Insurers, Reinsurers Differ on Government Terrorism Timing

The U.S. government should make a determination whether a loss event is an “act of terrorism” in either days or months, depending which sector of the insurance and reinsurance industry you ask.

In comment letters collected to the U.S. Department of Treasury’s Federal Insurance Office (FIO) in regards to implementation of the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIA), industry participants either disagreed wildly about the timing of terrorism determination or left extremely vague answers.

Treasury released a public comment notice last month as part the requirements of the TRIA renewal. The comments will be incorporated into a report and ultimately used as part of final rules for for a revamped terrorism act “certification process.”

On the side of certainty, both the group of insurance users and reinsurers Lloyds of London encouraged federal government to act quickly.

“We suggest that Treasury promulgate a certification rule that requires the Secretary to make a preliminary certification decision within a brief but defined number of days after a potential act of terrorism has occurred indicating whether or not an act is expected to be a certified act of terrorism,” said a letter from the Coalition to Insure Against Terrorism, an amalgamation of insurance users such as real estate companies, airlines and financial services in their response. “After having made a preliminary determination or having received a request from a policyholder or insurer, the Secretary should then have a set number of days to announce a final determination, beginning from the date of the event or the receipt of the request.”

London-based Lloyd’s agreed with the request for a quick determination, adding that it would “ help to signal to insureds on which policies they are likely to be able to claim.”

“The process could be phased, with a preliminary “no” or “likely yes” being required within a certain number of days, with a further period allowed for final determination,” Lloyds’ Chief Risk Officer and general counsel Sean McGovern said in their letter. “There should also be some reference to the impact this determination process would have on various claims-handling obligations (and time lines) that insurers face under various State laws. “

ISO’s Director of Government Relations George Ortiz said that “ there is no one quick simple accurate answer to the question of timeframe,” however, ISO’s Property Claims Service typically takes “2-3 weeks” to provide the industry with catastrophe losses estimates. Ortiz add that “it would be possible to make a determination with a good degree of confidence within a relatively short period of time shortly thereafter.”

The Risk Insurance Management Society and American Academy of Actuaries allowed for more time in their suggestions.

RIMS suggested a 60-90 day deadline from the date of an event for a formal decision on certification, while the AAA said a “reasonable” timeline would be 30 days.

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