TRIA Effectiveness Report: Terrorism Insurance Captives

Photo by Omar Flores on Unsplash

First published on May 5, 2020

Every two years U.S. Treasury reports to Congress on the effectiveness of the Terrorism Risk Insurance Program. Treasury’s 2018 report revealed the outsized role captive insurance companies play in the program. For example, we learned:

• At least 500 captives participate in the program, although “Treasury does not have a comprehensive U.S. captive count”;
• Captives account for 23% of the all US terrorism premiums earned despite representing only 4% of the total commercial property and casualty insurance market; and
• Captives would receive about 95% of all payouts from the federal backstop under a hypothetical truck bomb attack in Chicago.

As explained in the attached comments to Treasury, the 2020 Report should build on this analysis to quantify the serious risks terrorism insurance captives present to:

• The integrity of the program;
• The assets of regular policyholders such as churches, charities, schools and small businesses that cannot afford to set up their own insurance companies; and
• Funding for the care of victims of NBCR terrorist attacks and the families left behind.

The attached also proposes a public listing of participating insurers with basic information so Congress and those put at risk can better understand these risks and hold the corporations creating them to account.