance is sought and purchased. 

86 See “Future of TRIPRA Remains Uncertain, Rating Pressure Intensifies,” A.M. Best, October 9, 2013, 

http://www3.ambest.com/bestweek/DisplayBinary.aspx?TY=P&record_code=217533. A similar evaluation is 

taking place in connection with whether the Program will be renewed after December 31, 2020. A.M. Best has 

stated that it will begin discussions with “[c]ompanies viewed to have material terrorism exposure in addition to a 

significant reliance on TRIPRA.” A.M. Best further stated that these companies will be “asked to present detailed 

plans on how they will mitigate this exposure in the event that TRIPRA is not renewed . . . . Insurers that currently 

would be materially affected by the absence of TRIPRA, and cannot provide a sufficient action plan to reduce 

exposures to terrorism risks, likely will face negative rating pressure by year-end 2019.” “TRIPRA Expiration 

Raises Potential for Rating Downgrades for P/C Insurers,” A.M. Best, May 10, 2019, 

http://www3.ambest.com/bestweek/DisplayBinary.aspx?TY=P&record_code=285472.

87 Treasury will continue to evaluate these issues in its 2020 Program Effectiveness Report.
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 40 

Furthermore, reinsurance agreements often cover multiple classes of risks, so it can be difficult 

to isolate and assess how reinsurance specifically responds to terrorism risks. 

A small insurer concerned about its ability to manage terrorism losses above its TRIA deductible 

(or seeking to transfer risk within its co-pay share) may seek to limit its exposure by purchasing 

reinsurance. For example, a small insurer could purchase reinsurance that provides 

reimbursement for any losses experienced above the insurer’s deductible if an act of terrorism is 

certified but the Program Trigger is not met by aggregate industry insured losses. Whether the 

purchase of such reinsurance is practical (assuming that it is available) will depend, in part, upon 

the cost of the reinsurance and the insurer’s assessment of its ability to bear exposure to such loss 

without reinsurance. Probable maximum loss (PML) information reflects the largest single loss 

an insurer projects it might sustain based on the portfolio of policies it has issued. A small 

insurer with a modest PML, based upon its book of business, will need less reinsurance to protect 

itself against catastrophic loss, assuming that it has evaluated exposures under its portfolio 

correctly.88

As Treasury observed in its 2017 Small Insurer Study, reinsurance markets typically have been 

cyclical and a range of macroeconomic factors play a role in the reinsurance market, including 

the extent of catastrophe losses and available capacity from the reinsurance and capital markets 

to support risk transfer from the primary insurance market.89 In early 2017, the reinsurance 

market had been “soft” for some time, meaning that reinsurance premium rates were relatively 

low and availability was relatively high.90 Extreme catastrophe losses in late 2017 suggested 

that reinsurance rates might finally begin to rise in response to this unprecedented loss 

experience; however, significant increases had not yet materialized by Q4 2018.91 

88 PML, as defined for purposes of Treasury’s collection of data from participating insurers, seeks the largest loss 

figure for a single insurer emanating from a single location, assuming the detonation of a 5-6 ton truck bomb at that 

location. See Federal Insurance Office, U.S. Department of the Treasury, Instructions for Terrorism Risk Insurance 

Program (TRIP) 2019 Data Call: Small Insurers, 21, https://www.treasury.gov/resource-center/finmkts/Documents/Small_FinalInstructions_2019.pdf. 

89 See, e.g., L.S. Howard, “Is Soft Market Bottoming? A.M. Best Points to Some Promising Signs,” Insurance 

Journal, January 10, 2017, http://www.insurancejournal.com/news/international/2017/01/10/438420.htm. 

90 See FIO, 2017 Small Insurer Study, 24.

91 An A.M. Best study of the reinsurance market noted that “[t]he degree of optimism for a material and sustainable 

improvement in reinsurance pricing that existed immediately following the 2017 catastrophe losses did not develop 

as anticipated and while pricing terms and conditions did stabilize, they continue to remain below expectations for 

producing a reasonable risk-adjusted return relative to the average cost of capital for most reinsurers.” See

“Optimism Fizzles, It’s Back to the ‘New Normal,’” A.M. Best, September 4, 2018, 5, 

http://www3.ambest.com/bestweek/DisplayBinary.aspx?TY=P&record_code=277679. However, more recent 

information (post-dating Treasury’s 2019 TRIP data call), has noted property catastrophe reinsurance rate increases 

in Q2 2019 of between 15 percent to 25 percent on loss-affected accounts. See “Global Reinsurers See Promising 

Green Shoots in 2019 with ‘Hardening’ Pricing: S&P,” Insurance Journal, June 5, 2019, 

https://www.insurancejournal.com/news/international/2019/06/05/528442.htm. 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 41 

Figure 20 illustrates the percentage of TRIP-eligible lines premiums ceded by direct insurers to 

reinsurers between 2009 and 2018. 

