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What happened during 9/11(with the insurance claims)
- many claims were covered
- even though war is excluded
- pres bush met with many insurance execs and convinced them to cover many claims
After 9/11 what happened to many written policies?
they were written with an exclusion for terrorism
How did most insurers view covering terrorism after 9/11?
- 9/11 and terrorism exclusion on policies created a demand for terrorism coverage
- insurers didn't want to sell it
- reinsurers also started to exclude it
What year was TRIA created?
What does tria stand for
terrorism risk and insurance act
What is the purpose of tria?
- created by gov't to serve as a backdrop for insurers to offer coverage.
- (this allows the economy to recover and businesses to feel secure that coverage can be acquired)
What years was tria extended?
2005, (modified in 2007), extended again for 7 years and will expire at the end of 2014.
Do insurers like tria?
other names for tria?
- Triea(2007 version)
- tripra(current version)
purpose of tria?
- terrorism too unpredictable for insurers to properly price the exposure
- Gov't theory was over time, private insurance mkt forces could eventually handle terrorism
t/f emerging risks are tough to price?
was the gov't theory about terrorism correct?
is TRIA similar to the NFIP?why or why not?
yes, because the government essentially reinsures the terrorism risk for insurance carriers
What does tria do financially for insurers?
it won't allow insurers to get wiped out from one catastrophic loss
What is terrorism for purposes of tria?(4) *very important
- must be certified act of terrorism by gov't(not presidential declaration)
- must be:
- a violent act that is dangerous to human life, property or infrastructure
- resulting in damage within the USA
- must be committed by individual(s) in an effort to coerce the civilian population, influence US policy, or affect US government conduct by coercian(make a statement/prove a point,call attention to something, violence with an agenda)
In 2007, the tria extension expanded definition of terrorism to include____________.
domestic terrorism(ex. okc bombing, boston marathon )
What does TRIA not include coverage for?
nuclear, biological or chemical.
Who can certify an event as an act of terrorism?
dept of treasury, dept of justice, and secretary of state.
What is the Make available provision of tria?
- Insurers must offer coverage for certified acts of terror
- same terms as non-terrorism coverage
What does the make available provision of tria basically do?
basically offers policy without the terrorism exclusions if insured desires the policy
When must terrorism coverage be offered based on the make available provision?
must be offered at initial offer, purchase and renewal
Can insurers decline to write coverage for certified acts of terror?
disclosure requirement of tria(2)
- insurers must make clear disclosure on how much the premium is for terrorism coverage
- must also disclose to insured that coverage may be limited if the federal damages cap is exceeded
- (if gov't bails, insurer bails too)
federal participation trigger of tria
the fed does not get involved until industry verified costs exceed 100 million in a calendar year(basically a deductible)
How much is the deductible for tria?
20% of the previous year earned premiums
After the TRIA deductible how much does the insurer pay?
- 15% of all losses that exceed the deductible
- while the fed pays 85%
How much is the program cap for tria?
What happens for terrorism losses over the 100 billion tria cap?
for losses above 100 billion, treasury secretary determines a pro-rata share formula for how losses will be paid.
to do the math for tria losses consult the square on 12/1/14 notes.
DO THIS NOW IT IS VERY IMPORTANT
Who runs the NFIP?
who is allowed to participate in the nfip?(3)
- places where there is no;
- no flood insurance available
- no disaster assistance
- no federal mortgages in special flood hazard area(SFHA)
What are some methods of mitigation and flood plan mgmt(2)
- establish special flood hazard areas(SFHA)
- distribute flood insurance rate maps(FIRM)
What do the mandatory purchase requirements of nfip do?
- they are mandatory for certain homes in sfha
- coverage must be provided for the term of the loan
- coverage limit must equal the outstanding principle balance of the loan or the maximum limit available under the program, whichever is lower(250,000)
types of coverages under nfip(a,b,c)
- a.the building
- b. detached structures(ex. the garage)
- c. contents(ex fridge)
what is covered under basement coverage(7)
- foundation elements
- required utility connections
- water heaters
- electrical outlets and wiring
- other utilities
- basically whatever makes the house work
what is the standard deductible for flood coverage?
can you raise your deductible for flood coverage?
yeah, up to 5000 if you have good credit
replacement cost coverage in NFIP(How does it work?)(5)
- applies to single family dwellings
- that are the principle residence
- building only
- Insured to 80% of replacement cost or maximum NFIP coverage available
- otherwise, acv applies
Is there a waiting period for NFIP?
insurance can be purchased at any time, but there is a 30 day wait period for coverage to become effective after policy application
Are there exceptions to the waiting period for NFIP? If so what are they?
- When in conjunction with making, increasing,renewing or extending a loan or
- when a map revision has placed a building into SFHA
How are flood policies written?
they are written on a one-year renewable term basis
What is the future of flood insurance?
there is debate on it continuing
What needs to be reformed for flood insurance?(4)
- maps are outdated
- new predictive modeling is needed
- they need to charge appropriate rates for high risk areas
- force those that live in high risk to bear more of the true cost for choosing to live in those areas