Examkin

Question

Difficulty: MediumTerrorism Risk Insurance Act (TRIA)

An underwriting compliance team is analyzing a sequence of destructive events that impacted several urban commercial centers. The affected businesses had voluntarily accepted terrorism coverage after their insurers fulfilled the mandatory requirement to offer it. To determine if the federal backstop provisions of the Terrorism Risk Insurance Act (TRIA) will share in the financial losses of these commercial claims, which of the following statutory requirements must be met?

  1. A
    The state Commissioner of Insurance must unilaterally declare the incident an act of terrorism to activate the federal cost-sharing provisions.
  2. B
    The federal government must assume the role of primary insurer and directly settle the commercial claims once the aggregate losses exceed the program trigger.
  3. The Secretary of the Treasury, in consultation with the Secretary of Homeland Security and the Attorney General, must officially certify the incident as an act of terrorism.Answer
  4. D
    The federal backstop must be applied to the commercial property claims as well as any resulting claims on personal homeowners and life insurance policies.

Answer

The incident must be officially certified as an act of terrorism by the Secretary of the Treasury, in consultation with the Secretary of Homeland Security and the Attorney General.
For the Terrorism Risk Insurance Act (TRIA) to apply and federal cost-sharing to initiate, the specific event must be officially certified as an 'act of terrorism'. By statute, this certification is the exclusive responsibility of the Secretary of the Treasury, who must make the determination in consultation with the Secretary of Homeland Security and the Attorney General.

Step-by-Step Solution

1
Identify the core objective of the scenario.
The scenario requires identifying the statutory prerequisite for triggering TRIA's federal backstop for commercial claims.
Understanding the activation criteria for TRIA is essential for determining when the federal government shares in terrorism-related losses.
2
Evaluate the certification authority under TRIA.
TRIA mandates that the Secretary of the Treasury, alongside the Secretary of Homeland Security and the Attorney General, holds the exclusive authority to certify an act of terrorism.
State authorities (like the Commissioner) do not have jurisdiction over federal TRIA certification.
3
Review the scope and mechanics of TRIA to eliminate distractors.
TRIA functions as a reinsurance backstop for commercial property and casualty insurers only. It does not apply to personal or life insurance, nor does the government act as the primary insurer.
Eliminating distractors based on incorrect mechanics (primary insurer role) and incorrect risk classification (personal lines) confirms the correct certification requirement.

Key Concept

TRIA Certification Authority and Scope of Coverage
Estimated Time:1m 15s
Rate this question

Topics

Terrorism Risk Insurance Act (TRIA)

More questions from this topic