Belgium’s Terrorism Reinsurance & Insurance Pool (TRIP) was created on February 1, 2008. TRIP, a non-profit organization, distributes the loss costs of terrorism cover among all participants according to their market share, and it acts also as a reinsurance buyer.
TRIP guarantees the cover of terrorism claims during a calendar year up to a global annual limit of EUR1 billion USD1.4 billion. This amount will be adjusted every January based on the Consumer Price Index (relative to December 2005). The Belgian government can change the amount based on several factors, including economic developments, the financial capitalization of the (re)insurers, and the development of terror risk. Carriers are not required to participate in the pool, but participant liability is capped at EUR1 billion, while non-participant liability is not capped at all. Membership in TRIP represents more than 90 percent of the market.
The current annual TRIP limit, based on the December 2008 CPI, is EUR1,075,398,743 (USD1.5 billion). Thus, the first layer becomes EUR475,398,743 (USD665 million) in excess of EUR300 million (USD420 million) for 2009. Beyond the EUR700 million (USD 980 million) capacity (indexed) provided by the (re)insurance industry, the Belgian government will provide an additional capacity of EUR300 million. Market retention is based on TRIP member market shares. The first layer is placed in the reinsurance market, and the insurers can also participate as reinsurers at their discretion.
The classes of business are required to cover damages caused by terrorism are:
- Workmen’s Compensation Insurance
- Motor Liability Insurance
- Strict Liability Insurance for public places or scenes in case of fire or explosion
- Property “Simple Risks Insurance”
- Life Insurance classified by the Banking, Finance and Insurance Commission (CBFA) under n° 21, 22, and 23
- Health Insurance classified by the CBFA under n° 02
- Accident Insurance classified by the CBFA under n° 01
For other classes of business, the law is applicable as far as the insurance policies provide terrorism coverage.
Following classes of business are excluded:
- Terrorism insurance contracts written as such
- Insurance for businesses classified by the CBFA as: railway hull (04), aviation hull (05), ocean hull (part of class 06), aircraft liability (11), ocean-going vessel liability (part of class 12) and railway liability (part of class 13)
- Insurance companies covering liabilities from nuclear risks pertaining to Public Liability and damage to nuclear installations in accordance with the law of July 22, 1985 (the “Law”)
- Theoretical surrender value of life insurance
NBC terrorism is covered for policies where terrorism coverage is compulsory and where it is included in specific policies. When it is covered, as defined in the law, “nuclear” can include “damage caused by weapons or machines intended to explode by a modification of structure of the atomic nucleus,” but the law allows the exclusion of “nuclear bombs.”
Buildings, including contents located at a single company site, are allowed a recovery of up to EUR75 million (USD105 million). All insured objects of a company in an area of less than 50 meters on the same risk-address are deemed to be one and the same location. The parent company and its subsidiaries are considered to be one insurance entity.
The Law provides a broad definition of terrorism, based on that provided by the Organization for Economic Co-operation and Development (OECD). The flexibility of the definition has made it necessary for a committee to decide whether a specific event can be attributed to terrorism. This committee includes a representative of the Minister of Economy, CBFA members and two representatives from the (re)insurance industry.
The committee meets on a monthly basis — of its own accord or at the behest of the government to decide if any events that have occurred since the last meeting could be construed as resulting from terror. A final decision must be rendered within six months of the event’s occurrence. The total compensated amount will be set for the first time at this meeting, and revision is possible every six months. The final decision with respect to the total compensated amount will be set after three years (analogous to the consolidation principle of the Belgian workers compensation business).
(The report includes all charts and exhibits)
Click here to have articles from this series delivered directly to your inbox.