Treasury Releases Study of Small Insurers

In June 2019 US Treasury released its Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace.

Finding include:

  • Small insurer direct earned premium (DEP) in the TRIP-eligible lines of insurance and policyholder surplus has remained relatively constant over the past decade;
  • Small insurers allocate a lower percentage of DEP for terrorism risk insurance than do non-small insurers;
  • Small insurers are more likely than larger insurers to charge no premium for terrorism risk insurance;
  • Small insurers tend to provide coverage in fewer states than do non-small insurers;
  • Small insurers earn a higher percentage of DEP in the commercial multi-peril (CMP) and workers’ compensation lines than do non-small insurers;
  • Small insurers issue a very limited number of policies for standalone terrorism insurance;
  • Small insurers are participating in the cyber insurance market covered under the TRIP-eligible lines of insurance, although at different premium levels and terrorism risk insurance take-up rates than other market participants;
  • Small insurers are more likely than non-small insurers to exclude coverage for nuclear, biological, chemical, and radiological (NBCR) risks from their terrorism risk insurance coverage although reported limits still indicate that they may have a significant aggregate exposure associated with such losses;
  • The participation of small insurers in the lines of insurance covered by TRIP is slightly higher than their share in property and casualty (P&C) insurance lines not covered by TRIP;
  • The mandatory availability requirement appears to affect small insurer participation in the terrorism risk insurance market by causing them to assume more terrorism risk exposure than they might otherwise provide absent the requirement;
  • Small insurers could sustain significant terrorism losses without federal backstop support if their losses fail to satisfy the Program Trigger;
  • Small insurers cede a higher percentage of their DEP to purchase reinsurance than do non-small insurers; and
  • Small insurers face an elevated risk for workers’ compensation losses given that a higher percentage of their TRIP-eligible DEP is from workers’ compensation policies.

A copy of the report can be downloaded here:

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