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Interpreting your companies' TRIA procedures
Interpreting your companies' TRIA procedures: how
to create a company-specific implementation checklist
Resource kit 90287
By Ellen D. Kiehl, Ph.D., CAE
Table of contents
Why has PIA created this resource kit?
Some requirements from which confusion may arise
Stakes are high for companies AND producers
Understanding company notices
Developing a company-specific terrorism implementation matrix
Some wording examples from company notices
Pricing
Other PIA terrorism resources
Sample checklist items for company terrorism implementation
Why has PIA created this resource kit?
PIA has heard from members that a good deal of confusion continues to exist in the marketplace about the
Terrorism Risk Insurance Act. While the act places no responsibilities directly on insurance agents and brokers,
insurance producers are impacted daily by responsibilities that originate with the act. Insurers are explicitly
allowed by the Treasury Department to accomplish their duties through agents and brokers. But, insurers'
instructions sometimes are unclear or incomplete, and they are inconsistent from carrier to carrier.
To help PIA members cope with this serious situation, PIA created this document to discuss the practical
realities that still face insurance brokers some two months after the act was signed. It also contains some
suggested items to help agencies create a company-specific implementation checklist.
The act creates a "mandatory offer" of terrorism coverage. The mandatory offer took effect as soon as the
act was signed on Nov. 26, 2002, catching insurers unprepared for its immediate implementation.
As with other mandatory offers, insurance companies have had to create their own internal procedures for
notifying, billing and documenting policyholders' choice either to accept terrorism coverage, or to reject it.
Moreover, there is a marked lack of uniformity among insurers. This wide variety in approaches creates a
challenge for agents and brokers, and multiplies the opportunities for costly E&O exposures to arise.
"PIA members would naturally like to have one way to comply [with the act's requirements], for all their
carriers, across all lines, classes and territories," commented PIA National's Pat Borowski. "But it's not possible,
because everyone in the insurance sector is still in the process of working out the details."
"Insurers don't know how to price, how to underwrite, or even what to say about the act's terrorism coverage,"
agrees PIA's errors & omissions consultant, David Paige, Esq. "It's a moving target. Agents should be upfront
with their clients, stating that this is a very complicated issue, a developing situation that is not easy to explain.
A major E&O aspect is the challenge of trying to properly inform clients about what the act's coverage does—
and does NOT—mean. For example, not all events are covered, and the policy's existing sublimits and
exclusions still apply."
The purpose of this resource kit is to provide practical information and a suggested method of collecting and
analyzing each of your carriers' materials, so you can better understand how they are interpreting and
implementing the act's requirements. Again, you will find there are a wide variety of approaches out there, and
many of them involve YOU.
Some requirements from which confusion may arise
Premium shown for terrorism coverage may create confusion. The act requires insurers to list the premium
charged, if any, for the act's mandatory coverage. One unintended side-effect of this provision is that insureds
who see a separate premium listed for the terrorism coverage in their policies may assume that they can deduct
the stated premium amount from their payment and thereby reject the coverage. In some cases, they clearly are
being given this choice. But in many cases they do not have the option of rejecting the coverage. Explaining this
will often fall to the agent or broker. By not paying the full premium billed, the insured risks a nonpayment
cancellation, so the stakes are high.
Insurers are NOT required to offer terrorism EXCLUSIONS. One major difference from most "mandatory
offer" situations, is that the act does not require insurers to give policyholders a choice to REJECT coverage
(which would require the attachment of a terrorism exclusion). As one industry source told PIA, "All that [the
act] does, is require that insurers "make available" coverage for certified acts of terrorism on the same terms as
coverage for other perils. It does not contain the converse as well. That is, there is no requirement to make
available NO coverage for certified acts of terrorism."
Thus, except in the case of policies that already contained a terrorism exclusion when the act went into effect,
policyholders may have no choice except to pay any additional premium associated with the act's coverage, or
reject the policy as a whole.
