The Captive Insurance Companies Association (CICA), the Vermont Captive Insurance Association (VCIA) and the Captive Insurance Council of the District of Columbia (CIC-DC) have all submitted a response to a request for public comment regarding the participation of captive insurers in the Terrorism Risk Insurance Program (TRIP) established under the Terrorism Risk Insurance Act (TRIA).
In November 2020, the US Treasury Department requested comment on a number of proposals that would limit the access of captive insurers to TRIP.
The comments included information on the modelling of insured terrorism losses done by the Federal Insurance Office (FIO).
The modelling has shown that the coverage provided by captive insurers participating in TRIP is important to ensuring the effectiveness of the programme, especially with respect to nuclear, biological and chemical risks.
The associations also suggest that the access of captive insurers to TRIP would “seriously undermine” the stability provided by TRIA and be directly contrary to US Congress’s purposes in enacting and reauthorising TRIA.
It also highlights that captive parent revenues to captive insurers for the purpose of TRIP deductible calculation could make terrorism insurance provided by a captive insurer unaffordable for many insureds.
The associations explain that this would reduce the capacity for terrorism insurance and threatening the stability of the market.
Also, it notes that singling out captive insurers for the disclosure of sensitive information would be detrimental to TRIP and contrary to the purposes of TRIA.
Commenting on the responses, Dan Towle, CICA president, highlights that 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.
He adds: “We were pleased to partner with VCIA and CIC-DC and other leading industry experts on a collective captive industry response.”
VCIA president Richard Smith notes: “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.”
Joe Holahan, CIC-DC president, states that there concerns around a number of proposals identified by the treasury, including requiring captives to disclose confidential information.
He adds: “Requiring public disclosure of sensitive information should not be a condition of participating in TRIP.”
