NAIC Committees Review TRIA Extension Filing Provisions

The National Association of Insurance Commissioners (“NAIC”) Property and Casualty Insurance Committee and the Terrorism Insurance Implementation Working Group held a joint conference call on Wednesday, December 19, 2007 regarding filing procedures for compliance with the provisions of the recently-passed Terrorism Risk Insurance Program Reauthorization Act of 2007 (“TRIP”).

The NAIC drafted a model bulletin to expedite the delivery to insurers of a common message related to implementation issues that have developed as a result of TRIP.  The purpose of the conference call was to further explain the bulletin and answer any questions about it. 

The Terrorism Risk Insurance Act of 2002 (TRIA), originally provided a federal backstop for defined acts of terrorism and imposed certain obligations on insurers.  A two-year extension renewed the program during 2006 and 2007.   With last week’s passage of TRIP, TRIA will be extended for an additional seven years from December 31, 2007. 

However, in order to become law, TRIP awaits the signature of President Bush before its aforementioned effective date.

Several provisions of TRIA were changed by the 2007 TRIP extension.  Those changes include:

• Revising the definition of a certified act of terrorism to eliminate the requirement that the individual(s) are acting on behalf of any foreign person or foreign interest
• Extending the program through December 31, 2014
• Requiring clear and conspicuous notice to policyholders of the existence of the $100 million cap
• Fixing the insurer deductible to 20 percent of the insurer’s direct earned premium, and the federal share of compensation at 85 percent of insured losses that exceed insurer deductibles
• Fixing the program trigger at $100 million for all additional program years
• Requiring the Comptroller General to study the availability and affordability of insurance coverage for losses caused by terrorist attacks involving nuclear, biological, chemical, or radiological materials and issue a report not later than one year after the enactment of TRIP
• Requiring the President’s Working Group on Financial Markets to continue an ongoing study of the long-term availability of terrorism risk insurance
• Accelerating the timing of the mandatory recoupment of the federal share through policyholder surcharges.

Other terms of TRIA, as amended by the Terrorism Risk Insurance Extension Act of 2005, remain unchanged.

Conference call participants asked several questions during the course of the discussion, some of which NAIC representatives declined to answer.  Instead, the NAIC intends to post questions and answers regarding the topic on its Web site sometime this week.

The United States Secretary of the Treasury also intends to formulate a similar bulletin to be released shortly.

The Terrorism Insurance Implementation Working Group Model Bulletin and two disclosure forms, copies of which are attached for your review, were adopted by unanimous vote at the end of the call.

Also attached is a sample of a TRIA expedited filing form.

 

Should you have any questions or comments, please do not hesitate to contact this office.