A business owner is concerned about the potential financial impact of a terrorist attack on their newly purchased commercial warehouse. When discussing the commercial property policy, the insurance agent explains the provisions of the Terrorism Risk Insurance Act (TRIA). Which of the following best describes how TRIA operates to support this commercial coverage?
- It provides a federal backstop that shares the cost of covered commercial property and casualty losses with the primary insurer after specific financial thresholds are met.Cevap
- BThe federal government directly issues a distinct reinsurance policy to the business owner, assuming full liability for the terrorism risk from the first dollar of loss.
- CIt mandates that the state Guaranty Association will automatically step in to pay all commercial terrorism claims to protect the primary insurer from insolvency.
- DIt categorizes terrorism solely as a speculative risk, meaning the business owner must completely retain the risk rather than transferring it to an insurer.
Cevap
It provides a federal backstop that shares the cost of covered commercial property and casualty losses with the primary insurer after specific financial thresholds are met.
TRIA was enacted to stabilize the commercial insurance market by requiring commercial property and casualty insurers to make terrorism coverage available. To make this financially viable for insurers, TRIA establishes a federal backstop where the government shares the cost of catastrophic losses once specific insurer deductibles and aggregate program triggers are satisfied.
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Anahtar Kavram
TRIA Federal Backstop Mechanism