CAS Exam 6C Spring 2014, Question 11
Study guide: Exam 6C
Part a (0.75 points)
Briefly describe three reasons policy-makers passed the Terrorism Risk Insurance Act (TRIA).
Part b (1 point)
For each terrorism event below, calculate the reimbursement for which an insurer would be eligible under TRIA. All losses occurred after 2007.
- i. Terrorism Event #1
| Item | Amount |
|---|---|
| Aggregate industry losses | $75 million |
| Insurer's share of losses | $50 million |
| Insurer's deductible | $5 million |
- ii. Terrorism Event #2
| Item | Amount |
|---|---|
| Aggregate industry losses | $200 million |
| Insurer's share of losses | $75 million |
| Insurer's deductible | $10 million |
Part c (0.5 points)
Identify two reasons why terrorism could be considered uninsurable by the private market.
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