PCI Cites ISO Action as Supporting TRIA Renewal

The Property Casualty Insurers Association of America has issued a comment citing the call by the Insurance Services Office, Inc. (ISO) to ask state regulators to approve conditional commercial policy contract language that excludes terrorism risks (See IJ Website May 3), as demonstrating “the need to extend the federal terrorism insurance backstop.”

“The action taken by ISO demonstrates the need for Congress and the Treasury to take action this year to extend the Terrorism Risk Insurance Act (TRIA). Without action, commercial insurance consumers will face an uncertain future, policyholders and insurers could be exposed to additional terrorism risk, and the nation’s economy would again be subject to a catastrophic blow from a terrorist attack,” stated Carl Parks, PCI senior vice president, federal government relations.

The bulletin noted: “The optional endorsements filed today will help insurers and policyholders manage potential coverage problems posed by the Dec. 31, 2005, ‘hard ending’ of the federal backstop by providing critical tools needed now to make underwriting decisions on terrorism coverage in an uncertain post-TRIA environment. ISO filed the conditional endorsements under its commercial lines programs for regulatory approval in all jurisdictions.

“The endorsements provide participating ISO insurers several options including: a total exclusion of losses from acts of terrorism, an exclusion for losses resulting from acts involving nuclear, biological or chemical terrorism, and a means to cover terrorism losses not otherwise excluded up to a sublimit (a lesser amount than the full policy limit). These ‘conditional’ endorsements would only take effect if TRIA is not extended beyond Dec. 31, 2005.”

TRIA is set to expire at the end of 2005 unless Congress reauthorizes it or otherwise provides a financial guarantee against future terrorist losses. The PCI pointed out that “Commercial consumers and insurers will have already begun negotiating renewals for policies that extend into 2006, and some state laws require insurers to provide notice of changes in policy terms and conditions as early as September 2004.”

“Failure to extend the program in 2004 will confuse policyholders and create uncertainly for insurers,” Parks stressed. “We are encouraging Congress and the Treasury to take action to extend the program this year to avoid any potential disruption of the market.”