Deductible Calculation in Wiki Example

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Example: Suppose that in 2018, a certified terrorism event caused 80 billion of industry losses. An insurance company experienced 250 million of losses. How much of this is paid by the federal government and how much is paid by the insurance company according to the 2015 reauthorization of TRIA.

line of business direct EP (2017)
auto 30 million
commercial property 100 million
WC 80 million
federal government reimbursement = (loss - deductible) x (1 - coinsurance%)
loss = 250 million
deductible = 20% X (direct EP) = 20% x (180 million) = 36 million (recall that TRIA includes only commerical insurance, so auto is excluded)

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Question: why is WC EP included in the deductible calculation? Based on my understanding, only EP for commercial coverage should be used to calculate deductible.
Thanks

chrisboersma

Covered Lines of Insurance :

Commercial property/ casualty insurance, including excess insurance, workers’ compensation, and surety but excluding crop insurance, private mortgage insurance, title insurance, financial guaranty insurance, medical malpractice insurance, health or life insurance, flood insurance, or reinsurance. (§102(12))

The precise criteria under the current TRIA program are as follows

Each insurer is responsible for paying out a certain amount in claims—known as its deductible—before receiving federal coverage. An insurer’s deductible is proportionate to its size, equaling 20% of an insurer’s annual direct earned premiums for the commercial property/casualty lines of insurance specified in TRIA.

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Thank you very much!