Property Not Covered

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Changes to the Federal TerrorismRisk Insurance
Program
Deborah Summerlin, CPCU Vice President,
Insurance Lines January 18, 2008 Audio Dial
877-326-2337 Conference ID x6925778
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Before We Begin

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Todays Presentation

• Summary of TRIPRA Changes
• TRIPRA Compliance
• AAIS Terrorism Disclosure Notices
• Withdrawn Terrorism Endorsements
• Revised Terrorism Endorsements
• Terrorism Supplements
• Filings, Bulletins Future Communications
• Your Questions

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Summary -- TRIPRA Changes

• TRIP Extended to 12/31/2014Conditional and
  Post-TRIP Terrorism endorsements remain on file
  in most states
• Act of Terrorism RevisedNo longer a distinction
  between foreign and domestic acts of
  terrorism non-certified terrorism exclusion
  endorsements being withdrawn
• 100 Billion Cap ClarifiedNeither the Federal
  government, nor insurers that have met their
  deductibles will be required to pay losses
  exceeding 100 billion in a Program Year

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TRIP Provisions Still In Effect

• Make Available Requirement coverage shall not
  materially differ from the terms, amounts, and
  other coverage limitations applicable to loss
  caused by events other than terrorism
• Insurer Deductibles20 of previous years direct
  earned premium
• Program Trigger100 Million per Program Year
• Federal Share of Compensation85 in each
  remaining Program Year
• Lines of Insurance

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TRIP Provisions Still In Effect

• Lines of Insurance IncludedCommercial lines of
  property casualty insurance, including
• excess insurance
• workers' compensation insurance
• directors and officers liability insurance
• Lines or Types of Insurance Not Included
• Crop Livestock Private Mortgage Medical
  Malpractice Health Life Flood (NFIA)
  Reinsurance Auto Burglary Theft Surety
  Professional Liability and Farmowners Multiple
  Peril

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Treasury Position On Farm Lines

• TRIEA Redefined For TRIP, reference to Property
  Casualty Lines of Insurance was redefined to
  exclude farm owners multiple peril insurance in
  late 2005
• Treasury Guidance
• Premium for farm policies reported on NAIC Annual
  Statement Line -1, Fire Line - 2.1, Allied
  Lines and/or Line - 17, Other Liability, remain
  subject to TRIP and the mandatory offer of
  coverage for loss resulting from certified acts
  of terrorism
• Premium for farm policies reported on NAIC Annual
  Statement as Line 3, Farmowners Multiple Peril,
  is no longer subject to TRIP Terrorism Exclusion
  endorsements filed in 2006 approved in states
  other than FL, GA NY

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Treasury Position On Umbrella

• Treasury Guidance
• Excess or umbrella insurance falls within the
  commercial property and casualty insurance
  included in TRIP, but only to the extent it
  provides coverage above primary or underlying
  coverage that is a type of insurance included in
  TRIP
• Farmowners and Commercial Auto excluded from TRIP
  as of TRIEA (2005) Personal Auto never subject
  to TRIP
• Farm Umbrella Terrorism Exclusion endorsements
  filed in 2006 approved in states other than FL,
  GA NY

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Farmowners FUP Exclusions

• Optional Use
• NBC Only or NBC Other Means
• Terrorism Exclusions Do Not Apply To personal
  exposures
• when the policy includes form GL-2/UM 0002, the
  following exclusion applies only to liability
  arising out of "farming" or the activities
  related to a "business" of any "insured"
• when the policy includes form GL-610/UM 0610, the
  following exclusion does not apply to liability
  arising out of the "insured's" personal or
  non-business activities when coverage for such
  activities has been added by endorsement

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Treasury Position On Rental Dwellings

• Coverage for one to four family dwellings
  regularly rented or held for rental to others are
  treated as commercial insurance for TRIP, if
  premiums are reported on NAIC Annual Statement
  Line 1 - Fire Line 2.1 - Allied Lines and Line
  17 - Other Liability
• AAIS files materials for certified acts of
  terrorism under the Dwelling Properties Program
  and the Premises-Only section of the Personal and
  Premises Liability Program
• No AAIS terrorism exclusions or certified
  terrorism loss rating information filed for the
  Dwelling Properties Program or the Premises-Only
  section of the Personal and Premises Liability

