Vermont Captive Insurance Association Issues Public Comment on Treasury Department Notice

WASHINGTON, June 16 -- Richard Smith, president of the Vermont Captive Insurance Association, Burlington, has issued a public comment on the Department of the Treasury's notice entitled "2020 Report on the Effectiveness of the Terrorism Risk Insurance Program". The comment was written on June 9, 2020, and posted on June 10, 2020:

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I am writing on behalf of the Vermont Captive Insurance Association (VCIA) in response to the Federal Register invitation to comment on the effectiveness of the Terrorism Risk Insurance Act of 2002 as amended (TRIA). VCIA is the largest trade association for captive insurance in the world. Established in 1985, the Association has grown to provide education, networking, and advocacy support on both the state and federal levels for its over 400 member organizations from around the United States.

VCIA strongly supports the TRIA Program and believes that it has been extremely effective in ensuring the availability and affordability of terrorism risk insurance for insureds. The TRIA Program serves as an important public-private risk-sharing mechanism to ensure that risk insurance coverage remains commercially available and that the U.S. economy could recover more swiftly in the event of a terrorist attack.

Captive insurers are key players in providing terrorism coverage in the TRIA Program. They issue policies for terrorism risks subject to the Program that often are not readily available from other insurer sources or are insufficient to cover the risks. Examples of these coverages are NBCR and high-profile property risks. Captives write these risks because their owners cannot otherwise obtain adequate coverages at reasonable prices in the traditional market or no other insurer will underwrite them. This is particularly true in large metropolitan areas where the threat to high profile properties as targets for international terrorism is the greatest. The private insurance market has been unable to accurately model, predict, or price the growing terrorist threat that many companies face. In addition to these hard to get coverages, captive insurers underwrite risks in all policyholder industry sectors. Furthermore, premiums for insurance or reinsurance are at market rates.

In 2018, 574 U.S. domiciled captives responded to the Treasury data call providing terrorism-specific insurance programs, in addition to many ancillary terrorism coverages provided as part of the "make-available" requirements accepted by policyholders for captive underwriting property, workers' compensation, general liability, and other lines of insurance.

In summary, the market for terrorism insurance is still highly dependent on this federal terrorism reinsurance program to provide needed coverage at affordable prices. This is true for the traditional insurance market as well as the captive industry. TRIA's initial goals were two-fold: (1) to make terrorism coverage available and (2) to ensure market stability in the aftermath of a large-scale terrorist event. TRIA has successfully achieved both these goals. The U.S. Treasury Department's reports on the program have indicated that the terrorism insurance market is stable, that coverage is available, and that this is due to the presence of the TRIA program.

Thank you for this opportunity to provide comments.

Sincerely,

Richard Smith

President

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The notice can be viewed at: https://beta.regulations.gov/document/TREAS-TRIP-2020-0010-0001

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