Figure 20: 2009-2018 Percentage of DEP Ceded By Insurers to Reinsurers

(By Insurer Category)

25%

28%

31%

37% 36%

34%

32%

28%

32%

26%

20% 19%

21% 20% 20% 19%

21% 21% 21%

23%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

WC Reinsurance Polices Including NBCR 

Coverage (%)

Year

Small Insurer Non-Small Insurer

Source: S&P Global

Figure 20 shows that small insurers tend to cede a greater percentage of their direct premiums to 

reinsurers than do larger insurers.

The 2018 and 2019 TRIP data calls collected information from insurers concerning their

purchases of reinsurance for terrorism risk and associated PML figures, which factors in the 

relative size of the exposures underwritten by small insurers, in order to determine the extent to 

which PML levels may be guiding reinsurance purchases.92 Figures 21 and 22 illustrate the 2017 

and 2018 average reinsurance purchases for small insurers with reference to small insurer 

deductibles under the Program, the Program Trigger, and average PML figures reported by those 

insurers. 

 

92 Treasury did not collect PML information from small insurers in its 2017 TRIP Data Call; accordingly, the prior 

analysis of this issue in Treasury’s 2017 Small Insurer Study only considered reinsurance purchases against the 

Program Trigger and small insurer deductibles, and not PML estimates. See FIO, 2017 Small Insurer Study, 25-26.
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 42 

Figure 21: 2017 Comparison Between 

Small Insurer Deductibles, Reported PML Figures, and Reinsurance Purchases

$781 

 $-

 $50

 $100

 $150

 $200

 $250

 $300

 $350

 $400

0-5

5-10

10-1515-2020-3030-4040-60

+60

Reinsurance ($ millions)

Insurer Program Deductible ($ millions)

Average Attachment Point Average Reinsurance Coverage

PML Amount 2017 Program Trigger

Source: 2018 TRIP Data Call

Figure 22: 2018 Comparison Between 

Small Insurer Deductibles, Reported PML Figures, and Reinsurance Purchase

$1,197 

 $-

 $50

 $100

 $150

 $200

 $250

 $300

 $350

 $400

0-5

5-10

10-1515-2020-3030-4040-60

+60

Reinsurance ($ millions)

Insurer Program Deductible ($ millions)

Average Attachment Point Average Reinsurance Coverage

PML Amount 2018 Program Trigger

Source: 2019 TRIP Data Call
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 43 

Where reinsurance purchases approximate a small insurer’s PML, the lack of reinsurance up to 

the Program Trigger may not be as significant, if this reflects that the small insurer is less likely

to be exposed to a catastrophic loss up to the Program Trigger amount. As shown in Figures 21 

and 22, PML estimates below the Program Trigger may explain the lack of reinsurance 

purchases up to the amount of the Program Trigger in some cases. The reported information, 

however, continues to reflect a significant portion of small insurers that remain exposed for a 

PML above the insurer deductible and below the Program Trigger threshold, without the support 

of private reinsurance for that exposure.93

The reinsurance information collected by Treasury illustrates a particular aspect of the potential 

impact of further increasing the Program Trigger. As the Program Trigger increases, more 

insurers will face a potential gap between their deductible and federal share payments under 

TRIP. The additional insurers that would be so affected for the first time would be those at the 

top end of the small insurer category.94 As the analysis indicates, most insurers of this size 

already have reinsurance, on average, above the Program Trigger. The more important impact, 

however, would be upon those companies already characterized as small insurers that would then 

face a larger gap than is already the case. For such insurers, i.e., all small insurers but 

particularly the smallest of them, the increase of the Program Trigger would further limit their 

ability to access payments under the Program, and require them to manage that exposure in other 

ways, such as through the purchase of private reinsurance, if available, or through other 

mechanisms. 

F. Impact of State Workers’ Compensation Laws 

The workers’ compensation system provides an important mechanism for the protection of U.S. 

workers from the consequences of employment-related injuries.95 However, certain aspects of 

the system increase the aggregate terrorism exposures of insurers participating in the workers’ 

compensation market. 

