T errorism R isk I nsurance P rogram

2 Terrorism Risk Insurance Program Purpose Address Insurance Market Disruptions Ensure Availability and Affordability of Commercial P&C Terrorism Coverage Provide Transition Period Stabilize and Build Capacity in Private Market Strengthen Overall Economy

3 Terrorism Risk Insurance Program Overview Certifies Act of Terrorism Resulting in Damage > 5M* IN United States U.S. Missions U.S. Air Carriers U.S. Vessels FOR Specified Commercial Lines Workers Compensation Secretary of State Secretary of Treasury Attorney General *Program Trigger $100M

4 Terrorism Risk Insurance Program Lines Excluded Medical Malpractice Commercial Auto Reinsurance Burglary & Theft Life & Health Surety Crop Farm Owners Multi Peril Financial Guaranty Professional Liability* Flood *NAIC SERFF Uniform P&C Matrix: Professional E + O Liability

5 Terrorism Risk Insurance Program As Amended All Acts of Terrorism Covered Extended 2014 Insurer Deductible 20% Insurer “Co Pay” 15% Program Trigger $100M $100B “HARD” Cap on losses 3% Cap Surcharge Mandatory Recoupment Eliminated

6 Terrorism Risk Insurance Program Regulations 1st Final Rule -Provides key definitions, such as “Act of Terrorism,” “Insurer,” and “Affiliate” -Identifies lines of Commercial Property & Casualty Insurance included in the Program 2 nd Final Rule -Make available requirements -Disclosure requirements 3 rd Final Rule -State residual market mechanisms

7 4th Final Rule – Claims - Speed with which TRIP will act on a request for reimbursement. - Payment of allocated loss adjustment expenses. - Level of documentation required to support a claim. - Unique data elements required in reporting. - Advanced payments. Terrorism Risk Insurance Program Regulations

8 5th Final Rule - Litigation Management Follows Requirements of Act -Exclusive Federal cause of action -Preserves government subrogation rights -Federal funds not used to pay punitive damages Presidential Memorandum* -Advance approval of Secretary of Treasury for proposed settlements of Federal causes of action > $ 2M personal injury or death > $ 10M property damage Terrorism Risk Insurance Program Regulations *2005 Extension Act reaffirms Presidential Memorandum

9 Terrorism Risk Insurance Program Regulations 6 th Final Rule - Affiliation Determination -Affiliations frozen after first trigger event -Recall: Certified Event –vs- Trigger Event

10 Terrorism Risk Insurance Program Regulations 7 th Final Rule - Implements 2005 changes mandated by Congress -Clarifies multiple events not cumulative to reach trigger event -NAIC Model Forms: Safe Harbor

11 Terrorism Risk Insurance Program Regulations 8 th Final Rule (Interim Guidance) -Implements 2007 Extension Act Changes -Mandatory Make Available Requirement (foreign and domestic)-Any offers made on or after 12/26/07* -Disclosure of CAP on Insured losses by first offer, purchase or renewal for policies issued after 12/26/2007 -Disclosure of Premium Amount -Offer, Purchase, Renewal of Policy -Must Match the Offer *Insurer 90 day compliance window (March 31, 2008)

12 Terrorism Risk Insurance Program Regulations 9 th Final Rule - $100B Cap Proration 10 th Final Rule - Recoupment of Federal Payments

13 Terrorism Risk Insurance Program Claims Process/Forms 1.Initial Notice of loss/Registration 2.Certification of loss 3.Schedule A – DEP & Insurer deductible 4.Schedule B – Certification of Compliance 5.Schedule C - Bordereau

14 Terrorism Risk Insurance Program Bordereau Formats Excel Comma delimited text file Pipe delimited text file Online manual completion

15 Terrorism Risk Insurance Program Claims Process - Links to: TRIP Claims Manager Register Treasury Payments

16 Terrorism Risk Insurance Program Security & Best Practices Review Claims Facility utilizes well proven security architecture tools and protocols Security Accreditation issued by Treasury in October 2004 after extensive review by Booz Allen Hamilton 2005 Deloitte audit concluded plans and procedures “support the operation of an effective and efficient TRIP Claims Facility.”

17 Terrorism Risk Insurance Program Claims Payments TRIP Claims Contractor 4. TRIP Office Approves Payment 5. Treasury Issues Funds 3. Co. Establishes Segregated Account Insurance Co. 1.Company Submits Certification of Loss with Bordereau 2. Reviews COL for Accuracy/Recommends Payment Reg. Acct # Payment

18 Terrorism Risk Insurance Program Aggregate Industry Retention 2003$10.0B 2004$12.5B 2005$15.0B 2006$25.0B 2007$27.5B

19 $40B Insured LossAssumptions Loss occurs Insurers Impacted $27.5B TRIA covered DEP 100 Industry Aggregate RetentionInsurers = $30B Trip Pays $28.9B 20% Deductible = $6.0B 15% Coinsurance = $5.1B 100 Companies Pay $11.1B $11.1B Paid by 100 companies Program Trigger Event $100M * 16.4B plus 33% (5.4B) = 21.8B Total Recoupment – PAYGO Terrorism Risk Insurance Program Recoupment Example Discretionary Recoupment $12.5B Mandatory Recoupment $16.4B*

20 Terrorism Risk Insurance Program Accelerated Recoupment – Pay Go Event DateCollections Completed Prior 12/31/20109/30/2012 1/1/2011 – 12/31/201135% 9/30/2012 9/30/2017 After 1/1/20129/30/17

21 Terrorism Risk Insurance Program Terrorism Premium as Percentage of Property Premium, by industry Marsh, Inc.

22 Terrorism Risk Insurance Program Take-Up Rate Rising 2006 Marsh Marketwatch Report; Insurance Information Institute

23 Terrorism Risk Insurance STUDIES WHO WHAT WHEN PWGAvailability/Affordability 9/ /2013 Financial MarketsTerrorism Insurance ComptrollerAvailability/Affordability General Insurer NBCR Losses12/26/08 ComptrollerSpecific6/26/08 GeneralMarket Capacity Constraints Availability/Affordability Insurance/Reinsurance

24 Terrorism Risk Insurance Program TRIP 2008 Objectives Interim GuidanceJan 1, 2008 Report Proration ProceduresMay 1, 2008 Recoupment RegulationsJul 1, 2008 Final Proration RegulationSep 1, 2008 Recompete Contracts: Claims Audit Statistical Reporting Regulation: Final Netting