1. What are the key provisions of the Terrorism Risk Insurance Program Reauthorization Act of 2015?
2. Does the Reauthorization Act change the coverage provided to or the benefits payable to insureds?
3. Does the Reauthorization Act change the rates that carriers are required to use?
4. Does the Reauthorization Act change the forms that carriers are required to use?

1. What are the key provisions of the Terrorism Risk Insurance Program Reauthorization Act of 2015?

The key provisions of the Reauthorization Act, as summarized in the U.S. Department of Treasury’s Interim Guidance Concerning the Terrorism Risk Insurance Reauthorization Act of 2015, are:

• The 2015 Reauthorization Act extends the Program through December 31, 2020.
• An act of terrorism must be certified by the Secretary of the Treasury, in consultation with the Secretary of Homeland Security, and the Attorney General of the United States.
• The current $27.5 billion insurance marketplace aggregate retention amount increases by $2 billion per calendar year, beginning in 2015, until such amount equals $37.5 billion, and is subject to further revision thereafter.
• Beginning on January 1, 2016:
  • The current 85% Federal share of compensation under the Program decreases by one percentage point per calendar year until it is equal to 80% of the portion of the amount exceeding the insurer deductible.
  • The current Program trigger for aggregate insured losses to exceed $100 million increases by $20 million per calendar year until it is equal to $200 million in calendar year 2020 and any calendar year thereafter.

2. Does the Reauthorization Act change the coverage provided to or the benefits payable to insureds?

No.

3. Does the Extension Act change the rates that carriers are required to use?

No. The WCRIBMA did not request a change in the premium charge that was established in the WCRIBMA’s February 19, 2003 Filing and that became effective on February 20, 2003 under the “file and use” provisions of the Terrorism Risk Insurance Act of 2002 and continued under the Terrorism Risk Insurance Extension Act of 2005 and the Terrorism Risk Insurance Program Reauthorization Act of 2007. The premium charge will continue to be 0.03 as shown on the Miscellaneous Values page of the Massachusetts Workers’ Compensation and Employer’s Liability Insurance Manual. The Miscellaneous Values page reference to “Terrorism Risk Insurance Act” was changed to “Terrorism Insurance Program”, which is the Program created by and defined under TRIA 2002. The Program definition did not change under the TRIEA 2005, TRIPRA 2007, and TRIPRA 2015 amendments and the requirement for insurers to provide clear and conspicuous disclosure of the premium charged for Insured Losses under the Program on separate line item of the policy did not change.

Back to Terrorism Risk Insurance Program Reauthorization Act of 2015 FAQs

4. Does the Reauthorization Act change the forms that carriers are required to use?

Yes. The Division of Insurance has approved NCCI’s Terrorism Risk Insurance Program Reauthorization Act Disclosure Endorsement (WC 00 04 22 B) for use by Massachusetts workers’ compensation insurers for voluntary and assigned risk policies. The effective date of the Endorsement is January 1, 2015. (Refer to Circular Letter #2252 dated January 23, 2015)

Back to Terrorism Risk Insurance Program Reauthorization Act of 2015 FAQs

1. What mandatory information must be disclosed by the insurance companies to their policyholders under section 103 (b) of the Reauthorization Act ?
2. Does the Terrorism Risk Insurance Program Reauthorization Act Disclosure Endorsement WC 00 04 22 B) satisfy the ‘separate line item’ requirement for disclosing the terrorism premium charge?

Top of Page

1. What mandatory information must be disclosed by the insurance companies to their policyholders under section 103 (b) of the TRIA?

Under the Terrorism Risk Insurance Act of 2002 and the Terrorism Risk Insurance Extension Act of 2005, insurers must provide clear and conspicuous disclosure to the policyholder of the premium charged (on a separate line item in the policy) for insured losses covered by the Terrorism Insurance Program (“Program”) established by TRIA 2002 and the Federal share of compensation for insured losses under the Program. The Reauthorization Act requires an additional disclosure. Insurers must also provide a clear and conspicuous disclosure of the $100,000,000,000 cap on Annual Liability.

Back to Disclosure FAQs

2. Does the Terrorism Risk Insurance Program Reauthorization Act Disclosure Endorsement (WC 00 04 22 B) satisfy the ‘separate line item’ requirement for disclosing the terrorism premium charge?

Use of the Terrorism Risk Insurance Program Reauthorization Act Disclosure Endorsement (WC 00 04 22 B) alone does not satisfy the separate line item requirement. The premium charged for insured terrorism losses must be shown in Item 4 of the Policy Information Page on any policy that provides Massachusetts workers’ compensation coverage.

