The Terrorism Risk Insurance Act (TRIA) tries to prevent double payments of policyholder and claimant losses under multiple federal disaster relief programs. When Treasury implemented TRIA’s double payment rules more than 15 years ago it assumed future disaster relief programs would look a lot like those previously rolled out for hurricanes, floods and earthquakes. COVID-19 has shaken that assumption.

1. 1
2020 TRIP Effectiveness Report
Prohibition on Duplicative Compensation
Centers for Better Insurance Submission
The Centers for Better Insurance, LLC (CBI) is an independent organization committed to
enhancing the value the insurance industry delivers to all stakeholders (including policyholders,
employees and society at large). CBI does so by making available unbiased analysis and insights
about key regulatory issues facing the industry for use by insurance professionals, regulators and
policymakers. Additional information regarding CBI is available on the web at www.betterins.org
or by email request at info@betterins.org.
This comment letter focuses on the effectiveness of the program’s statutory prohibition on
duplicative compensation, particularly in the context of the following issues raised by Treasury:
• The overall effectiveness of TRIP; and
• Any other issues relating to TRIP, terrorism risk insurance, or reinsurance that may be
relevant to FIO’s assessment of the effectiveness of TRIP in the Effectiveness Report.
CBI is submitting separate comment letters with respect to certain other matters of relevance to
the issues raised in Treasury’s Notice appearing at 85 FR 23435 (April 27, 2020).
Executive Summary
The Terrorism Risk Insurance Act purports to prohibit duplicative compensation with respect to
other federal disaster relief programs. There has long been a concern within the insurance
industry that the program actually facilitates duplicative recoveries in certain instances which
would lead to grave risk to efficacy of the program and wasteful expenditure of taxpayer funds.
More than 15 years ago Treasury reviewed these concerns and felt them largely unjustified based
on its expectations for the structure of future disaster relief programs and the interplay among
those programs, state laws and insurance contract wordings.
With the recent proliferation of large-scale federal relief programs meant to support employees,
businesses and state and local governments during the COVID-19 crisis, now is an ideal time for
Treasury to test these earlier assumptions against the backdrop of this unfortunate but real world
experience. Treasury may very well find its preliminary assumptions have not held up.
While Treasury’s hands are largely tied by the statute, it can and should make Congress aware
of these risks and develop approaches or strategies to prevent unintended outcomes which can
be deployed by Congress, state legislatures, insurers and Treasury on short notice following a
terrorist attack.

2. 2
Statutory Prohibition
The Terrorism Risk Insurance Act provides:1
PROHIBITION ON DUPLICATIVE COMPENSATION.—The Federal share of
compensation for insured losses under the Program shall be reduced by the
amount of compensation provided by the Federal Government to any person
under any other Federal program for those insured losses.
The regulations governing the Terrorism Risk Insurance Program provide:2
Reduction of amount payable. The Federal share of compensation for insured
losses under the Program shall be reduced by the amount of other compensation
provided by other Federal programs to an insured or a third party to the extent
such other compensation duplicates the insurance indemnification for those
insured losses.
(i) Other Federal program compensation. For purposes of this section,
compensation provided by other Federal programs for insured losses
means compensation that is provided by Federal programs established for
the purpose of compensating persons for losses in the event of
emergencies, disasters, acts of terrorism, or similar events. Compensation
provided by Federal programs for insured losses excludes benefit or
entitlement payments, such as those made under the Social Security Act,
under laws administered by the Secretary of Veteran Affairs, railroad
retirement benefit payments, and other similar types of benefit payments.
(ii) Insurer due diligence. With respect to any underlying claim for insured
losses, each insurer shall inquire of all involved policyholders, insureds,
and claimants whether the person receiving insurance proceeds for an
insured loss has received, expects to receive, or is entitled to receive
compensation from another Federal program for the insured loss, and if
so, the source and the amount of the compensation received or expected.
The response, source, and such amounts shall be reported with each
underlying claim.
1
TRIA Sec. 103(e)(1)(C).
2
31 CFR § 50.71(b)(2)

