RMI 3567 Exam 2 Questions And Answers Rated 100% Correct!!

What are three positive externalities that occurred due to access to terrorism insurance? - Answer-1. facilitates real estate transaction 2. strengthens businesses' ability to operate in risky areas 3. protects wealth/savings of households in risky areas Pollution from gasoline in a car or industrial pollution would be examples of what? - Answer-negative externality This is the most common terrorism model for insurance - Answer-risk pool What are the two main features/provisions of TRIA? - Answer-Make Available Provision Federal Loss Provision What is a cyber-attack in which the perpetrator seeks to make a machine or network resource unavailable to its intended users by temporarily or indefinitely disrupting services of a host connected to the Internet? - Answer-Denial-of-service attack What is an externality? - Answer-cost or benefit of an economic activity incurred by a third party What was the old public insurance model? what is it now? - Answer-Old: government becomes the insurer New: government only intervenes if there is a problem, "crowds in" markets What are 3 models for insuring terrorism risk? - Answer-1. public insurance 2. public reinsurance 3. risk pool What country utilized the risk pool terrorism insurance model? - Answer-Netherlands What country utilized the public insurance terrorism insurance model? - Answer-IsraelWhat country utilized the public reinsurance terrorism insurance model? - Answer-US What is TRIA? - Answer-Terrorism Risk Insurance Act federal program for commercial insurance lines Made make available provision act Under the make available provision insurers must do what two things? - Answer-1. insurers must offer terrorism coverage in P&C policies 2. insurers must make premiums explicit for terrorism coverage What is the Israeli Property Tax Act? - Answer-15% of sales taxes go into compensation fund compensation fund pays damages for commercial and residential coverage What does the Compensation Fund in Israel cover? - Answer-- all direct damage: businesses, citizens and foreigners - indirect damages: commercial, ex: loss of revenue - damages outside of Israel ex: to ships or airplanes Who determines if an event qualifies as a terrorism event and what areas are affected by terrorism in Israel? - Answer-Financial Minister What happened in Gaza in 2012? - Answer-1,500 rockets were fired from Gaza into Israeli-controlled neighborhoods 2500 claims, Direct: 20M euros Indirect: 100M euros Affected areas: communities within 40km of Gaza What are the benefits of the public insurance model for terrorism? - Answer-- everyone is covered- large governments can finance large losses What are the limitations of the public insurance model for terrorism? - Answer-- not risk-based - crowd out market What has been the largest loss so far that TRIA would have potentially paid out for? - Answer-Katrina What is the federal loss sharing provision under TRIA? - Answer-basically free reinsurance for insurers who offer terrorism insurance What are the triggers under the federal loss sharing provision under TRIA? - Answer-triggers are industry level losses - as a whole not just one insurer What are the 3 benefits of public reinsurance for terrorism? - Answer-1. facilitates access to terrorism insurance 2. crowds in private sector 3. subsidizes extreme event financing - deductibles/coinsurance preserve insurers' incentives to minimize losses