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TRIPRA Compliance

• Policyholder Disclosure Required
• At time of offer, purchase, and renewal, once the
  law was enacted
• Separate line item disclosure required for
  policies issued more than 90 days after enactment
• Clear and Conspicuous Disclosure
• Premium charge for terrorism coverage
• Federal governments share of compensation for
  insured losses
• New Clear and conspicuous disclosure of the
  existence of the 100 billion cap at the time of
  offer, purchase, and renewal

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Treasury Guidance On TRIPRA

• Draft Interim Guidance Posted Dec. 31,
  2007posted at http//www.treasury.gov/offices/do
  mestic-finance/financial-institution/terrorism-ins
  urance/
• Offers made on or after Dec. 26, 2007 must be
  compliant with TRIPRA definition of terrorism and
  disclose premium federal share of compensation,
  plus 100 billion cap on the companys liability
• March 31, 2008 considered to be latest reasonable
  date for compliant offers when a compliant offer
  was not possible following the Dec. 26 enactment

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Treasury Guidance On TRIPRA

• What about policies issued before Dec. 26, 2007
  that will be in effect in 2008?
• Make Available requirements apply at the time of
  the offer, purchase, and renewal
• If the offer was fully compliant with the TRIP
  requirements applicable prior to Dec. 26, no new
  offer of coverage is required, unless
• If existing coverage did not continue past Dec.
  31, 2007, then a new offer is required for the
  duration of the policy term
• Note Conditional Terrorism Exclusions Were Not
  Triggered TRIP did not terminate make available
  requirements still apply

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Compliance Requirements Summary

• Policies issued before Dec. 26, 2007
• If compliant with TRIP at that time, no new offer
  of coverage required (unless existing coverage
  ceased beyond Dec. 31, 2007)
• Policies issued as of Dec 26, 2007 and later
• Mandatory offer MUST be compliant with TRIPRAs
  revised definition of terrorism
• Mandatory offer must disclose terrorism premium
  and federal share of compensation, plus 100
  billion cap on the companys liability
• Treasury expects retroactive offers to be made by
  March 31, 2008

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AAIS Terrorism Disclosure Notices

• CL 1045 01 08 Sample notice can be used to make
  mandatory offer of coverage at time offer,
  purchase, and renewal
• Available now for programs other than Dwelling
  Properties and Premises-Only section of Personal
  Premises Liability
• FL 1045 01 08 Sample notice can be used to make
  mandatory offer of coverage at time offer,
  purchase, and renewal
• Available now for Dwelling Properties and
  Premises-Only section of Personal Premises
  Liability programs
• CL 0605 01 08 Filed for use as separate line
  item disclosure
• Can be used for programs other than Dwelling
  Properties and Premises-Only section of Personal
  Premises Liability, but not until state
  approval/available bulletin is issued

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Withdrawn Terrorism Endorsements

• Non-Certified Act of Terrorism Exclusion and War
  And Military Action Exclusion With and Without
  Limited Fire Exception
• Biological and Chemical Non-Certified Act Of
  Terrorism Exclusion and War And Military Action
  Exclusion -- With and Without Limited Fire
  Exception
• Certified And Non-Certified Act Of Terrorism
  Exclusion And War And Military Action Exclusion
  -- With and Without Limited Fire Exception
• Certified And Non-Certified Act Of Terrorism
  Exclusion And War And Military Action Exclusion
  (Biological And Chemical Non-Certified Acts Of
  Terrorism) -- With and Without Limited Fire
  Exception

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Revised Terrorism Endorsements

• For each state program, two revised terrorism
  endorsements filed (other than for Dwelling
  Properties and Premises-Only Liability)
• Certified Terrorism Loss and
• Either
• Certified Act Of Terrorism Exclusion or
• Certified Act Of Terrorism Exclusion(With
  Limited Exception)
• One revised terrorism endorsement filed For
  Dwelling Properties Premises-Only Liability
  Certified Terrorism Loss

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Revised Terrorism Endorsements

• Changes to Certified Terrorism Loss Endorsement
• Certified Act of Terrorism Definition
• No longer refers to an individual or individuals
  acting on behalf of a foreign person or foreign
  interest
• Requires insured losses in excess of five million
  dollars in the aggregate, attributable to all
  types of insurance subject to TRIA