3. 3
Examples of Federal Compensation from COVID-19 Response
In response to the COVID-19 crisis, the federal government has implementeda series of programs
established under the Families First Coronavirus Response Act (FFCRA) and the Coronavirus
Economic Stabilization (CARES) Act of 2020.
Federal COVID-19 programs include:
Program Element of Loss Benefit Amount
Emergency Paid Sick Leave Act
Sick leave payments to
symptomatic or
quarantined employees
Up to $5110 per employee
Emergency Economic Injury Grant
Continuing operating
expenses
$10,000 advance on
Economic Injury Disaster
Loan without requirement of
repayment
Employee Retention Tax Credit
Continuing payroll
expenses
Refundable tax credit of 50%
of up to $10,000 in wages
paid
Paycheck Protection Program
Continuing payroll and
operating expenses
Forgivable loans up to $10
million
These programs are useful reference points for the types of programs the Federal government
may implement following an catastrophic act of terrorism, such as a nuclear, biological, chemical
or radiological attack, on a scale similar to the COVID-19 crisis.
Potential Duplication with Workers Compensation Benefits
The Emergency Paid Sick Leave Act requires covered employers to provide up to two weeks of
paid sick leave to symptomatic or quarantined employees. The employer is entitled to a tax credit
in the amount of emergency paid sick leave payments up to $511 per day per employee.
An employee’s right to emergency paid sick leave is “in addition to - and shall not in any way
diminish, reduce or eliminate – any other right or benefit … under … another Federal, State or
local law.”3 An employer cannot require the employee to first use other available benefits before
accessing the emergency paid sick leave.4
3
29 CFR § 826.160(a)(1)
4
29 CFR § 826.160(b). But see California Executive Order N-62-20 para. 5 (providing “where an employee has paid
sick leave benefits specifically available in response to COVID-19, those benefits shall be used and exhausted
before any temporary disability benefits or benefits under Labor Code section 4850 are due and payable”).

4. 4
Illustration: Risk of Duplicative Workers Compensation Benefits
As a result of a biological terrorist attack in a major urban area, tens of thousands of workers are
potentially exposed to a virus at their respective worksites. Health authorities order all workers
in the area to quarantine for 2 weeks. Under the applicable state workers compensation scheme,
a period of quarantine due to a suspected exposure at work is considered a compensable
temporary total disability. Congress extends the Emergency Paid Sick Leave Act to cover 2 weeks
of paid sick leave for workers quarantined because of the attack.
ABC Corp. employs 100 workers within the impacted area. ABC pays $511,000 in emergency paid
sick leave benefits (100 employees x $5110) under the Emergency Paid Sick Leave Act. ABC claims
a tax credit under the program to fully offset this expense.
Because these employees are considered temporarily totally disabled during the period of
quarantine under state workers compensation law, the employer is also liable to pay workers
compensation benefits of $1052 per week per employee ($210,400 in total).
The following economic outcomes are possible:
No Offsets Federal Offset State Offset
Actual Lost Wages $511,000 $511,000 $511,000
Payments to Employees $721,400 $511,000 $511,000
Federal Payments (EPSLA) $511,000 $300,600 $511,000
Insurer Obligation $210,400 $0 $0
Federal Share (TRIA) $0 $168,320 $0
Insurer Share (TRIA) $0 $42,080 $0
If neither the federal sick pay program nor state workers compensation obligation offsets the
other, employees would receive an excess payment while the workers compensation insurer
would be denied a backstop recovery under TRIA.
If benefits under the federal sick leave program are reduced by available workers compensation
benefits, employees would be fully covered while the insurer, backstop and sick pay program
allocate the costs among themselves.
If benefits under the workers compensation program are reduced by the federal sick pay
program, the entire cost would fall to that federal program.

5. 5
Potential Duplication with Business Income Coverage
The Paycheck Protection Program allows covered employers to borrow up to $10 million to cover
continuing payroll, rent, mortgage interest and utility expenses. If at least 75% of the borrowed
amount is actually spent on payroll during an 8-week period the entire loan is forgiven.5
Illustration: Risk of Duplicative Business Income Loss Benefits
A terrorist group attacks the natural gas system serving a major metropolitan area. The attack
compromises natural gas mains and service lines throughout a two-state region causing
numerous explosions and fires. The respective governors order an evacuation of the
metropolitan area while fires are put out and gas mains and service lines are checked for damage
and replaced as necessary. Congress extends the Paycheck Protection Program to cover 8 weeks
of continuing payroll, rent, mortgage interest and utility expenses for impacted small businesses.
XYZ Corp. is a private sanitation company operating routes and a transfer station within the
metropolitan area. XYZ Corp. applies for and receives a $1 million Paycheck Protection Loan. At
the end of the 8-week period, XYZ Corp. resumes normal operations. It qualifies for and receives
full forgiveness of its Paycheck Protection Loan.
XYZ Corp. makes a $1 million business income loss claim with its commercial property insurer for
its continuing payroll, rent and utilities expenses for the same 8-week period.
The following economic outcomes are possible:
No Offsets Federal Offset Insurance Offset
Employer’s Continuing Expenses $1,000,000 $1,000,000 $1,000,000
Payments to Employer $2,000,000 $1,000,000 $1,000,000
Federal Payments (PPP) $1,000,000 $0 $1,000,000
Other Insurer Obligation $1,000,000 $0 $0
Federal Share (TRIA) $0 $800,000 $0
Insurer Share (TRIA) $0 $200,000 $0
If neither the Paycheck Protection Program nor the business income insurance offsets the other,
XYZ Corp. would receive an excess payment while the commercial property insurer would be
denied a backstop recovery under TRIA.
If benefits under the Paycheck Protection Program are reduced by available business income loss
coverage, XYZ Corp. would be fully covered while the insurer, backstop and Paycheck Protection
Program allocate the costs among themselves.
If the business income claim is reduced by benefits under the Paycheck Protection Program, the
entire cost would fall to that federal program.
5
85 FR 20811.

