Webel.TRIA-2
This is a short reading that covers the updates contained in the 2015 Congressional Reauthorization of TRIA.
Contents
Pop Quiz
BattleTable
Based on past exams, the main things you need to know (in rough order of importance) are:
- there are currently no old exam problems from this reading
reference part (a) part (b) part (c) part (d) none
Full BattleQuiz You must be logged in or this will not work.
In Plain English!
The Basics
This reading is easy to cover. It's worth reading the source paper - it will only take 10 minutes.
The first page of the reading provides a very nice summary of TRIA, along with its 2005 & 2007 extensions, and the critical extension & update of Jan 12, 2015.
The 2015 legislation of the 114th Congress extended TRIA almost 6 years, to the end of 2020
Side note: The 2007 extension provided coverage for all terrorism (including domestic) whereas the 2002 version covered only foreign terrorism.
The only things you have to know are the differences between the 2015 version of TRIA versus the 2002 version.
- decrease federal loss-sharing gradually from 85% to 80% (also called co-insurance)
- increase program trigger by $20 million/year from $100 million to $200 million (2016 value is $120 million)
- increase the mandatory recoupment from $27.5 billion to $37.5 billion (recoupment percentage increases from 133% to 140%)
That's it! (There are actually 4 more items in the list of differences on page 2, but it's very unlikely you'd be asked for all of them.)
mini BattleQuiz 1 You must be logged in or this will not work.
A Concept Question
Here's something think about:
- TRIA was originally intended to be temporary, but terrorism is still considered uninsurable. The private market is stronger (prices are down & penetration is up) but there is concern that if TRIA does eventually expire, there will be a subsequent lack of AA (Availability & Affordability). Discuss the implications of ending TRIA after 2020.
Actually, this would be more like a PhD dissertation than a question on an actuarial exam. Interesting to think about nonetheless. Even if this specific question doesn't appear, thinking about it will deepen your understanding of terrorism insurance in general. You'll then have a better chance of answering whatever question they do ask.
If you'd like, send me your thoughts on this question or post something in the forum. I'll compile them and add the to the wiki. Let's crowd-source this mofo! But to keep things in perspective, terrorism is not a high-value topic for this exam, so don't spend a whole lot of time on it.
A Possible Calculation
A question the CBO (Congressional Budget Office in the U.S.) probably considered is the impact of the 2015 changes to TRIA. Could you calculate reimbursement under the original TRIA versus the 2015 version. You already have the basic formula from the Webel.TRIA-1. Actually, this calculation could be part of an answer to the question posed above.
(Obviously the reimbursement under the 2015 version would be lower, so the federal government would save money. Or would it? What if private insurers became insolvent after a big terrorist attack, either foreign or domestic? The government would likely need to step in, and any savings may disappear.)
Full BattleQuiz You must be logged in or this will not work.