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Revised Terrorism Endorsements

• Changes to Certified Terrorism Loss Endorsement
• 100 Billion Cap
• If aggregate loss exceeds 100 billion in a
  Program Year and the TRIA deductible is met, the
  company will not be responsible for any portion
  of certified terrorism loss over 100 billion
• If certified terrorism loss exceeds 100 billion
  in a Program Year, losses up to that amount are
  subject to pro rata allocation per procedures to
  be established by the Secretary of the Treasury

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Revised Terrorism Endorsements

• Changes to Certified Act Of Terrorism Exclusion
  Endorsement
• Certified Act of Terrorism definition revised
• Changes to Certified Act Of Terrorism Exclusion
  (With Limited Exception) Endorsement
• Certified Act of Terrorism definition revised
  and
• 100 billion cap provisions clarified within Fire
  Exception

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Current Terrorism Supplements

• Terrorism Supplements for Multi-Line, Artisans,
  Businessowners, Commercial Properties, Dwelling
  Properties/Premises-Only Liability Farm Inland
  Marine
• Terrorism Supplement Rules address
• TRIP and Make Available Requirement
• Terrorism Endorsements for Certified Loss and
  Non-Certified Terrorism Loss
• TRIP Disclosure Requirements
• Conditional Terrorism Exclusion Endorsements
• Post-TRIP Terrorism Exclusion Endorsements
• Interstate Accounts
• Terrorism Supplement Rating Information (other
  than Dwelling Properties)

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Changes To Terrorism Supplements

• Omit
• References to non-certified acts of terrorism and
  corresponding endorsements
• References to Artisans, Businessowners
  Commercial Properties from the multi-line
  supplements
• Add
• Reference to Farm Inland Marine in the multi-line
  supplements (and withdraw separate Farm Inland
  Marine Supplement)
• No Change to Rating Information for Certified
  Terrorism Loss
• Withdraw AP, BP, and CP rating information for
  non-certified acts of terrorism

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Terrorism Filings

• AAIS filing process began January 12, 2008 via
  SERFF
• Submitted via expedited filing forms developed by
  the NAIC, unless prohibited
• Expedited Filing Procedures Announced in 12
  states
• Materials filed, retroactively, for all policies
  issued as of the date of enactment, Dec. 26, 2007
• Summarized information available
  athttp//www.aaisonline.com/terrorism/Terrorism_
  Filing_Chart.pdf

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Table _at_ AAISonline.com
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Bulletins Released

• 08-0107 Countrywide Overview
• 08-0118 Dwelling Properties
• 08-0119 Personal Premises Liability
  (Premises-Only Section)
• 08-0120 AgOP, CIM, COP, CXL, CP, DOP, FIM
  Glass
• 08-0121 Artisans
• 08-0122 Businessowners
• 08-0123 Farm Properties
• 08-0124 Personal Premises Liability (Farm
  Liability Section)
• 08-0125 Commercial Umbrella
• 08-0126 Inland Marine Guide
• 08-0127 Commercial Liability

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Future Bulletins

• For Each State/Line of Insurance (or Line of
  Insurance Group), Bulletin will include
• List of Revised Terrorism Endorsements Approved
  or Made Available
• Any Company Action Needed to Adopt Filing
• AAIS and, if any, State Filing Numbers
• Countrywide Bulletins Will Provide Sample
  Versions of Revised Terrorism Supplements
• State-Specific Terrorism Supplements Distributed
  by Bulletin When Approved or Made Available

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Additional Communications

• Postings to AAISonline.com
• Bulletins
• Additional Web Seminars, as needed

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Frequently Asked Questions

• What are the filing requirements for the revised
  terrorism forms and disclosures?TRIPRA does not
  preempt state filing laws. To date, expedited
  filing (file and use) permitted in 12 states.
  Otherwise, existing state laws determine. AAIS
  files sample Make Available notice on
  informational basis.
• Must act of terrorism be redefined for policies
  that were already in-force when TRIPRA was
  enacted?Policies in force prior to Dec. 26,
  2007 should comply with the TRIP requirements
  that were in place at that time. New make
  available offer is required if existing coverage
  did not continue beyond Dec. 31, 2007.
• How are world-wide terrorism exposures addressed?

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Your Questions