6. 6
The Consequences
The consequences for stakeholders of offset rights under TRIA and other federal programs are
significant. These include:
Fractured Administrative Accountability
Uncertainty in the coordination of benefits is likely to drive confusion on the part of employers
and employees, conflicts between agencies in administration and potential slowdown,
inefficiency or in accuracy in benefit distribution at a time of urgent need for relief. For example,
under the ABC Corp example:
• The Department of Labor oversees the Emergency Paid Sick Leave Act;
• The Internal Revenue Service oversees the tax credit;
• Treasury oversees the Terrorism Risk Insurance Program;
• State workers compensation commissions oversee the administration of workers
compensation benefits; and
• State Departments of Insurance oversee workers compensation insurers.
It would be challenging to wrangle this diverse collection of agencies within a few days after a
catastrophic terrorism attack with the hope to agree on, write up and roll out rules for the orderly
coordination of benefits across programs.
Economic Inefficiency and Failure of the Program
If benefits are not coordinated, it is likely policyholders and claimants would receive a windfall
through double recovery while insurers would be denied their promised recourse to the federal
backstop for reimbursement. Given the scale of the Paycheck Protection Program, such an
outcome could easily result in tens of billions of dollars in economic waste coupled with the
failure of the Terrorism Risk Insurance Program to perform its vital role for the US economic
recovery.
For example, suppose US businesses suffer $150 billion of insured loss from a terrorist attack
consisting of:
Business Income Loss $50 billion
Workers Compensation Loss $75 billion
Liability Loss $25 billion
Congress immediately extends the Paycheck Protection Program through which $50 billion in
forgivable loans are made without any coordination with available insurance or the Terrorism
Risk Insurance Program.

7. 7
The following economic outcomes are possible:
Actual Loss Paid by PPP
Paid Loss by
Insurers
Reimbursed by
TRIP
Business Income Loss $50 billion $50 billion $33.3 billion $0
WC Loss $75 billion $0 $50 billion $40 billion
Liability Loss $25 billion $0 $16.7 billion $13.36 billion
Under this scenario, workers compensation and third-party claimants would have their
recoveries for medical care, death benefits and lost wages reduced by 1/3 under the operation
of the $100 billion liability cap. Businesses, on the other hand, would recover 166% of their
business income losses. Moreover, Treasury would reimburse insurers only 43.4% of their
payouts as compared with the promised 80%.
This is very unlikely the outcome Congress expects.
Proposed Approach
This is not a new issue. In 2004, the insurance industry raised these concerns. Treasury explained
based on its review of disaster programs in place at that time:6
Treasury expects that duplicative compensation situations will be rare. This is
because the most likely Federal programs identified by Treasury as potential
sources of duplicate payments already guard against duplicate compensation.
***
Further, it is expected that Congress will include mechanisms to prevent double
Federal recovery in programs designed to help victims of future acts of terrorism,
much in the same way the September 11th Compensation Fund of 2001 treats
collateral source payments. Moreover, any payments from other Federal
insurance programs should be offset by operation of the ‘‘other insurance’’
clauses in insurers’ standard policy forms for commercial property and casualty
insurance. Finally, insurers themselves can discount settlement offers to reflect
payments received from other Federal programs and in that way avoid the
problem of compensation being duplicative. For claims that do not settle and
proceed to award, some states allow or require reductions based on collateral
source payments.
6
69 FR 39301.

8. 8
Given the proliferation of newly designed federal relief programs originating from the COVID-19
experience, Treasury may wish to test these assumptions by examining whether:
• Those newly created programs do, indeed, guard against duplicate compensation;
• The rules for these programs were established in sufficient time to allow coordination
with insurance claims settlements;
• “Other insurance” clauses in insurance policies have operated to prevent double
recoveries; and
• Whether insurer claims practices and state laws have operated to reduce double
recoveries.
Treasury should include at least initial observations in the 2020 Program Effectiveness Report to
Congress. In the following report Treasury would then be in the position to offer a more detailed
study, strategies stakeholders can use to reduce duplicative recoveries and, if appropriate,
recommendations for amended statutory wording.