The Terrorism
Risk Insurance Act (Act) of 2002 was passed by Congress on
November 19, 2002 and signed into law by President Bush on
November 26, 2002. The Act provides a federal backstop for
certain acts of terrorism via a temporary federal program for
sharing with the insurance industry the risk of loss from foreign
terrorist attacks. This article summarizes how the Act applies in
Florida. This is only a summary, so see the last paragraph for
other links that will give in-depth analysis of the Act.
Insurers
falling under the Act include admitted companies, non-admitted
companies and residual insurance entities such as JUAs. Lines of
business affected include commercial lines, including workers'
compensation and bonds. Personal lines, flood, life, and health
insurance (to name a few) are not included in the Act. The
threshold dollar amount that must be reached before the federal
government steps in to cover losses is a minimum of $5 million.
As a practical matter, some carriers will absorb losses higher
than that due to their direct earned premium volume.
Insurers are
required to notify policyholders of the premium charge, if any,
associated with the inclusion of terrorism coverage. For policies
in force on November 26, 2002 the notice must be made by February
24, 2003. For policies written after November 26, 2002 the notice
must be made at the time of the offer, purchase, or renewal.
For
admitted companies in Florida the Department of Financial
Services, DFS, (Formerly the Department of Insurance) has
recently (March, 2003) approved several terrorism exclusions.
Therefore an admitted company may, if they so desire, exclude
coverage for terrorism. Note that an admitted carrier is not
required to let the policyholder reject coverage and could issue a
policy including terrorism and not offer an option to reject. If
terrorism is excluded the carrier must offer the overage to
the policyholder. If coverage is excluded the policyholder must
sign a form indicating such. Carriers may charge for terrorism
coverage and the rate must be approved by the DFS. The notice of
premium requirement applies to admitted carriers.
For
non-admitted companies in Florida forms and rates need not
be approved by the DFS. Therefore a surplus lines carrier may, if
they so desire, exclude coverage for terrorism. If terrorism is
excluded the carrier must offer the overage to the
policyholder. If coverage is excluded the policyholder must sign
a form indicating such. Note that a surplus lines carrier is
not required to let the policyholder reject coverage and could
issue a policy with the coverage without offering an option to
reject. The same notice of premium requirement applies to
non-admitted carriers.
For a more
comprehensive summary (four pages) of the Act,
click here to see the Independent Insurance Agents and Brokers
of America (IIABA) summary document.
To see an
extremely comprehensive web page with dozens of links pertaining
to the Act see IIABA's terrorism page located here:
http://www.iiaba.net/vu/Terrorism.htm |
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