Insurer Seeks Washington State Permission to Exclude Terrorism Acts

October 24, 2001

Philadelphia-based Ace USA is seeking permission from the Washington State Insurance Commissioner to exclude acts of terrorism from the policies it issues to businesses.

According to a report in The Seattle Times, the first-of-its-kind filing in Washington was made recently by Ace, representing nine companies that insure businesses in the state. Ace seeks to exclude acts of terrorism from its commercial lines of coverage only, starting Jan. 1.

Commercial lines of insurance are issued to businesses to cover things such as vehicles, buildings, liability and business interruption. For a building the size of Seattle’s 76-story Bank of America tower, the annual premium likely is six figures, according to insurance experts. Washington State does not have a list of Ace USA’s clients, and Ace declined to release them.

Ace’s move comes as the insurance industry is asking President Bush and Congress for federal assistance to stabilize the industry in the aftermath of the Sept. 11 attacks, which preliminarily are thought to generate claims in the area of $40 to $50 billion.

It also occurs as chief regulators from around the country, including Washington Insurance Commissioners Mike Kreidler, gather in Washington, D.C., for a three-day summit starting this week on the state of the insurance industry.

Ace’s request has not been reviewed by state regulators but is likely to be granted, according to Beth Berendt, deputy commissioner.

Washington state law does not permit exclusions for terrorism on personal lines of insurance, such as life, auto and property, said Berendt.

Berendt said her office is expecting to come across more such filings regarding commercial lines as part of the shakeout from Sept. 11, and others in the industry confirm that forecast as part of a domino effect.

Prior to Sept. 11, terrorism was not specifically excluded from insurance coverage, because no one considered the risk of terrorism in the U.S. to be that great. After Sept. 11, re-insurers like Lloyds of London — insurance companies that insure insurance companies — have said that beginning Jan. 1, they will no longer cover terrorist acts.

That is why the industry is looking to the government to participate in a pooled coverage plan for future terrorist acts. The industry has pointed to similar systems in other countries, including Spain, South Africa and Great Britain.

Cathy Weatherford, executive vice president and chief executive of the National Association of Insurance Commissioners, commented that she doesn’t think that personal lines will be immediately affected. Weatherford said she was aware of only one other state, Ohio, which so far had received a terrorist-exclusion filing like the one filed by Ace in Washington.

Topics Catastrophe Carriers Natural Disasters Washington

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