New York Superintendent of Insurance Gregory Serio has issued guidance to the industry on the Federal Terrorism Bill. Circular Letter 25 of 2002 lays out the applicability, guidelines, and compliance procedures for the provisions of the Terrorism Risk Insurance Act of 2002 (Act).
The Circular Letter also provides guidance to property/casualty insurers with respect to the underwriting criteria and policy terms and conditions applicable to limitations of coverage in property/casualty policies for terrorist acts that are not covered by the Act.
“The Department’s Circular letter will advise the industry on how to implement the Federal Terrorism Risk Insurance Act. The new Act will go a long way to increase the confidence of the insurance industry in writing coverage in New York City, New York State and throughout the United States,” Serio said. “This Act, when carried out in accordance to our guidance, will promote availability and effectively stabilize an insurance marketplace where coverages were simply unavailable or were priced so high that coverage was unattainable.”
The Act requires insurers to make available property and casualty insurance coverage for insured losses that do not differ materially from the terms, amounts, and other coverage limitations applicable to losses arising from events other than acts of terrorism. Additionally, the Act nullifies any terrorism exclusions that have been implemented.
Although the Department has not approved any terrorism exclusions, policyholders of excess lines or other authorized insurers not regulated by the Department may have implemented such exclusions, and thus those exclusion are now null and void. Such exclusions can only be reinstated if the insured submits a written statement that affirmatively authorizes the reinstatement, or the insured fails to pay the increased premium within thirty days of receiving a disclosure notice that is required by the Act.
“Continued economic activity is dependent on well-functioning insurance markets, and the implementation of the Act will jump-start the economy and ensure that it will no longer be affected by the insurance marketplace’s instability,” Serio continued. “The Act will allow the industry to resume allocation of their resources to traditional insurance risks, including the ability to offer a level of terrorism coverage adequate to meet the legitimate needs and expectations of policyholders. It will also allow for the crafting of remedies to both the short and long-term weaknesses in the insurance system.”
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