©

TRIPRA NBCR Discussion FIO U.S. Treasury ACRSM 

 2019 Guy Carpenter & Company September 30, thLLC2019
2015 TRIA Federal Insurance Backstop Legislation Program Recap

Effective 2020 

Layers of U.S. Taxpayer Protection

1. U.S. Treasury Certification

2. $5M Minimum Certification Threshold3. Minimum $200M Industry Event Threshold 4. Individual Cedent TRIPRA Deductibles (20% DEP) 5. 20% Cedent Co-participation 6. Industry Aggregate of all carrier’s TRIPRA 

Retentions (est. $42.7B)

7. 140% Mandatory Federal Recoupment below 

$40.8B est. Industry Market Aggregate Retention 

Amount (IMARA)

8. Discretionary Federal Recoupment excess of the 

IMARA

9. $100B TRIPRA Protection Cap

TRIPRA provides up to nine levels of carrier retentions and U.S. taxpayer p

It has supported the private (re)insurance markets in providing needed capaci

© 2019 Guy Carpenter & Company, LLC Source: Guy Carpenter 
NBCR Coverage Recap

FIO June 2018 

Private Reinsurance Availability - Report Conclusions• Reinsurance purchased for terrorism risk insurance remains 

subject to limitations and exclusions for specified risks

• Many reporting insurers identified various exclusions / 

limitations to coverage under their terrorism risk reinsurance,typically for exposures at particular locations and more generally for NBCR risks.

• Marsh Terrorism Report: “Insurers with significant property and 

workers’ compensation accumulations in Tier 1 cities should expect to have less access to reinsurance capital than those portfolios with exposure in Tier 2 and Tier 3 cities and regions.”

• Many reporting insurers indicated that while they had some 

amount of reinsurance coverage for NBCR-related terrorism risk, the total per loss figures identified by those insurers in 

Figure 30 – for property, liability, and workers’ compensation exposures involving NBCR-related terrorism risks – were far below the generally available limits identified.

• Although TRIA requires participating insurers to offer 

insurance for terrorism risk on the same basis as for other perils, it does not require such insurance to be offered for NBCR exposures for which coverage is otherwise generally 

not provided (or specifically excluded) under the policy in question.

$92.2B Total Per Loss Reinsurance Limits Purchased for Terrorism Losses 

vs. $17.5B for NBCR Losses subject to TRIP(19% NBCR implied tak

© 2019 Guy Carpenter & Company, LLC 
NBCR Coverage Recap

FIO June 2018 

Private Reinsurance Availability - Report Conclusions• Private reinsurance capacity for terrorism risk has improved 

significantly since the immediate aftermath of 9/11. Many commenters attribute this improvement in large part to the backstop support the Program provides for a major portion of 

insurers’ exposure to terrorism risk nationwide.

• Because many insurers generally exclude NBCR risks under 

P&C policies (except Workers Compensation), the amount of direct insurance coverage for such risks may be substantially limited.

• The reported data reflects, however, that regardless of the 

amount of direct coverage available for NBCR exposures, it is less likely to be supported by private reinsurance than conventional terrorism.

• Furthermore, a large portion of the limited reinsurance 

obtained for NBCR exposures supports the risks assumed by captive insurers which – while potentially significant on an individual basis – represents only a small percentage of total risk exposures assumed by insurers participating in the Program.

• Nevertheless, the aggregation risks presented by terrorism continues to be a limiting factor upon the d

reinsurance capacity, as does the difficulty of modeling potential NBCR exposure from both a frequenc

• Commenters (including state regulators) generally supported the proposition that there is sufficient priv

support the risk exposures to which participating insurers remain exposed under the Program.

• However, commenters did not believe that there was sufficient private reinsurance capacity for the exp

supports in connection with a catastrophic terrorism loss. (e.g. NBCR, WC and Tier I city risks - especi

• The TRIP data reflects that private reinsurance capacity is reduced as the aggregation risk pres

of terrorism loss (such as from an NBCR attack) increases. 

