FEDERAL REGULATION · 5 MIN READ
Federal Programs: TRIA, NFIP, and the NRRA
Three federal frameworks sit directly on top of the P&C market. The Terrorism Risk Insurance Act (TRIA) is a federal backstop for certified acts of terrorism. Losses must first be certified (a formal certification process involving the Treasury Secretary), and above each insurer's deductible the federal government pays 80 percent of insured losses while the insurer retains 20 percent, subject to a program trigger. TRIA also imposes a make-available requirement: insurers must offer terrorism coverage on commercial lines on terms that do not differ materially from other coverage, though the insured is free to decline it. Federal outlays are recovered through recoupment surcharges on policyholders, and the program has been reauthorized through 2027. The National Flood Insurance Program (NFIP) addresses a peril the private market historically declined. FEMA runs the program; the Standard Flood Insurance Policy is a federal contract (44 CFR Part 61) and most policies are sold through the Write-Your-Own (WYO) program (42 USC 4081), under which private carriers issue and service policies in their own names while the federal government bears the flood risk. The Biggert-Waters Act of 2012 pushed premiums toward actuarial rates, the Homeowner Flood Insurance Affordability Act of 2014 slowed those increases, and Risk Rating 2.0 modernized rating around property-specific risk. The Nonadmitted and Reinsurance Reform Act (NRRA), part of Dodd-Frank, streamlined surplus lines regulation. Only the insured's home state may regulate a nonadmitted placement or tax its premium, home-state surplus lines broker licensing controls multi-state risks, and an Exempt Commercial Purchaser (a large sophisticated buyer) can be placed with a nonadmitted insurer without the usual diligent-search requirement. The NRRA definition of home state (section 527) determines which single state collects the premium tax on a multi-state risk.
Key rules
TRIA pays 80% of certified terrorism losses above the insurer deductible.
The insurer retains 20 percent plus its deductible, losses must be formally certified as acts of terrorism, and federal payments are recouped through policyholder surcharges.
Why the exam cares: The 80/20 share, the certification requirement, and recoupment are each tested as discrete facts.
TRIA's make-available rule forces insurers to offer terrorism cover, not insureds to buy it.
Commercial insurers must make terrorism coverage available on terms not materially different from other coverage; the policyholder may reject the offer.
Why the exam cares: Wrong answers convert the offer duty into a purchase mandate - the exam checks which party bears the obligation.
Under the NFIP WYO program, private carriers service policies but the government bears the risk.
Write-Your-Own insurers issue the Standard Flood Insurance Policy in their own names for a fee, while flood losses are paid from the federal program.
Why the exam cares: Questions probe who actually carries flood risk under WYO - the federal government, not the fronting carrier.
Biggert-Waters 2012 moved NFIP toward actuarial rates; HFIAA 2014 slowed the increases.
Biggert-Waters phased out many subsidized rates; the 2014 affordability act capped annual increases and restored grandfathering, and Risk Rating 2.0 now rates each property on its own flood characteristics.
Why the exam cares: The paired statutes are tested as a sequence - reform, then affordability correction, then modern rating.
NRRA gives the insured's home state exclusive authority over surplus lines placement and tax.
Only the home state may require broker licensing, regulate the placement, or collect premium tax on a multi-state nonadmitted risk; Exempt Commercial Purchasers skip the diligent-search step.
Why the exam cares: Multi-state surplus lines scenarios test which state taxes the premium - the answer is always the single home state.
Numbers to memorize
- 80/20 — federal/insurer sharing of certified terrorism losses above the insurer deductible under TRIA
- 2027 — year through which TRIA has been reauthorized
- 2012 and 2014 — Biggert-Waters reform act and HFIAA affordability correction for the NFIP
- 44 CFR Part 61 — regulation containing the NFIP Standard Flood Insurance Policy
Common traps
- Assuming TRIA pays on any terrorism loss — remember losses must first be certified through the formal certification process before the federal share applies.
- Reading make-available as a purchase mandate — remember insurers must offer terrorism coverage; commercial insureds may decline it.
- Thinking WYO carriers bear flood risk — remember they write and service NFIP policies for a fee while the federal government pays the losses.
- Allocating surplus lines premium tax among every state where risk is located — remember the NRRA sends 100 percent of the tax to the insured's home state.
For each federal program, memorize one sentence on who bears the risk and who regulates - most questions reduce to exactly those two facts.
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