A risk advisory firm is conducting a compliance seminar on federal regulatory backstops for catastrophic perils. During the session on the Terrorism Risk Insurance Act (TRIA), the presenter asks attendees to identify the statutory requirements and coverage parameters that apply to certified events. Which of the following statements correctly describe the qualifying criteria for certification or the application of TRIA provisions? (Select all that apply)
- The event must be officially certified by the Secretary of the Treasury, in consultation with the Secretary of Homeland Security and the Attorney General.Answer
- BOnce an event is certified, the federal government assumes primary liability and reimburses 100% of all covered losses without requiring an insurer retention.
- The act must result in aggregate property and casualty insurance losses exceeding $5 million to be eligible for certification.Answer
- DThe mandatory coverage offer provisions under the Act apply universally to all property and casualty lines, including personal auto and homeowners policies.
Answer
The correct statements are that the event must be certified by the Secretary of the Treasury (in consultation with the Secretary of Homeland Security and the Attorney General) and that it must result in aggregate property and casualty losses exceeding $5 million.
The correct statements accurately reflect the exact statutory criteria for TRIA certification: the authority lies with the Secretary of the Treasury (consulting with Homeland Security and the Attorney General) and the event must exceed a minimum loss threshold of $5 million in property and casualty damages.
Step-by-Step Solution
Key Concept
Under the Terrorism Risk Insurance Act (TRIA), an act of terrorism must result in over $5 million in property and casualty losses and be certified by the Secretary of the Treasury (with Homeland Security and the Attorney General). The program acts as a federal backstop for commercial lines only, requiring insurers to bear a deductible and copayment.