© 2019 Guy Carpenter & Company, LLC 
Terrorism Take-Up Rates 

FIO June 2019 | Marsh May 2019

Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace - Report Conclusions• Per Statutory law, primary Workers Compensation policies 

must provide coverage for terrorism risk, and thus the effective 

take-up rate for this line is 100 percent.

• 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 acros

s

the overall market.

• Figures 11 and 12 illustrate take-up rates on a state-by-state

basis. These figures include policyholder take-up rates for all

lines (excluding WC) ranging from 55% 

 70%.

Marsh 2019 Terrorism Report 

• Terrorism insurance take-up rates have remained close to 60%

in the U.S. over the last several years.

• Companies based in the Northeast U.S. have traditionally 

purchased property terrorism insurance at a higher rate than companies in other regions

© 2019 Guy Carpenter & Company, LLC
The Efficacy of Private Market Capital for Terrorism

Total Private Industry Capital Large Loss Scenario Consi

The (Re)insurance industry with the support of TRIRPA is adequately capi

conventional attacks - but not adequately capitalized to support large N

© 2019 Guy Carpenter & Company, LLC
Reinsurance Market Condition Overview

• Combined maximum Property and Workers Compensation conventional-only terro

- Direct Insurance Capacity $2.0B estimated (per program)- Reinsurance Treaty Capacity $1.5B estimated (per program)

• Insurers with significant accumulations in Tier 1 cities should expect to have notab

reinsurance capital than those portfolios with exposure in Tier 2 and Tier 3 cities an

• Reinsurance capacity for coverage including NBCR, especially in Tier 1 cities and 

Districts has become increasingly challenging to secure over the past several year

– Accumulated terrorism aggregate constraints by an increasing number markets

- Aggregates have been consumed by those select carriers with NBCR alread- Ratings agency implications to those that include NBCR- Limited NBCR Retro capacity- Several key reinsurance markets will not cover NBCR

- Direct Insurance Capacity range $700M to $800M (per program)- Reinsurance Treaty Capacity range $400M to $800M (per program)

• These estimates represent “theoretical maximums” per program - and assume the 

insurance backstop through TRIPRA will continue in its current form.

• Should TRIPRA expire or be reauthorized at the end of 2020 with notable increase

cedent net retentions, multiple carriers would likely simultaneously enter the privat

– The impact this would have on aggregate U.S. (re)insurance sector capacity an

untested and unknown.

– The current reinsurance market demand that has been somewhat balanced wh

a measured pace - would quickly become unbalanced leading to market and e

© 2019 Guy Carpenter & Company, LLC
NBCR Coverage 

Reauthorization Considerations

• Should NBCR events be treated differently under TRIRPA?

– Consideration of bifurcation of NBCR events themselves (and/or in conjunctio

• With the Industry Market Aggregate Retention (IMARA) to be indexed to premium 

erosion of the federal backstop - should consideration be made to limit the IMAR 

losses? 

• How should a TRIRPA reauthorization address the growing uninsured NBCR risk 

– The program Cap has remained unchanged since 2003

- WC exposures that remain a carrier liability to all employers via statutory law- Increased Property Total Insured Values and Business Interruption exposure

– Rating Agency attention for these losses is expected to increase in the future

– Consideration of increasing the Cap for only NBCR losses? If so by what amo

• Consideration of bifurcating the carrier TRIPRA deductibles and co-share percent

NBCR vs. conventional terrorism losses 

• Consideration and analysis of NBCR fire following laws and exclusion/inclusion st

Data Call

– Will help further the understanding of what portion of NBCR modeled losses m

uninsured (by state).

• Revisit the role of [NBCR] Captives being formed and the impact of transferring th

the mandatory recoupment layer

– Compare to traditional insurance where most of the risk is transferred to the p

deductible layer(s). 

© 2019 Guy Carpenter & Company, LLC 
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