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Manmut
USA
26 Posts |
 Posted - 02/18/2003 : 11:04:12
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With the passage of the Terrorism Risk Insurance Act, insurance companies have been tearing their hair out trying to make rhyme or reason out of this federal intrusion into the insurance industry. I'm sure the insurance companies will consider a terrorist act a CAT, so I was wondering how everyone thnks that it will affect CAT adjusters.
Patrick Laws
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Patrick W. Laws |
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Newt
USA
657 Posts |
Posted - 02/18/2003 : 12:30:52
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| I think it will either go away or the way of NFIP, depends on how many acts. |
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CCarr
Canada
1200 Posts |
Posted - 02/18/2003 : 13:35:03
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I think there is a lot going on, before you will see or hear any notion of an insurance company considering a future terrorist act as a CAT; in the way I think you are mentioning it, Pat.
Since 9/11, insurers around the world have tediously debated and considered the 'war' exclusion. Notwithstanding the specifics of the TRIA, there is a much greater likelyhood of insurers calling a future similar 'act' of 'attack', a war; especially if your CIC verbally was to again call such an 'act' a war.
As to the affect on 'cat adjusters', I don't envision any different result than what happened after 9/11, and the interesting debates about the lack of 'cat adjuster' involvement; that are found in the CADO forums. |
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Justin
USA
137 Posts |
Posted - 02/18/2003 : 14:20:17
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Clayton, do you think they would consider it if it brought in the reinsurance treaty?
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CCarr
Canada
1200 Posts |
Posted - 02/18/2003 : 15:23:44
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Justin, if the 'they' that you refer to are insurers, my observations are unchanged. It is the reinsurers that 'drive the market', or 'call the shots'; in essence they control what a primary carrier can and will write and how much of it.
We have seen a lot of blood from reinsurers, since Q3 of 2001, causing retreat from specific markets and coverages, pull outs and mergers within that sector.
If the new reinsurance contracts with carriers, both on a treaty basis and facultative, since 2002, are steadfast in not supporting primary carriers on their interpretation of 'war' relative to the basic exclusion; carriers simply could not afford to close their eyes to that exclusion. |
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Catmandale
USA
67 Posts |
Posted - 02/19/2003 : 01:12:16
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I received a letter recently, regarding my office policy and terrorism coverage. Here it is:
JAN 31 2003
Policyholder Disclosure Notice of Terrorism Insurance Coverage
Coverage for acts of terrorism is already included in your current policy. You should know that, effective November 26, 2002, under your existing coverage any losses caused by certified acts of terrorism would be partially reimbursed by the United States under a formula established by federal law. Under this formula, the United States pays 90 % of covered terrorism losses exceeding the statutorily established deductible paid by the insurance company providing the coverage.
Your XXXXX policy does not exclude coverage for insured losses that result from acts of terrorism, as defined in the new law. XXXXXX does not charge a separate premium to cover insured losses caused by terrorism. Your insurance policy establishes the coverage that exists for insured losses. This notice does not expand coverage beyond that described in your policy.
Please contact your XXXX agent if you have questions about the new law.
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"When we thought that we had all the answers,
suddenly all the questions changed."
Mario Benedetti (1920); Uruguayan writer.
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Manmut
USA
26 Posts |
Posted - 02/24/2003 : 10:36:00
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Actually, under this federal legislation, the insurers no longer have the ability to make a coverage decision regarding terrorism on their own. Under TRIA, the Secretary of the Treasury will decide if an event qualifies as terrorism under the coverage that the government is forcing insurers to provide. There are federally mandated criteria as to what is considered terrorism. It must:
1. be violent or dangerous to human life, property, or infrastructure;
2. Result in damage within the U.S., (or outside the U.S. in the case of certain air carriers, vessels or U.S. missions); and
3. Be committed by someone acting on behalf of a foreign person or interest, as part of an effort to coerce the civilian population of the U.S. or to influence the policy or affect the conduct of the U.S. government by coercion.
Furthermore, an event will NOT be considered an act of terrorism if:
1. It is committed as part of the course of a war declared by Congress (except that this exclusion does not apply to workers compensation claims);
1. Property and casualty insurance losses from the act, in the aggregate, do not exceed $5 million; or
3. It is any other occurrence not defined by the Act as an act of terrorism.
The losses will be paid as follows:
1.First $5 million in losses paid by insurers
2.Losses above $5 million and up to $100 billion insurer pays deductible (per the formula below in Section VIII.) and the excess loss above the deductible is paid 10% by insurers and 90% by the federal government
3. Losses in excess of $100 billion not payable by either the government or insurer (provided that the insurer has paid its deductible).
The caveat to the government's agreement to pay 90% is that this is considered by the government to be a loan. In other words, the insurers will be required to pay the government back.