The costs of medical care and treatment, rehabilitation, loss of wages, and other financial 

hardships are covered under workers’ compensation policies. Because payments under these

policies are defined by the scope of benefits available under state law and are not subject to 

 

93 In addition, the PML data may not fully evaluate a particular insurer’s exposure in connection with an act of 

terrorism, in that the PML information is limited to exposure at a single location, and the aggregation issues posed 

by terrorism could potentially result in losses at multiple locations for an individual insurer.

94 For example, if the Program Trigger were to be raised from $200 million to $250 million after 2020, only about an 

additional 10 insurers (based upon the 2018 data) would be characterized as small insurers with a potential gap 

between their individual deductible and the Program Trigger.

95 The 2018 Effectiveness Report provides an overview of the workers’ compensation system in the United States. 

FIO, 2018 Effectiveness Report, 67-68.
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 44 

express limits of liability, losses under a workers’ compensation policy are potentially 

unlimited.96 Insurers also have limited ability to collect sufficient premium to cover these 

potentially unlimited costs, because specific pricing rules under state law may limit pricing

flexibility.97 As a result, a large-scale act of terrorism could create significant aggregation risks 

for both small insurers and non-small insurers writing workers’ compensation insurance, 

particularly in the event of extensive losses arising from an NBCR event.98

Because insurers are required by state law to cover terrorism risk (including NBCR-related 

terrorism risk) in connection with workers’ compensation insurance, workers’ compensation 

carriers must find ways to manage their aggregation risk. One potential option for workers’ 

compensation carriers includes declining to write certain risks altogether. For example, insurers 

may avoid writing policies that would create a substantial accumulation of exposures in the same 

location. However, this could present challenges for insurers that seek to write business in large 

metropolitan areas with dense populations, as well as for employers seeking to purchase 

coverage in those areas. 

To the extent coverage is unavailable in the “voluntary” market, policyholders may need to 

obtain workers’ compensation insurance in a state’s residual market, which is required to provide 

coverage to all applicants.

99 Coverage provided in residual markets tends to require a higher 

premium, and the responsibility for paying claims is distributed among all insurers writing in the 

state. After the September 11 Attacks, the market share of residual market mechanisms for 

workers’ compensation significantly increased, and included individual risks viewed as “high 

 

96 See Michael Dworsky and Lloyd Dixon, RAND Corporation, The Impact on Workers’ Compensation Insurance 

Markets of Allowing the Terrorism Risk Insurance Act to Expire (2014), 5-6, 

https://www.rand.org/content/dam/rand/pubs/research_reports/RR600/RR643/RAND_RR643.pdf. 

97 One commenter previously summarized the development of terrorism loss costs controlling the premium charge 

for workers’ compensation insurance under state law. See Letter from the National Council on Compensation 

Insurance to the Advisory Committee on Risk-Sharing Mechanisms (June 5, 2017), 

https://www.treasury.gov/initiatives/fio/acrsm/Documents/National_Council_on_Compensation_Insurance_June_20

17.pdf. The commenter also explained modeling exercises that determine in part the portion of premium charged for 

terrorism risk. Because the manner in which the risk is modeled takes into account the existence of the TRIP 

backstop, the absence of TRIP would necessarily result in increased cost factors. See NCCI Comments, 3-4.

98 See note 72, above.

99 A residual market provides insurance coverage for policyholders that cannot obtain coverage in the regular, or 

voluntary, market. Insurers operating in a particular jurisdiction are generally required to participate in residual 

markets as a condition of doing business in the voluntary market. The extent of an insurer’s participation in the 

residual market is generally based upon its share of the voluntary market. Depending upon the jurisdiction, 

insurance costs in the residual market may be higher, or the insurance costs may be subsidized through assessments 

on taxpayers or insurers, which may then be passed on to all policyholders in the jurisdiction. See, e.g., NCCI 

Comments, 2-3.
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 45 

profile” targets for purposes of terrorism risk.100 Since the enactment of TRIA, the share of the 

workers’ compensation residual market has stabilized around 4-6 percent of the market, which 

is a level consistent with the size of the residual market before the September 11 Attacks.

101

Private reinsurance can help insurers remain in the workers’ compensation market by managing 

their aggregation risks, including those from NBCR events. Figure 23 analyzes the extent to

which private reinsurance purchased by insurers writing workers’ compensation insurance 

included coverage for NBCR risks associated with workers’ compensation policies. 