In some cases, an insurer may not be able to exclude the coverage—even if it wants to and the client would
agree to the exclusion. This could occur because the insurer, as yet, has no filings in place that it could use to
exclude the federally mandated coverage.
(This situation is particularly likely in New York state, for licensed carriers. The New York State Insurance
Department [NYSID] has signaled that it will scrutinize exclusion filings carefully against specific guidelines
New York has published. In New York especially, agents and brokers may notice distinct differences between
the practices of admitted carriers and excess line carriers, differences which reflect their respective ability to
create and use terrorism exclusions. As of Jan. 28, 2003, the NYSID approved exclusions for ISO that "mirror"
the coverage offer required by the act, allowing insurers using ISO forms to offer clients the choice of excluding
the act's coverage. Filings are pending by AAIS, URB and some individual insurers.)
This situation (where the insured sees a separate premium charge, but has no option to reject coverage) also will
apply to lines where insurers cannot legally attach an endorsement. These include workers' compensation
policies and auto financial responsibility coverages.
Further issues limiting carriers' ability to exclude coverage for terrorism losses arise in states with Standard Fire
Policy provisions, where statutorily mandated fire coverage cannot be abridged, even in the nonadmitted
market. Twenty-nine states (including Connecticut, New Hampshire, New Jersey and New York) have statutes
dictating specific fire insurance coverage terms. These laws date from attempts at fire-form standardization
going back to the nineteenth century. In the 1950s states added a nuclear exclusion so that fire damage
following a nuclear event could be excluded, to protect insurer solvency. However, the SFP provisions mean
that, except for nuclear events, coverage for fire-following losses from other terrorism events, such as the World
Trade Center destruction, remains in place, even if a terrorism exclusion is attached to the policy.
Stakes are high for companies AND producers
E&O exposures. Nonpayment cancellations are not the only potential problem the act entails. For companies,
unless they can document compliance with the act's mandatory offer and other notice provisions, they forfeit
access to the significant financial backstop created by the act. For producers, if there ever is a terrorism loss
affecting your policyholders, the "mandatory offer" aspect of the act creates definite E&O exposures. You will
want to be in a position to show, at a minimum, that policyholders received the notices required by the act. If
they had a choice, but did not elect the act's coverage, you will want to have documentation showing that
election. Yet, there will be serious complications in any plan you might consider to undertake a unilateral,
agency-initiated process to accomplish such documentation, because of the lack of standardization in insurer
practices.
Another issue is the lack of understanding and consensus about the coverage issues raised by the act. Faced with
a decision, naturally clients will turn to you as their agent or broker for further information and advice. You will
want to be confident that you have a good working knowledge of the basics of the act's coverage, its limitations,
and how it compares to and potentially interacts with any existing definitions of terrorism that you may have
become familiar with, in connection with ISO's or other terrorism exclusions you saw prior to the act. Further,
you will want to be confident you understand each of your carriers' approaches to coverage and the forms they
are using.
Read the full PIA resource kit. PIA has created "Understanding the Terrorism Risk Insurance Act,"
QuickSource document No. 90283. It gives a summary of the act, its notification and mandatory offer
requirements and the practical effects of their implementation. This additional document is designed for use in
conjunction with the larger document. It suggests a method to upgrade your agency's current grasp of the
situation.
Understanding company notices
Collect and analyze your company notices. Every agency has seen a flurry of notices regarding the
requirements of the act. Agencies are receiving both instructions that are designed specifically for agents and
brokers, and copies of notices that are going direct to policyholders. Some companies are using relatively
simple procedures, while others are using lengthy forms and sets of instructions. This kit will help you analyze
each company's approach and compare it to those of other companies you represent. Keeping the companies'
approaches straight will be important if you want to help policyholders respond and prevent possible E&O
exposure.
