TRIA Excel Practice Problem 2
The solution worksheet states that the insurer in question is not eligible for TRIA coverage as its losses lie below $5M even though industry losses total $48B.
This appears to conflict with the Webel text, as well as other threads in the BattleActs forum; the $5M threshold for TRIA coverage certification is applied to industry losses rather than individual insurer losses in those sources.
Is there another reason that TRIA loss-sharing criteria are not met in this problem, or is the solution worksheet in error?
Comments
I think I may have misinterpreted the Webel text when I created that problem. The text says:
In point 1, they refer to insured losses and in point 2 they refer to aggregate insured losses. Since the word "aggregate" was not used in point 1, I assumed it meant a single insurer. Upon further research however, I don't think that's the case. I think point 1 should more properly have also stated "aggregate insured losses".
So in that case, I will need to change the solution to that problem. And just for clarity, here is what I found when I researched this using other sources:
I will make the necessary adjustments to that practice problem. Thank you for pointing that out.
Update: @JBoyle
Thanks, Graham!
I realized that none of the loss-sharing practices sets industry losses over $100B. I imagined you would need more information like whether the single insurer loss is part of $100B aggregate losses. Then I started to wonder how does the govt determine it? What are the criterias? Maybe by the timing of losses? In addition, could a single insurer loss be partially part of and partially beyond $100B if this particular loss would max out the federal govt limit? I am just thinking out loud here.
I think it's prob very unlikely that on the exam it would provide you industry losses over $100B. However, I just wanna know whether I am on the right track of thinking it through.
I expect that federal government is the party keeping tabs on the 100B limit. When they see that they have reached the limit, for any further loss reimbursement requests coming from insurers, government informs that the limit has been reached and that they are not responsible for compensating the amount on which they seek reimbursement.
For these problems, the agg insured losses are >37.5B. Does this not affect how we would calculate the answer? We do not have to worry about the 140% surcharge?
For losses greater than 37.5 billion, the Treasury Secretary has discretionary authority to determine the amount to recoup. This means that while there is no mandatory requirement to recoup 140% of the federal outlays, the Secretary may still choose to recoup some or all of the federal payments, depending on the circumstances.