Lisle, Ill., Dec. 19, 2014-- The American Association of Insurance Services (AAIS) today informed its member insurers in affected lines of steps they can take to address terrorism exposure as the federal terrorism reinsurance program is set to expire on Dec. 31, 2014.
AAIS is a national insurance advisory organization that develops policy forms and manuals used by more than 700 property/casualty insurers.
Even though the U.S. House and Senate had each passed bills in 2014 that would have renewed the program, the 113th Congress adjourned on Dec. 16 without final agreement on renewal of the Terrorism Risk Insurance Act (TRIA), which is scheduled to expire at the end of this month.
With the pending expiration of the program, AAIS member companies in most affected lines have access to two types of endorsements they can use to address terrorism exposure:
- For policies that take effect before Dec. 31, affiliates can still use "certified" terrorism coverage endorsements to meet their obligation to make such coverage available through Dec. 31. They can also add a "conditional" terrorism exclusion, where permitted, to exclude terrorism coverage as soon as the program expires.
- For policies issued after Dec. 31, affiliates can attach endorsements in most states that would exclude loss caused by terrorism as defined in the endorsements.
To date, New York and Florida have not approved terrorism exclusions. AAIS government affairs and legal staff are contacting insurance departments in those two states to ask that they consider filings of terrorism exclusions that have been approved in other states. (The scope of terrorism exclusions can vary depending on whether a state requires coverage of damage from "fire following" an act of terrorism.)
AAIS government affairs and legal staff also continue to participate in deliberations of the Terrorism Insurance Implementation (C) Working Group of the National Association of Insurance Commissioners (NAIC).
“Our government affairs staff has been closely following the events leading up to the expiration of TRIA," says Robin Westcott, AAIS vice president of government affairs.
"By actively participating in the NAIC working group, monitoring the congressional path, and assisting in internal coordination of the AAIS response plan," Westcott says, "AAIS was prepared to implement changes required by terms of re-authorization and has provided an appropriate path for companies now that the program is due to expire.
"We will continue to monitor Congress for any activity regarding re-authorization of the program after the 114th Congress convenes in January.”