Figure 23: 2016-2018 Reinsurance Purchases Including Coverage for 

Workers’ Compensation Losses Arising from NBCR Risks (By Insurer Category)

Source: 2017-2019 TRIP Data Calls

All three TRIP data calls indicated that a significant percentage of small insurers with workers’ 

compensation risks did not purchase any reinsurance coverage for workers’ compensation losses 

caused by NBCR risks. The minority of small insurers that did obtain reinsurance coverage for 

this type of risk did so at limits lower than the limits obtained under their conventional terrorism 

reinsurance policies.

102

100 NCCI Comments, 2-3.

101 NCCI Comments, 2-3.

102 For example, small insurers that obtained NBCR reinsurance limits for workers’ compensation in 2017 obtained 

33%

43%

36%

52%

56% 53%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2016 2017 2018

WC Reinsurance Polices Including NBCR 

Coverage (%)

Year

Small Insurers Non-Small Insurers
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 46 

In contrast, Figure 23 demonstrates that a higher percentage of non-small insurers (over 50 

percent in any particular year) obtained reinsurance coverage for workers’ compensation losses 

arising from NBCR risks, as compared to small insurers. However, although the limits such 

insurers obtained were higher than the limits purchased by small insurers for workers’ 

compensation NBCR exposures, the amounts of coverage that non-small insurers obtained for 

NBCR risks were much lower than their limits for conventional terrorism risk – only about 15 to 

20 percent of total reinsurance limits of such insurers in any one year.

103

Treasury’s data indicates that the unique risks posed by the workers’ compensation system have 

not prevented small insurers from participating in the workers’ compensation market. However, 

it remains unclear to what extent that the Program’s existence supports their continued 

participation. If large workers’ compensation losses fall disproportionately upon a small number 

of participating insurers, and otherwise exceed the Program Trigger, TRIP provides a backstop 

that operates as a risk-spreading mechanism across the industry. In this situation, the Program 

could be a factor that allows an insurer to continue participating in the workers’ compensation 

market.

104 Although this risk-spreading mechanism applies irrespective of the size of the insurer 

participating in the workers’ compensation market, it may be more critical for small insurers.

an average per loss limit of $47 million compared to a general average terrorism reinsurance limit of $63 million. In 

2018, these respective figures had increased to $51 million and $74 million.

103 For example, in 2018, the reported average purchase of NBCR workers’ compensation reinsurance on a per loss 

basis by non-small insurers that purchased such coverage was $170 million – as compared with an average limit of 

$1.09 billion obtained by those same non-small insurers for conventional terrorism risk.

104 “TRIA effectively allows insurers to continue to participate in the workers’ compensation insurance markets 

when, in the absence of a government backstop for the terrorism risk, they might be forced from the market 

altogether.” FIO, 2016 Effectiveness Report, 22, note 69. One commenter noted that “[g]iven the challenges 

presented by the terrorism peril, Congress determined a workable solution was needed that provides primary 

insurance carriers with a mechanism to manage the impact of the terrorism peril. That solution was the creation of 

TRIP and it appears it may have contributed to a relatively stable workers compensation insurance market.” NCCI 

Comments, 4. The National Association of Insurance Commissioners also recently issued a brief stating that “[a]n 

expiration of TRIA would be particularly disruptive to the workers’ compensation market. Workers’ compensation 

benefits are codified in state law and an employer cannot decline to provide coverage for acts of terrorism. Without 

TRIA, workers’ compensation insurers might raise prices or decline to write coverage for businesses with many 

employees concentrated in single locations or near iconic properties.” National Association of Insurance 

Commissioners, Issue Brief: Terrorism Risk Insurance (May 2019), 

https://www.naic.org/documents/government_relations_terrorism_risk_insurance.pdf. 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 47 

VI. CONCLUSION

Small insurers are significant participants in the market for terrorism risk insurance in the United 

States, although the market share of small insurers subject to the Program has slightly decreased

over the last decade. This decline is generally consistent with Treasury’s analysis of the 

respective market shares for P&C lines of insurance not subject to TRIP. Although both 

premiums received in TRIP-eligible lines of insurance and policyholder surplus for small 

insurers have been relatively consistent over the last decade, they have not increased as much as

the premiums received by larger insurers, which resulted in the relative decline in small insurer 

market share.

Treasury’s study found that small insurers charge less than non-small insurers for terrorism risk 

insurance, and small insurers are more likely to charge no premium for such coverage. 

