Self-Insurance Institute Issues Public Comments to Treasury Department – ​​InsuranceNewsNet


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WASHINGTON, May 23The Self-Insurance Institute of America Inc. made a public comment to US Department of Treasury. The comment was written on May 16, 2022and posted on May 17, 2022:

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To: Federal Insurance Office, Attention: Richard IfftRoom 1410 tons, Treasury Department, 1500 Pennsylvania Avenue, NW, washington d.c. 20220

SUBJECT: 2022 Terrorism Risk Insurance Program Effectiveness Report

Dear Mr Ifft:

The Self-Insurance Institute of America, Inc. (“SIIA”) submits these comments to the Treasury Department in response to the Request for Comments (the “Request”) on the 2022 Report on the Effectiveness of the Terrorism Risk Insurance Program (“TRIP” or “Program”). Specifically, these comments respond to various questions set out in the application regarding the participation of captive insurers in TRIP, in addition to emerging trends.

SIIA is a membership association dedicated to the protection and promotion of companies involved in the self-insurance and captive insurance industry. SIIA members include captive owners and industry participants, risk retention groups, third party administrators, excess/stop-loss/reinsurance insurers, self-insured employers and captive managers.


A well-functioning program to encourage risk protection against terrorism-related losses remains essential, given the continuing and evolving threats faced by the private sector. Insurance and reinsurance markets for risks United States (continue to evolve, with captive insurance arrangements providing stability and affordability in areas where commercial insurance/reinsurance markets do not provide sufficient coverage options for businesses. These captive arrangements support an affordable market for terrorism risk mitigation and help broaden participation in the supply needed terrorism coverage for a variety of organizations.In particular, the current state of the market has led organizations to use captive insurance to insure against risks in:

* High-risk geographic areas, including urban centers and areas near nuclear or other high-risk facilities;

* Various types of properties, including sports facilities and other public places; and

* Various industries including residential real estate, transportation, telecommunications and utilities.

* NBCR Terrorism Risk

As the Department is aware, entities that choose to self-insure their own insurance risks are liable for any economic loss associated with insuring that risk, whereas a captive insurance arrangement allows a company or an entity to finance part of the risk that it chooses to assume itself. In some cases, entities that cannot find sufficient or affordable cover for a particular insurance risk in the fully insured commercial market – such as terrorism or cyber risk – self-insure those risks, often by funding the risk. through a captive. Captives can serve either (1) as a direct insurer in cases of certain terrorist, cyber, and even COVID-related risks, or (2) as a reinsurer of a standard commercial carrier (for example, in cases related to the workers’ compensation insurance).

Captive Insurance and risks related to terrorism, workers’ compensation and pandemic risk

Broad market captives provide terrorism-related coverage to a number of businesses and entities ranging from religious institutions and industrial and energy producers to sports and concert venues, residential living spaces and major centers of transportation. Captives also provide cybersecurity-related coverage to financial institutions and healthcare organizations. It is important to note that captives contribute to the program’s post-loss sharing mechanism, thereby also contributing to the overall payment of losses, and thereby broadening participation in the pool of terrorism risks.

However, where a coverage problem may exist is in the interplay of terrorism risks and the various forms of “war exclusions” commonly found in virtually all insurance and reinsurance. For example, the question of when does terrorism (especially in the form of a cyber event) become an “undeclared war” comes to the fore. For example, would denial of service attacks in countries by non-state but state-affiliated actors be identified as a form of terrorism or the initial stages of an “undeclared war”?

With respect to workers’ compensation (and since the scope of this coverage derives directly from various state and federal laws), there are no exclusions for injury or death to one or more employees as a result of a terrorist act, provided that such act arises out of and in the course of employment. So the standard workers compensation policy covers them. And, since captives almost exclusively reinsure an admitted workers’ compensation organization, they don’t exclude coverage either.

Another important question for the Department to consider is how the COVID-19 pandemic has changed the design of risk and reinsurance programs, in addition to whether TRIP and potential pandemic risk created in the future may whether or not to provide mutual benefits.

Captive Insurance and cyber risks

Cyberattacks are a real threat in today’s ever-changing cyber risk landscape, especially as the COVID-19 pandemic has forced many organizations to accelerate digital transformations already underway. For example, e-commerce is booming, while schools and offices have embraced and adapted online distance learning courses and remote working. This rapid transformation has further increased systemic vulnerabilities to cyberattacks. Various scenarios estimating catastrophic damage from cyber events range from tens of billions to hundreds of billions of dollars.

The treatment of cyber hedging under TRIP has enabled more robust participation by insurers and reinsurers due to loss mitigation in certain extreme scenarios. The cyber threat landscape is continually changing and evolving as attackers develop new tools and discover new attack vectors. Machine learning and artificial intelligence are increasingly used by attackers and defenders, and the importance of these tools is likely to increase in the future. Modern computer networks are complex systems and a weakness in any component of the system could leave the entire system vulnerable.

Cyberattacks also do not respect geographical borders. This can lead to many scenarios where a cyberattack outside of the WE would result in considerable damage and loss within it. In general, providing coverage under TRIP for damage inside the WE of a foreign occurrence would best be considered a type of loss that was meant to fall under the Program covers. Extraneous events such as those contemplated in of the Treasury the investigation would meet the intent of damages covered under TRIP and as such should be covered.

Currently, cyber or terrorism coverage can be offered on a stand-alone or integrated basis. Although many captives typically address the economic impact of a cyber event (including ransomware) on the insured’s business, they often may not cover potential third party liabilities resulting from such an attack. As a result, there were significant losses. These risks and losses are likely to increase as carriers increase and tighten the underwriting standards and service provider purchases required to offer their coverage. In fact, some companies have experienced more than 50% growth in premiums while experiencing significant increases in deductibles or lowerings of coverage limits and sub-limits. This change is likely to affect a number of small and medium-sized businesses that do not have the financial resources to hire the very robust cybersecurity services that some standard carriers now require for coverage.

Size and reach of the TRIP

The Department must be aware that in addition to the largest WE companies and institutions that can use the TRIP program, this same protection should also be extended to the many small and medium-sized American and other businesses that are exposed to terrorism-related risks and are largely unable to access appropriate protection under the TRIP program. current Program. As stated in the application, TRIP was created to ensure the widespread availability and affordability of P&C terrorism risk insurance, and to build capacity to absorb future losses. Thus, SIIA recommends that the Department consider considering the appropriate size and scope of TRIP, which could and should include small and medium-sized businesses that are at risk of significant losses from the same terrorism-related risks to which large businesses are. confronted.

Thank you in advance for considering these comments. Please do not hesitate to contact me if you have any questions or if any SIIA members can serve as a resource on these issues.


Ryan C. Labor

Senior Vice President, Government Relations

Self-Insurance Institute of America, Inc.

TARGETED NEWS SERVICE (founded in 2004) provides nonpartisan news and information on “edited journalism” for news organizations, public policy groups and individuals; as well as “collected” public policy information, including press releases, reports, speeches. For more information, contact MYRON STRIPPEDeditor, [email protected], Springfield, Virginia; 703/304-1897;


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