So, insurers will be told by the Sec. of the Treasury when the coverage applies, they will be required to pay $5 million up front, and a policy deductible (this applies to the insurer, not the insured) that increases each year of the plan. The deductible is applied as follows:
1. Transition Period (November 26 December 31, 2002):
1% of direct earned premiums from calendar year 2001
2. Program Year 1 (January 1, 2003 December 31, 2003):
7% of direct earned premiums from calendar year 2002
3. Program Year 2 (January 1, 2004 December 31, 2004):
10% of direct earned premiums from calendar year 2003
4. Program Year 3 (January 1, 2005 December 31, 2005):
15% of direct earned premiums from calendar year 2004
I suppose that whether a terrorism loss will be considered a CAT by insurers will depend on the severity and frequency of the damage. I think the main problem for adjusters will be that the feds have yet to provide any information about how terrorism claims will be adjusted. I was just seeking some informed input as to how this might affect CAT adjusters if a terrorist act was considered a CAT. |
Patrick W. Laws |
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TomToll
USA
87 Posts |
Posted - 02/24/2003 : 12:07:40
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My observation of the 9/11 horror was that of a terroristic act, not war. GW used the term war to express his feeling of loss of life and devistation. Now, here is another scenario. If we declare war on Iraq, then all damages in the United States as a result of our war in Iraq should be declared an act of war, as we will be in the middle of one. How are we to determine if Iraq is not bringing war to our homeland. How do we differentiate Ben Laden from Sadam Hussein.
Another question, if religion is so good, why is all this happening in the world. Almost every war or killing thousands is based on religious belief or the interpretation of that belief. Hope I am not opening up a can of worms, just wondering why the world is in the shape it is, with all countries having religious beliefs. If all in this country believe in God, why after our 1492 AD invasion of this country, did we murder, rape, pillage, and basically destroy the original owners of this part of the continent, the American Natives. |
Tom Toll |
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CCarr
Canada
1200 Posts |
Posted - 02/24/2003 : 20:42:29
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Thanks for the backgrounder Pat, on the framework of TRIA.
The agreement is written within the concept of an "excess of loss reinsurance" treaty, that is, a form of nonproportional reinsurance that indemnifies the ceding insurer for that portion of each loss occurrence in excess of a stipulated insurer retention.
The agreement also combines principals common with "catastrophe reinsurance", which is a type of excess of loss treaty that protects the ceding insurer against a loss or losses in excess of a specified retention, from an accumulation of losses resulting from a single catastrophic event or a series of events.
In essence, the government, through the TRIA, is attempting to replace the void previously filled by reinsurer's for this exposure. As I suggested before, primary insurers can not face this exposure alone, without significant protection from a treaty or agreement; and in the absence of the reinsurers providing this protection, the government is attempting to fill the void.
In that regard, I suggest, it will not have the 'framework' of the NFIP. Insurer's will deal with their own loss exposures and under the agreement / "treaty" (TRIA), insurer's will seek reimbursement. Therefore, it will not be a government 'handled' cat. This instead, is the first advance by the federal government, the first of a bigger step to come, into the 'insurance marketplace'; well beyond that of the single peril NFIP.
However, I recently read an article by Conning Research, titled, "Terrorism Insurance Act Does Not Solve Problems", which delves into the problems that still exist that is putting great pressure on insurers (still mostly driven by the reinsurer's); regarding the financial burdens.
The summary of this article can be found at the following link, and the summary provides a link to the detailed article.
www.insurlinks.com/fullnewsstoryraw.cfm?ID=938 |
Edited by - CCarr on 02/24/2003 20:54:56 |
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Gale
USA
231 Posts |
Posted - 03/20/2004 : 23:07:49
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When I read this it hit me the insurance carriers are abreast of the risk they cover and the ones they don't. With Swiss Re being the largest reinsurer in the world Europe is clearly a major concern to the industry.
http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2004/03/21/do2109.xml&sSheet=/opinion/2004/03/21/ixop.html
"With effect from the renewal date of your policy, an important change has been made to your cover. This insurance does not cover any loss, damage, liability, cost or expense of any kind directly or indirectly caused by, resulting from, or in connection with any act of terrorism."
Oh, I thought. I get it. The next time our cellar is flooded with our neighbour's raw sewage the insurance company will try to claim it was an act of terrorism. But no. I read the small print. The terrorism they have in mind is the sort involving bombs, including "biological, chemical and/or nuclear". So terror by sewage still seems to be covered. And, anyway, I don't think my neighbour would qualify as a terrorist because he is not motivated by "political, religious, ideological or similar purposes including the intention to influence any government(s) or put any section of the public in fear".
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KileAnderson
USA
875 Posts |
Posted - 03/21/2004 : 00:35:30
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| The world has evolved and insurance like many industries will have to evolve with it. Conventional warfare is going to be a rare event. Asymetric warfare is the new reality. Countries are being attacked by loosley affiliated networks of fanatics. The old definition of war being armed conflict between 2 or more nation states no longer applies. As armed forces around the globe transform themselves to meet this new reality so too will the insurance industry. |
Edited by - KileAnderson on 03/21/2004 00:36:16 |
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kwsmith
10 Posts |
Posted - 03/21/2004 : 20:29:26
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| there's a headline on the drudge report to the effect that al q. is claiming to have suitcase nukes. who's willing to work a cat from one of those? |
kwsmith |
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Terrorism
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