The Treasury Department’s annual review of the US terrorism risk pool says the federal government is considering ways to leverage artificial intelligence (AI) as well as obtain more detailed location data on cities and states exposed to terrorism risk.
Both initiatives were disclosed as part of Treasury’s annual review of the terrorism insurance backstop called the Terrorism Risk Insurance Program (TRIP) that was created following the 9/11 attacks.
The federal government wants to determine whether developments in AI “will affect terrorism insurance underwriting, marketing, claims management, and perils,” government documents releases last week state said.
Treasury’s Federal Insurance Office (FIO) cited artificial intelligence in last year’s report as part of a broader review if new technologies, adding that AI could impact product design, distribution, and delivery of terrorism insurance. But the FIO said that Treasury it would monitor AI initiatives through the National Association of Insurance Commissioners (NAIC).
The request as part of the this year’s report means that federal regulators and the FIO are now seeking AI use directly insurers participating in TRIP.
This year’s report also asks insurers to also give feedback if expanded data to price and model terrorism risk would should be explored.
“Given the nature of terrorism risk, should [the FIO] be seeking more granular information than state or metropolitan level information (such as ZIP code level or geocoded information) to assist in FIO’s analysis of the terrorism risk insurance market and TRIP,” the document said.
A push for more detailed information should not be surprising since the FIO announced last month that it was launching a similar project tied to climate risk and the US homeowners insurance market.
In that effort, the federal government said it will collect ZIP Code-level data from the largest homeowners insurers through the NAIC in order to “conduct a nationwide assessment of climate-related financial risks to consumers across the United States.”
TRIP was established by the Terrorism Risk Insurance Act (TRIA) of 2002 and covers commercial property and casualty insurance, requiring insurers to offer terrorism risk insurance while providing them with a reinsurance-like backstop for losses resulting from certified acts of terrorism.
Under current legislation, TRIP’s program trigger was set at $200 million for 2020 and gradually increases to $250 million by 2025
