Cell captives and the Terrorism Risk Insurance Act (TRIA) could be an economical way to fund vital coverage, according to JLT Towner Insurance Management.
According to JLT, as socio-political events intensify, risk managers are giving more consideration to how to finance their increasing risk exposures, including terrorism.
Captive insurance companies can access the federal terrorism backstop for qualifying events, however, JLT suggested that risk managers might be missing the opportunity to utilise the benefits of a cell captive to meet terrorism risk and other exposures.
Thomas Stokes, managing principal and US consulting practice leader of JLT Towner Insurance Management, commented: “For example, organisations cannot create a cell captive for the sole purpose of taking advantage of the federal insurance backstop. But when terrorism coverage is either unavailable or exorbitantly priced, using a cell captive to assume related risk can make sense.”
Stokes noted that if insurance companies choose to use the Terrorism Risk Insurance Program (TRIP) they need to follow all the steps necessary steps to ensure the Terrorism Risk Insurance Program Reauthorization Act coverage.
The US Treasury has recently proposed rules on whether to apply TRIA to self-insurance arrangements, including captive insurance companies, prompted by passage of TRIPRA last year, which extended the programme until 2020.
The programme is designed to allow for terrorism coverage similar to other insured peril, and provides compensation for insured losses resulting from a certified act of terrorism.
He said: “They include Internal Revenue Service and Treasury Department recognition of an incorporated cell as a qualified insurance company for federal backstop purposes, which we have already gained.”
“According to JLT, a cell captive offers additional benefits including quicker licensing and fewer expenses."
