Moody’s Assurance Company — The Case for Transparency in TRIA

Moody’s believes “greater transparency, more informed decisions, and fair access to information open the door to shared progress”. This 5 minute video suggests we start by establishing a public registry of terrorism insurance captives.

According to the last information from the New York Department of Financial Services, Moody’s Assurance Company, Inc. provides its corporate parent $500 million of nuclear, biological, chemical, and radiological terrorism insurance. As much as $415 million is automatically “reinsured” by U.S. Treasury’s Terrorism Risk Insurance Program.

Should Moody’s call on Treasury to pay, Treasury would mark up its outlay by 40% and send the resulting bill to all commercial property and casualty insurance policyholders — that’s $581 million in risk Moody’s has dropped onto the balance sheets school districts, churches, small businesses and others. In that sense, Moody’s arrangement is like the hundreds of others engineered by large corporations.

What’s unusual about Moody’s captive is that an inside whistleblower publicly alleged Moody’s Assurance Company is really a sham designed to avoid $120 million in New York State and City taxes.

Whether or not those allegations are true (the case settled for $15.5 million in December 2019), the wide influence of Moody’s published analyses of the program and the limited oversight state insurance regulators exercise with respect to captives reinforce the pressing need for greater transparency about who benefits from the Terrorism Risk Insurance Program and by how much.

Moody’s believes “greater transparency, more informed decisions, and fair access to information open the door to shared progress.” A public register of captives and other participants in the Terrorism Risk Insurance Program would be a great place to start.