Additionally, terrorism risk insurance take-up rates by the policyholders of small insurers are 

lower than the take-up rate for non-small insurers’ policyholders. Small insurers also tend to 

operate on a regional basis by writing in fewer states than non-small insurers. Small insurers 

also have heavier concentrations of writings in the CMP and workers’ compensation lines of 

insurance (and therefore a larger overall market share in those lines) than non-small insurers. 

Small insurers issue a very limited number of standalone terrorism insurance policies. However, 

they do participate in the market for cyber insurance, including cyber terrorism insurance. 

Furthermore, small insurers’ greater market share of workers’ compensation lines, where NBCR 

insurance must be provided, increases the total risk of aggregated exposure arising to small 

insurers from such losses.

The mandatory availability requirement requires small insurers to offer and write terrorism risk 

insurance in some circumstances where they otherwise may not. The financial backstop 

provided by the Program provides some support to mitigate the economic impact of this

requirement for small insurers. If the federal backstop becomes insufficient because of changes 

in market conditions or Program mechanics, the mandatory availability requirement could cause 

small insurers to not provide insurance in certain markets. This could reduce the availability of 

insurance – not only of terrorism risk insurance, but also in other TRIP-eligible lines of 

insurance. However, based upon the data collected and analyzed as part of this Study, it does not 

appear that the reductions in Program support to date have caused small insurers to withdraw 

from any particular markets.

Additionally, in some circumstances, the Program Trigger requirement could prevent small 

insurers who have met their individual insurer deductibles from receiving the federal share of 

compensation. Small insurers will be protected from outcomes where the aggregate of all insurer

losses will exceed the Program Trigger. However, a highly concentrated act of terrorism that

affects a limited number of insurers could result in insured losses that fail to reach the Program 

Trigger. Although small insurers may purchase private reinsurance to avoid this potential risk, 

the TRIP data calls indicate that many small insurers do not purchase sufficient private 

reinsurance to address this possibility – however infrequent the potential loss may be. 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 48 

Small insurers could have the highest potential for unreimbursed losses in connection with the 

workers’ compensation line of insurance. Small insurers have a larger share of this market, 

which is subject to very high loss amounts with no defined limits of liability and significant 

potential aggregation risks. Because this line is highly regulated by the U.S. states from a 

pricing standpoint, insurers that write workers’ compensation insurance may find it difficult to 

buy reinsurance that will cover the risks that they write. Treasury’s data also indicates that many 

small insurers do not obtain reinsurance coverage for NBCR-related losses in workers’ 

compensation lines. 
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 49 

Appendix 1: 2018 Take-Up Rates by State 

Appendix 1 to this Study contains a table setting forth numerically the 2018 take-up rates, based

upon premium, presented graphically in Figures 12 and 13, by state for both small and non-small 

insurers. As noted above, workers’ compensation is not included within these figures, although 

excess workers’ compensation is included. 

Non-Small Insurers Small Insurers Combined

Alabama 64% 73% 65%

Alaska 44% 66% 47%

Arizona 67% 54% 66%

Arkansas 70% 67% 70%

California 63% 39% 61%

Colorado 62% 44% 61%

Connecticut 72% 72% 72%

Delaware 64% 62% 64%

District of Columbia 67% 81% 68%

Florida 56% 32% 52%

Georgia 69% 66% 68%

Hawaii 55% 83% 59%

Idaho 60% 71% 62%

Illinois 69% 35% 63%

Indiana 64% 77% 66%

Iowa 66% 69% 66%

Kansas 68% 59% 68%

Kentucky 70% 54% 68%

Louisiana 55% 50% 55%

Maine 69% 89% 72%

Maryland 74% 79% 75%

Massachusetts 69% 66% 69%

Michigan 71% 70% 71%

Minnesota 64% 74% 65%

Mississippi 67% 64% 67%

Missouri 70% 59% 68%

Montana 62% 53% 61%

Nebraska 66% 69% 66%

Nevada 67% 49% 66%

New Hampshire 67% 80% 69%

New Jersey 68% 69% 68%

New Mexico 69% 63% 69%

New York 67% 62% 66%
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019)

