Louisiana P&C Adjuster Practice Exam

What is described as the total amount of copayments and deductibles that insurers must pay for covered terrorism losses under TRIA?

1. Program Trigger

2. Aggregate Retention

3. Federal Cap

4. Insurance Shortfall

The correct answer is: Aggregate Retention

The term that refers to the total amount of copayments and deductibles that insurers must pay for covered terrorism losses under the Terrorism Risk Insurance Act (TRIA) is known as "Aggregate Retention." This term specifically describes the financial responsibility that insurers bear before federal assistance kicks in following a certified act of terrorism. Under TRIA, insurers are required to cover their portion of losses (the retention amount) before the federal government provides reimbursement for additional losses. The Aggregate Retention functions as a threshold that must be met, comprising the sum of the copayments and deductibles from all insured losses. Once these financial obligations are satisfied, insurers can then access the federal government's reinsurance support to cover losses exceeding the retention amount. This retention provision ensures that insurers maintain some level of financial responsibility while also providing a safety net through federal support for significant terrorism-related incidents. Such a mechanism is designed to stabilize the insurance market against the potential catastrophic impacts of terrorism.