TRIP captive changes would “seriously undermine” program: CICA, VCIA, CIC-DC

Three prominent captive insurance associations have submitted comments to the US Treasury, saying that changes to the United States’ Terrorism Risk Insurance Program (TRIP) would “seriously undermine” the stability provided by the program.

TRIP was established under the Terrorism Risk Insurance Act (TRIA), which was introduced following 9/11 to provide a federal backstop for terrorism insurance.

The comments, submitted in a letter from the Captive Insurance Companies Association (CICA), the Vermont Captive Insurance Association (VCIA) and the Captive Insurance Council of the District of Colombia (CIC-DC), were in response to a call for public comment from the US Treasury.

The proposed changes would limit captive insurers access to TRIP, as well as make financial information about captive insurers participating in TRIP public.

“We are concerned about a number of proposals identified by Treasury, including requiring captives to disclose confidential information,” Joe Holahan, CIC-DC president said.

“Requiring public disclosure of sensitive information should not be a condition of participating in TRIP.”

“Limiting the access of captive insurers to TRIP would seriously undermine the stability provided by TRIA and be directly contrary to Congress’s purposes in enacting and reauthorizing TRIA,” the associations said in their submission to the US Treasury.

VCIA president Rich Smith said that many of the Vermont association’s members need captives to get terrorism coverage.

“Many of our members from all of our associations rely on captive insurers to obtain coverage for terrorism risks and are concerned about these proposals,” he commented.

CICA president Dan Towle said that the associations partnered together to enable a “collective” captive industry submission.

“We were pleased to partner with VCIA and CIC-DC and other leading industry experts on a collective captive industry response,” he said.

“Captive insurers have played a critical role in achieving the market stability TRIP was designed to ensure by providing insurance for terrorism risks for which coverage from other insurers is insufficient or unavailable.”

US Treasury request for comment

“With respect to captive insurers:

“(a) Whether, in light of the size and operation of captive insurers and the current structure of TRIP, captive insurers are likely to obtain larger payments under the Program in a large loss event as compared to traditional insurers that assume similar risk exposures,” the US Treasury asked on 10 November.

“(b) Whether there are administrative rule changes that could be made to the Program rules and administration for captive insurers that would result in recovery percentages for captive insurers that may be more consistent with those indicated in modelled loss analyses for other industry segments.

“(c) Whether the Program should attribute some amount of captive parent revenues to captive insurers for TRIP deductible calculation purposes.

“(d) Whether changes to the Program structure for captive insurers could prevent policyholders (who may be unable to obtain terrorism risk insurance in the conventional market for a reasonable price) from obtaining such insurance from captive insurers.

“(2) Whether FIO should make public financial information regarding participating captive
insurers, taking into account whether this additional transparency would be beneficial to the
terrorism risk insurance market and the administration of TRIP.”

12 August 2024
5-6 November 2025
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