Back to Disclosure FAQs

1. How does the Bureau calculate the Terrorism Insurance Program premium?
2. What is the statistical code for premium reported under the Terrorism Insurance Program?
3. Is the Terrorism Insurance Program premium included in Standard Premium?
4. Is the Terrorism Insurance Program premium charge subject to the DIA Assessment?
5. How is the Terrorism Insurance Program premium affected by rate deviations?
6. Does the terrorism charge apply to minimum premium policies?
7. If a carrier issues a domestic servant only policy, should the carrier show zero premium on the Information Page following the statistical code?
8. Should the payroll associated with a non-ratable element (i.e., explosives loadings and air carrier surcharges) be excluded from the calculation of the Terrorism Insurance Program charge?

1. How does the WCRIBMA calculate the Terrorism Insurance Program premium?

Premium for the Terrorism Insurance Program is calculated on the basis of total payroll according to Rule V. A risk’s total payroll is divided by units of $100 and multiplied by the Terrorism Rate found on page RA-5, Miscellaneous Values. The calculation is expressed as [(Total Payroll/100) x Terrorism Rate = Premium].

Effective January 1, 2008, this premium is applied after Standard Premium and is included in Premium Subject to Short Rate Penalty and Premium Subject to Total Policy Minimum Premium. Total payroll should not include per capita employee counts, seat counts for the aircraft seat surcharge, or exposures included only for supplemental rate charges.

Prior to January 1, 2008, this premium is applied after Standard Premium and is not affected by any other rating element, including but not limited to, expense constant, premium discount, experience rating, All Risk Adjustment Program (ARAP), schedule rating, or retrospective rating. Per capita classifications are not subject to premium under this Act.

The final terrorism premium will be determined at final audit when actual payroll for the policy term becomes known.

Refer to the Massachusetts Voluntary Market Premium Algorithm, Appendix E, or the Residual Market Premium Algorithm, Appendix F.

The appropriate statistical code for premium reported under the Terrorism Insurance Program is 9740.

No. The Terrorism Insurance Program premium is not included in Standard Premium.

No. The DIA Assessment is a percentage of Standard Premium, so Terrorism Insurance Program premium is not subject to the DIA Assessment.

Terrorism premium is a percentage of payroll, and the charge is applied after Standard Premium. It was not the WCRIBMA’s intention for individual rating elements such as deviation to affect the terrorism premium.

There are two different answers, depending on the circumstances:

1. Yes. If there is even a small amount of payroll on the policy or audit, terrorism premium is calculated.

   Effective January 1, 2015, apply the terrorism rate to the payroll excluding per capita employee counts or exposures for supplemental rate charges. The terrorism premium is included in Premium Subject to Short Rate Penalty and Premium Subject to Total Policy Minimum Premium.
   
   Prior to January 1, 2015 and on or after January 1, 2008, apply the terrorism rate to the payroll excluding per capita employee counts, seat counts for the aircraft seat surcharge, or exposures for supplemental rate charges. The terrorism premium is included in Premium Subject to Short Rate Penalty and Premium Subject to Total Policy Minimum Premium.
   
   Prior to January 1, 2008, apply the terrorism rate to the payroll (not including any payroll for per capita classifications) and add it to the calculated state minimum premium. The terrorism premium is in addition to the minimum premium. 

2. No. If no payroll exists at the time of policy issuance or is developed at audit, then the terrorism charge does not apply.

1. Should the terrorism premium be used in determining eligibility for installment options?
2. Does 100% of the terrorism charge need to be paid with the deposit premium or can it be included in the installment plan?
3. Will the Assigned Risk Pool Performance Standards apply under the Terrorism Insurance Program?
4. Do carriers get the Servicing Carrier Fee on this charge?
5. Is the terrorism premium subject to assigned risk producer fees?

Top of Page

1. Should the terrorism premium be used in determining eligibility for installment options?

The Terrorism charge is premium and therefore should be used in determining eligibility for installment plans.

Back to Residual Market FAQs

2. Does 100% of the terrorism charge need to be paid with the deposit premium or can it be included in the installment plan?

The entire terrorism premium does not need to be collected with the deposit premium. Rather, for both new applications and renewal policies, the terrorism premium should be included as part of the semi-annual, quarterly and monthly installment plans.

Back to Residual Market FAQs

3. Will the Assigned Risk Pool Performance Standards apply under the Terrorism Insurance Program?

Yes.

Back to Residual Market FAQs

4. Do carriers get the Servicing Carrier Fee on this charge?

No. As provided in the Pool Plan of Operation, the servicing carrier fee is a percentage of standard premium. Since the terrorism premium is not included in Standard Premium, the terrorism premium will not be used when calculating the Servicing Carrier Fee.

Back to Residual Market FAQs

5. Is the terrorism premium subject to assigned risk producer fees?

No. In Massachusetts, assigned risk producer fee schedules are based on and applied to Standard Premium; therefore, producer fees should not be paid on the terrorism premium since this is not part of Standard Premium.

Back to Residual Market FAQs