Arguments that TRIA is not insurance - surcharges
I seem to recall something from Exam 5 about insurance rates only being valid if they were based on prospective losses/costs, not to recoup for losses already incurred. Would this be a valid argument as to why TRIA is not insurance?
Comments
You get into iffy terrain when you give this as an answer. Residual risk mechanisms also recoup costs from the market, and they are considered to be insurance. I would stick with the C-MAC framework when answering this question.
Okay, good to know. thank you!
Sure, good luck.
Could you let me know if this is an accurate example of how recoupment provisions would work? Let's say a terrorism attack affects only a couple insurers and results in the federal government being responsible for $30B of the losses in total. This means the government would pay those individual insurers, but then need to add surcharges that sum to 1.4*$30B in aggregate to ALL commercial P&C insurers with terrorism coverage?
Yes, correct.