U.S. Department of Treasury Issues New TRIA Rules
December 27, 2016

This week, the U.S. Department of the Treasury (“Treasury”) promulgated additional rules affecting the Terrorism Risk Insurance Act (“TRIA”), which had been recently reauthorized in late 2015 (the “Rules”). Of particular note is that, in accordance with the recent reauthorization, Treasury is obligated to collect data on the terrorism market and report to Congress on its findings, with advance consultation with state regulators. Treasury, to date, has not notified state regulators in advance of data requests, which has arguably resulted in inefficiencies by not allowing states to initiate coordinated data calls. The new Rules interpret TRIA to only require general discussions with state regulators as opposed to advance coordination as to data collection.

In addition, the New Rules continue to define a “small insurer” as an entity with policyholder surplus and direct earned premium on TRIA-covered lines less than five times the TRIA program trigger. “Small insurers” are exempt from Treasury’s consideration when it prepares its annual studies on the terrorism market and are also not subject to data calls. While there had been some discussion that policyholder surplus would not factor into the definition of a “small insurer,” Treasury officials expressed concern that large, but primarily personal lines entities would be able to fall under the “small insurer” definition if policyholder surplus was not included as a variable in the calculation.

The new Rules also indicate (i) that insurers may continue to provide in their disclosures that their TRIA premium is zero when the coverage is provided in the underlying policy for no extra charge, and (ii) that, perhaps contrary to the intent of TRIA, Treasury will continue to require disclosure to policyholders of the $100 billion cap on TRIA coverage at the time of purchase of the policy in addition to the time of offer and renewal.

We will continue to monitor TRIA, the Treasury’s interpretive guidance and their impact on insurers both domestic and worldwide.


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