Captives should not be treated differently than other insurers when participating in the Terrorism Risk Insurance Program (TRIP), according to the Self Insurance Institute of America (SIIA).
SIIA argued that captive arrangements provide a valuable risk transfer mechanism within the current terrorism risk lines of insurance.
The comments from SIIA were on behalf of its members to the US Treasury in response to proposed rules about whether to apply the Terrorism Risk Insurance Act to self-insurance arrangements, including captive insurance companies.
Passage of the TRIP Reauthorization Act last year prompted the rulemaking.
TRIP 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.
SIIA explained that captive insurance arrangements are being used to fill gaps in an insured’s risk programme.
They are complex and come in many forms based on the risk, company, or pool structure, said SIIA. Because of this, a one-size-fits-all approach for all insurance entities under TRIP does not often work for the complex nature that can be attributed to a captive owner or its risk.
SIIA argued in its comments: “Applying different criteria to qualify for reimbursement penalises those public and private entities seeking insurance coverage through a captive because of these various limitations in the commercial market.”
Previously, the Department of the Treasury has advised that state-licensed captive insurers may participate in TRIP by virtue of their status as licensed entities, but has so far not issued any concrete rules.
