The US Department of the Treasury is seeking comment from the industry regarding the way captive insurance companies are treated by the Terrorism Risk Insurance Program (TRIP), required by the Terrorism Risk Insurance Program Reauthorization Act of 2019.
The Treasury noted that captive insurers may receive benefits in connection with hypothetical loss events “that are proportionally larger than those received by other insurance industry segments.”
It is specifically seeking clarification about whether this is the case, and if so what changes could be implemented to make the payments more consistent between captives and traditional insurers without deincentivising policyholders from taking out terrorism coverage via a captive.
The consultation comes as part of technical changes the Treasury is proposing to clarify the way it calculates “property and casualty insurance losses” that would qualify under the legislation. It also wants to clarify “insured losses” when administering TRIP’s financial sharing mechanisms, including its trigger and cap, and to incorporate prior guidance into the rules in connection with standalone cyber insurance under TRIP.
US Treasury, Terrorism Risk Insurance Program, TRIP