______________________________________________________________________________

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

50

Non-Small Insurers Small Insurers Combined

North Carolina 72% 77% 73%

North Dakota 59% 62% 60%

Ohio 70% 69% 70%

Oklahoma 68% 58% 67%

Oregon 65% 58% 65%

Pennsylvania 72% 71% 72%

Rhode Island 72% 59% 71%

South Carolina 64% 72% 65%

South Dakota 57% 71% 59%

Tennessee 71% 63% 71%

Texas 60% 53% 60%

Utah 68% 47% 67%

Vermont 66% 92% 71%

Virginia 70% 68% 70%

Washington 63% 50% 62%

West Virginia 69% 62% 68%

Wisconsin 68% 66% 67%

Wyoming 66% 52% 65%

Source: 2019 TRIP Data Call
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 51 

Appendix 2: 2018 Take-Up Rates by State and Line Groups

Appendix 2 to this Study contains more detailed take-up information for small and non-small 

insurers, by state and by groups of TRIP-eligible lines of insurance. In order to streamline the 

data display, and provide information by more general categories of information, Treasury 

displays the information by the following categories: (1) Property Insurance;105 and (2) Liability

Insurance.106 Evaluation of Appendix 2 permits identification of differences in take-up, on a 

state-by-state basis, as between small insurers and non-small insurers, by the more general

coverage categories identified. 

Non-Small Small Combined

Property Liability Property Liability Property Liability

Alabama 77% 68% 69% 62% 70% 63%

Alaska 77% 62% 48% 47% 53% 50%

Arizona 67% 45% 81% 64% 80% 62%

Arkansas 76% 57% 75% 66% 75% 65%

California 42% 35% 74% 58% 71% 56%

Colorado 59% 31% 70% 60% 69% 57%

Connecticut 80% 61% 82% 72% 82% 71%

Delaware 75% 64% 81% 64% 80% 64%

District of Columbia 89% 70% 85% 70% 86% 70%

Florida 23% 46% 53% 58% 45% 56%

Georgia 82% 54% 79% 64% 79% 63%

Hawaii 91% 78% 60% 53% 66% 57%

Idaho 81% 62% 74% 60% 75% 60%

Illinois 84% 22% 81% 64% 81% 54%

Indiana 81% 77% 66% 63% 68% 65%

Iowa 81% 71% 74% 63% 75% 64%

Kansas 71% 36% 75% 64% 74% 62%

Kentucky 55% 53% 71% 67% 69% 66%

Louisiana 59% 45% 55% 54% 56% 53%

Maine 95% 88% 77% 67% 81% 71%

Maryland 85% 74% 83% 73% 83% 73%

Massachusetts 79% 49% 79% 67% 79% 65%

Michigan 80% 72% 80% 69% 80% 69%

Minnesota 79% 65% 70% 62% 72% 62%

Mississippi 71% 55% 70% 65% 70% 64%

Missouri 79% 40% 78% 62% 78% 59%

105 Fire, Allied Lines, Boiler & Machinery, and Commercial Multi-Peril (Property) combined.

106 Commercial Multi-Peril (Liability), Products Liability, and Other Liability combined.
Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (June 2019) 

______________________________________________________________________________ 

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

 52 

Non-Small Small Combined

Property Liability Property Liability Property Liability

Montana 56% 47% 72% 60% 70% 58%

Nebraska 78% 57% 73% 64% 74% 63%

Nevada 51% 41% 76% 62% 74% 61%

New Hampshire 87% 73% 79% 65% 81% 66%

New Jersey 79% 61% 77% 67% 77% 66%

New Mexico 73% 51% 79% 68% 78% 66%

New York 80% 50% 81% 64% 81% 62%

North Carolina 86% 70% 82% 71% 83% 71%

North Dakota 75% 52% 67% 55% 69% 55%

Ohio 70% 68% 79% 69% 78% 69%

Oklahoma 72% 37% 74% 61% 74% 58%

Oregon 64% 57% 77% 62% 76% 61%

Pennsylvania 75% 66% 82% 69% 81% 69%

Rhode Island 65% 54% 83% 72% 80% 71%

South Carolina 82% 62% 67% 66% 69% 66%

South Dakota 76% 70% 61% 54% 63% 57%

Tennessee 68% 60% 80% 70% 79% 69%

Texas 59% 39% 66% 56% 65% 55%

Utah 67% 39% 80% 65% 79% 63%

Vermont 95% 90% 75% 60% 81% 65%

Virginia 85% 56% 80% 69% 81% 68%

Washington 56% 50% 72% 61% 71% 60%

West Virginia 80% 47% 81% 60% 81% 59%

Wisconsin 77% 58% 78% 63% 78% 62%

Wyoming 70% 39% 75% 63% 74% 61%

Source: 2019 TRIP Data Call