As you likely are aware, it’s hard to grasp the speed at which the second Trump administration is implementing its political agenda. Swift executive orders are impacting all facets of American life and industries. Insurance is no exception, as recently indicated by an Insurance Business article that highlights how tariffs may pressure US Insurers.
The political climate is one of many reasons VCIA strategically planned its federal advocacy mission early on in 2025. You can find my Part I Preview of Hill Day here, which explains why we’re going and what we intend to do.
The 119th US Congress is settling in, having only passed just one bill thus far. Our VCIA Hill Day advocacy team, comprised of myself, Board Chair Gail Newman and Legislative Chair Zaw Win, along with representatives from McIntyre + Lemon, have simple, but important goals for our trip next week.
The first one is indeed very simple, which is to gauge the perception lawmakers have about insurance and about captive insurance. As we all know, sometimes perception over actual truth wins the day and it’s vital for us to understand how lawmakers feel about captive insurance and if we need to educate them or frankly reeducate them.
The second goal is more robust. We want to check the pulse on federal legislative activity that may relate to captives. Here we’re led by McIntyre + Lemon’s Jeff Klein who has his ear to the ground in DC for all things pertaining to insurance. Jeff has alerted us to both existing bills that have been put into law, and bills that have been introduced into Congress that this time around may be passed into law.
Below are some of the active or potential bills that we will likely discuss with staffers from the congressional offices of the Vermont Delegation (Senators Sanders and Welch, and Representative Balint) as well as those who work for the elected officials that hold key positions on the Banking Housing & Urban Affairs Committee, namely Senator Tim Scott (R-SC), Chair; and Senator Elizabeth Warren (D-MA), Ranking Member. Also on the itinerary is to meet staffers from the Chair of the Subcommittee on Housing and Insurance, Representative Mike Flood (R-NE). You are welcome to send me any comments or questions before our advocacy mission that I will take into consideration.
Terrorism Risk Insurance Act (TRIA)
TRIA was initially passed in 2002 as a direct response to the September 11, 2001 terrorist attacks. Prior to 9/11, terrorism coverage was typically included in commercial insurance policies at no additional cost because the risk was considered minimal. After the attacks, which resulted in approximately $45 billion in insurance losses, most insurers began excluding terrorism coverage from policies or charging prohibitively high premiums.
TRIA was designed as a temporary program to:
• Ensure terrorism coverage availability in the marketplace
• Create a federal backstop for catastrophic terrorism losses
• Allow time for the private insurance market to develop capacity for terrorism risk
The program has been reauthorized multiple times, in 2007, 2014 and 2020. It is set to expire EOY 2027 and it’s expected debate on reauthorization will likely start soon. The uncertainty around future reauthorizations creates planning challenges for long-term captive strategies and we will lobby hard for swift TRIA reauthorization.
Why is TRIA critical for captives? For captive insurers specifically, TRIA has several important implications:
1. Program Eligibility: Captive insurers domiciled in the U.S. or qualified jurisdictions can participate in TRIA, providing them access to the federal backstop for terrorism risks.
2. Risk Diversification: TRIA allows captives to underwrite terrorism risks that would otherwise be too catastrophic to manage, diversifying their portfolio.
3. Direct Procurement Options: Some captive owners use TRIA protection to directly procure terrorism coverage that might be unavailable or unaffordable in traditional markets.
4. Standalone Terrorism Captives: Some organizations have formed specialized captives specifically for terrorism coverage to access TRIA protection.
5. Coverage Flexibility: Captives can customize terrorism coverage terms while still maintaining the federal backstop protection.
National Flood Insurance Program (NFIP) and Private Flood Insurance
With catastrophic flooding more prominent than ever, the VCIA team is interested in The National Flood Insurance Program (NFIP) and how it relates to captives. NFIP provides federally-backed flood coverage in participating communities where private insurers historically feared to tread. Recent regulatory changes have created opportunities for captive insurers to enter the flood insurance space by offering coverage that complements or replaces NFIP policies. Captives now serve as vehicles for organizations to address flood coverage gaps, retain portions of flood risk, or create tailored coverage terms. This marks an evolution in the relationship between the federal program and captive markets, though challenges in risk modeling, pricing, and regulatory compliance remain significant hurdles for captives operating in this specialized coverage area.
SAFER Act on Cannabis Finance and Regulation
We’ve been monitoring the The Secure and Fair Enforcement (SAFE) Banking Act for several years now and we believe it may be brought up for a vote in this or the next session of congress. The SAFE Banking Act has passed the House multiple times but no the Senate. It would reduce banking barriers for cannabis businesses and for financial institutions that service cannabis-related businesses.
VCIA supports the passing of the SAFE Banking act because it would likely increase formation of cannabis industry captives due to improved financial infrastructure.
These bills are just some of the bills that might be brought up in our discussions. Please see our Hill Day legislative fact sheets for the significant talking points we may raise to congressional staffers. While we’re on the ground in DC we plan to capture pictures and video clips of what we’re doing and what we’re hearing, so that we can produce a report exclusive for VCIA members. Here at VCIA we are raising the bar on captive insurance federal advocacy and I sincerely hope you support our efforts and if you haven’t yet, join our membership.
Sincerely,
Kevin
VCIA CEO
802.658.8242 ext. 1
