Washington,D.C. – The U.S. Department of the Treasury is actively soliciting public comments to assess the effectiveness of the Terrorism Risk Insurance Program (TRIP) on small insurance companies. This initiative, spearheaded by the Federal Insurance Office (FIO), aims to identify any competitive disadvantages these smaller firms face in the terrorism risk insurance marketplace. The deadline for submitting comments is May 19, 2025.

Established by the Terrorism Risk Insurance Act of 2002 (TRIA), TRIP was designed to stabilize the commercial property and casualty insurance market following the September 11th attacks. The program ensures the continued availability and affordability of terrorism risk insurance, allowing private markets to build capacity to absorb future losses from terrorist events.The Secretary of the Treasury administers TRIP with support from the FIO.

The Treasury Department’s request for comments is rooted in Section 108(h) of TRIA, which mandates a biennial study of small insurers participating in the program. This study seeks to pinpoint competitive challenges and is a critical component of ongoing efforts to refine and improve TRIP’s effectiveness. The department is particularly interested in feedback that goes beyond aggregated data, offering nuanced perspectives on the ground.

Key Areas of Inquiry

The Treasury Department is focusing it’s inquiry on several key areas, including:

• market Share and Financial Health: Changes in market share, premium volume, and policyholder surplus of small insurers compared to larger counterparts.
• Market Differences: How the terrorism risk insurance market varies between small and large insurers,and whether similar differences exist for other types of risks.
• Mandatory Availability: The impact of TRIP’s mandatory availability requirement on small insurers, ensuring they offer terrorism risk insurance.
• Program Trigger: The effect of increasing the trigger amount for the Program on small insurers, which determines when federal assistance kicks in.
• Reinsurance: The availability and cost of private reinsurance for small insurers,a crucial element in managing their risk exposure.
• Workers’ Compensation: the impact of state workers’ compensation laws on small insurers and workers’ compensation carriers in the terrorism risk insurance market.

Beyond these specific areas,the Treasury Department is also seeking input on:

• Nuclear,Chemical,Biological,and Radiological (NBCR) Risks: Constraints on small insurers’ ability to cover NBCR risks.
• Risk Management: Risk management strategies and challenges faced by small insurers in handling losses below the federal trigger.
• Program Reauthorization: The effects of the 2019 reauthorization of TRIP on small insurer participation.
• Cyber Terrorism: The role of small insurers in covering cyber-related acts of terrorism.
• Places of Worship: The role of small insurers in covering terrorism risk for places of worship.
• Risk Modeling: The use of risk modeling techniques by small insurers to assess their exposure.

These inquiries reflect the evolving landscape of terrorism risks,including the increasing threat of cyberattacks and the need to protect vulnerable targets like places of worship. The insights gained from this study will inform future policy decisions and ensure that TRIP remains effective in a dynamic threat surroundings.

Impact on U.S. Insurance Market

The Terrorism Risk Insurance Program plays a vital role in the U.S. insurance market. Without it, many businesses would struggle to obtain affordable terrorism risk insurance, potentially hindering economic growth and growth.The program’s existence provides a safety net, encouraging investment and construction in urban areas and other potential targets.

However, concerns remain about the long-term impact of TRIP on the private insurance market. Some argue that the program may discourage private insurers from developing their own capacity to cover terrorism risks.Others worry about the potential for moral hazard, where insurers may take on excessive risks knowing that the government will step in to cover major losses.

The Treasury Department’s study of small insurers is particularly crucial as these companies frequently enough face unique challenges in the terrorism risk insurance market. They may lack the resources and expertise to accurately assess and manage terrorism risks, and they may struggle to compete with larger insurers that have greater economies of scale.

How to Submit Comments

Interested parties are encouraged to submit comments electronically through the Federal eRulemaking Portal at https://www.regulations.gov. Comments can also be mailed to:

Federal Insurance Office
Attn: Richard Ifft, Room 1410 MT
Department of the Treasury
1500 Pennsylvania Avenue NW
Washington, DC 20220

The Treasury Department recommends electronic submissions due to potential processing delays with postal mail. All comments should be captioned with “2025 TRIA Small Insurer Study Comments” and include the commenter’s name, group affiliation, address, email address, and telephone number. An executive summary (no more than five single-spaced pages) should be included where appropriate.

Recent Developments and Practical Applications

The Treasury Department has conducted similar studies in the past, providing valuable insights into the evolving terrorism risk insurance market. These studies have informed policy decisions and helped to refine TRIP’s structure and operation. The previous studies were issued in June 2017, June 2019, June 2021, and June 2023.

For example, the 2023 study examined the impact of the COVID-19 pandemic on the terrorism risk insurance market. The study found that the pandemic had led to increased uncertainty and volatility in the market, but that TRIP had helped to mitigate the negative effects. The study also highlighted the growing importance of cyber terrorism risks and the need for insurers to develop effective strategies for managing these risks.

The current study is expected to build on these previous efforts, providing an updated assessment of the challenges and opportunities facing small insurers in the terrorism risk insurance market.The findings will be used to inform future policy decisions and ensure that TRIP continues to serve its intended purpose of protecting the U.S. economy from the financial consequences of terrorism.

Potential Counterarguments

While TRIP is widely supported, some critics argue that it distorts the insurance market and creates unfair advantages for participating insurers. They contend that the program should be phased out over time,allowing private insurers to assume full duty for covering terrorism risks.

However, proponents of TRIP argue that the program is essential for maintaining stability in the insurance market and protecting the U.S. economy. They point out that terrorism risks are difficult to predict and manage, and that private insurers might potentially be unwilling or unable to provide adequate coverage without government support.

the treasury Department’s study of small insurers will help to inform this debate by providing a more detailed understanding of the program’s impact on different segments of the insurance market. The findings will be used to assess the costs and benefits of TRIP and to identify potential areas for enhancement.

Conclusion

The Treasury Department’s request for comments represents a crucial step in ensuring the continued effectiveness of the Terrorism Risk Insurance Program. By gathering input from small insurers and other stakeholders, the department can gain a deeper understanding of the challenges and opportunities facing the terrorism risk insurance market. This facts will be invaluable in shaping future policy decisions and protecting the U.S. economy from the financial consequences of terrorism.

The deadline for submitting comments is May 19, 2025. Interested parties are encouraged to participate in this important process.