The Alliance of American Insurers (AAI) reports it is pleased with the U.S. Treasury Department’s third set of guidelines to help insurers comply with the Federal Terrorism Risk Insurance Act of 2002. Issued Jan. 22, the guidance addresses disclosure issues, participation by non-U.S. insurers, and insured losses as they relate to U.S. air carriers and flag vessels.
“Treasury’s latest interim guidance helps answer some important questions,” Roger Kenney, Alliance associate vice president, remarked. “Of particular interest to insurers is how best to comply with the deadlines and the number of disclosure notices that must be provided to an insured, and how to comply with the ‘separate line item’ disclosure requirement for policies issued 90 days after the effective date of the Act.”
“We’re also pleased that Treasury and the National Association of Insurance Commissioners continue to have a positive working partnership, which speaks well of the existing state regulatory structure,” Kenney said.
Under this latest guidance, an insurer can comply with Treasury requirements “at the time of offer, purchase and renewal,” if the insurer makes “clear and conspicuous” disclosures to the policyholder or applicant no later than when the insurer first formally offers to provide insurance coverage (or renew a policy for a current policyholder) under the program, and makes “clear and conspicuous” reference back to that disclosure as well as the final terms of terrorism insurance coverage at the time the transaction is completed.
Regarding the separate line item requirement, insurers must include the “clear and conspicuous” disclosure on: 1) on the declarations page of the policy, 2) elsewhere in the policy itself, or 3) in any rider or endorsement that is made a part of the policy. Following any of these three options provides insurers with a safe harbor.
These guidelines and those previously issued Dec. 3, 2002, and Dec. 18, 2002, can be relied upon by insurers to comply with the statutory requirements, and are intended to assist insurers prior to Treasury’s issuing regulations.