The document summarizes a webinar on terrorism risk in 2015 that discussed the renewal of the Terrorism Risk Insurance Act (TRIA), terrorism risk modeling, and implications for workers' compensation insurance. It included presentations from Lloyd Dixon of RAND Corporation on the TRIA renewal, Gordon Woo of RMS on terrorism risk modeling, and covered the TRIA provisions through 2020, terrorism plots foiled due to small cell sizes, modeling TRIA as a stop-loss treaty, and RMS terrorism modeling solutions.

1. TERRORISM RISK IN 2015:
ISSUES AND PERSPECTIVES
PRESENTERS:
Chris Folkman, Director, Model Product Management, RMS
Lloyd Dixon, Director and Senior Economist, RAND Corporation
Gordon Woo, Catastrophist, RMS
Participant Dial In: (855) 467-7289
Conference ID: 71585071

2. TERRORISM RISK IN 2015:
ISSUES AND PERSPECTIVES
Chris Folkman

3. 3Copyright © 2014 Risk Management Solutions, Inc. All Rights Reserved. RMS Terrorism Webinar Jan. 28, 2015
AGENDA
§ TRIA (Terrorism Risk and Insurance Act) and renewal implications
§ Terrorism risk modeling in 2015
§ Q&A

4. 4Copyright © 2014 Risk Management Solutions, Inc. All Rights Reserved. RMS Terrorism Webinar Jan. 28, 2015
Presenters Lloyd Dixon
Director and Senior Economist
RAND Corporation
Gordon Woo
Catastrophist
RMS

5. IMPLICATIONS OF THE TRIA
RENEWAL
Lloyd Dixon
January 28, 2015

6. 6Copyright © 2014 Risk Management Solutions, Inc. All Rights Reserved. RMS Terrorism Webinar Jan. 28, 2015
Program Feature
Provision in 2014 Provision in 2020
Program trigger $100 million $200 million
Insurer deductible 20% of DEP 20% of DEP
Insurer co-pay 15% 20%
Recoupment surcharge 133% 140%
Aggregate industry retention $27.5 billion $37.5 billion
Program cap $100 billion $100 billion
Domestic terrorism covered Yes Yes
Treatment of NBCR Not treated
separately
Not treated
separately
TERRORISM RISK INSURANCE PROGRAM REAUTHORIZATION ACT
OF 2015 EXTENDS PROGRAM THROUGH 2020

7. 7Copyright © 2014 Risk Management Solutions, Inc. All Rights Reserved. RMS Terrorism Webinar Jan. 28, 2015
Hot Issues
Moving Forward
§ GAO study on setting premiums for TRIP coverage
§ GAO study on requiring insurers to set up reserve
funds for terrorism losses
§ Advisory committee on how to increase private
terrorism risk reinsurance capacity
§ Annual reporting requirements on terrorism coverage
§ Annual study on competitive challenges small insurers
face in the terrorism insurance risk market

8. 8Copyright © 2014 Risk Management Solutions, Inc. All Rights Reserved. RMS Terrorism Webinar Jan. 28, 2015
TRIA Has
Important Impacts
in Workers’
Compensation
Market
§ WC statutes constrain insurers’ response to risk
§ Insurers may limit capacity in high-risk areas
§ Employers would obtain coverage in residual markets
§ Residual market growth is costly even if there is never
another terror attack

9. 9Copyright © 2014 Risk Management Solutions, Inc. All Rights Reserved. RMS Terrorism Webinar Jan. 28, 2015
Hawaii
Alaska
A10468-MD-9
Cost Gradient
WITH TRIA, COSTS OF WC TERRORISM LOSSES
ARE SHARED NATIONWIDE

10. 10Copyright © 2014 Risk Management Solutions, Inc. All Rights Reserved. RMS Terrorism Webinar Jan. 28, 2015
Hawaii
Alaska
Cost Gradient
WITHOUT TRIA, WC COSTS WOULD BE CONCENTRATED
IN THE STATE OF THE ATTACK

11. TERRORISM RISK MODELING
Gordon Woo

12. 12Copyright © 2014 Risk Management Solutions, Inc. All Rights Reserved. RMS Terrorism Webinar Jan. 28, 2015Copyright © 2014 Risk Management Solutions, Inc
TERRORISM INSURANCE IN NORTH AMERICA AND
WESTERN EUROPE IS EFFECTIVELY INSURANCE
FOR COUNTER-TERRORISM FAILING§ Since 9/11, there
have been dozens
of terrorist plots, but
only a few notable
successes:
Madrid 2004
London 2005
Boston 2013
Paris 2015
Edward Snowden

13. 13Copyright © 2014 Risk Management Solutions, Inc. All Rights Reserved. RMS Terrorism Webinar Jan. 28, 2015
Too Many
Terrorists Spoil
the Plot
Cell Size 1 2 3 4 5 6 7 8 9 10
Plot
Interdiction
Probability
0.26 0.46 0.60 0.70 0.78 0.84 0.88 0.91 0.93 0.95
“For a large operation against the U.S., pick a
number of brothers not to exceed ten...’’
Osama bin Laden
Abottabad, Pakistan

14. 14Copyright © 2014 Risk Management Solutions, Inc. All Rights Reserved. RMS Terrorism Webinar Jan. 28, 2015
Terrorist Attacks
with Few
Operatives

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ISIL Activity Areas
ISIL Activity

16. 16Copyright © 2014 Risk Management Solutions, Inc. All Rights Reserved. RMS Terrorism Webinar Jan. 28, 2015
Foreign Fighters
in Syria and Iraq
0
500
1000
1500
2000
2500
3000
3500
Tunisia Saudi Jordan Morocco Russia France UK

17. 17Copyright © 2014 Risk Management Solutions, Inc. All Rights Reserved. RMS Terrorism Webinar Jan. 28, 2015
Modeling the
TRIA Renewal
§ Model TRIA as a stop-loss treaty (probabilistically)
or a cat treaty (for individual scenarios)
§ Coverage applies to a company’s gross loss prior
to the application of other reinsurance
§ See FAQ document on rms.com for step-by-step
instructions

18. 18Copyright © 2014 Risk Management Solutions, Inc. All Rights Reserved. RMS Terrorism Webinar Jan. 28, 2015
RMS TERRORISM MODELING AGENDA
§ Recent terrorism model release in 2014
§ New model releases planned in 2015
§ Ongoing solutions for exposure management, scenario modeling, probabilistic
analysis
§ Call us with modeling questions

19. 19Copyright © 2014 Risk Management Solutions, Inc. All Rights Reserved. RMS Terrorism Webinar Jan. 28, 2015 19Copyright © 2014 Risk Management Solutions, Inc. All Rights Reserved. Document Title-Date
Q + A