Letters and bulletins providing agency instructions. The first thing to look at, for each carrier, is any letters,
bulletins or other documents you have received from a company outlining its overall plans for implementing the
act. (Because this is a developing topic, many carriers have put out several documents as they've refined their
plans.) You will especially be looking for any instructions by which a company delegates any responsibilities to
you as its agent (or as the broker representing the policyholder). If you take the inventory suggested here (see
the sample checklist items) and find you do not currently have such an overall set of instructions for one or
more of your carriers, you should request one in writing.
Policyholder notices. The next things to review, for each carrier, are copies of policyholder notices, either
sample forms (not filled in with individual policyholder info) that companies have provided for your
information, or risk-specific notices that represent copies of actual notices received by your policyholders.
What type of notice is this? The first step in reviewing policyholder notices is to identify what type of notice
you are seeing. The types of notice fall into two main groups:
1. Notices affecting policies that DID contain a terrorism exclusion as of the enactment date (Nov. 26, 2002) of
the act.
2. Notices affecting policies that DID NOT contain a terrorism exclusion as of Nov. 26, 2002.
These two main groups are discussed separately below.
Policies that DID contain a terrorism exclusion as of Nov. 26, 2002. All companies, including excess/surplus
lines companies, that wrote policies that were in effect on Nov. 26, 2002, and contained terrorism exclusions,
must send a special notice to policyholders by Feb. 24, 2003.
This notice must tell these policyholders:
1. their terrorism exclusion was nullified by the act;
2. the premium they must pay if they want to avoid having the exclusion reinstated; and
3. the date that the terrorism exclusion will be reinstated if they fail to pay the premium. (Note: the insurer must
provide notice at least 30 days before any such reinstatement.)
Sign-off provisions. An insurer can reinstate the terrorism exclusion ONLY if:
1. the insurer has received a written statement from the insured that affirmatively authorizes such reinstatement;
OR
2. (A) the insured fails to pay any increased premium charged by the insurer for providing terrorism coverage,
AND
(B) the insurer provided notice, at least 30 days before any such reinstatement, of (i) the increased premium for
such terrorism coverage and (ii) the rights of the insured with respect to such coverage, including the date upon
which the exclusion would be reinstated if no payment is received.
Thus, insurers are including in these notices a "sign-off" form that would affirmatively authorize the
reinstatement of the pre-existing terrorism exclusion by rejecting the insurer's offer of terrorism coverage at an
increased premium.
To recognize such forms, it may help to look at the model disclosure form developed by NAIC for use in these
situations. Many forms used by insurers stick fairly close to the NAIC format, although some do not. Note that
the NAIC form contains a choice to either elect to purchase terrorism coverage, or elect to have the exclusion
for terrorism coverage reinstated. To view NAIC Model Disclosure Form No. 1, see:
http://www.naic.org/pressroom/releases/disclose_one_final.doc.
Insurers may require that the sign-off form be executed if the insured does not want to pay the additional
premium to avoid having their terrorism exclusion reinstated. Insurers (and producers) may want to get these
signatures (electing the reinstatement of the exclusion) even if the insured intends to waive coverage by simply
not paying the premium. The insurer may want the agency to get involved in helping them get the forms back.
Policies that contained terrorism sublimits, etc. You may have some policies that provided terrorism
coverage, but with different terms, amounts or coverage limitations than the other coverages in the policy. The
act requires a mandatory offer of terrorism coverage that DOES NOT differ materially from the terms, amounts
and coverage limitations applicable to other coverage in the policy. Treasury interprets the mandatory "make
available" requirement to mean an insurer must OFFER such coverage; so be prepared to see notices applicable
to any in-force policies with existing provisions that are different for terrorism coverage than they are for losses
from other causes.
Policies that DID NOT have a terrorism exclusion as of Nov. 26, 2002. Another set of disclosures is required
for policies other than those that contained terrorism exclusions as of Nov. 26, 2002. This includes other inforce policies (those that did NOT have terrorism exclusions) as well as any renewal or newly written policy
effective on or after Nov. 26, 2002.
For these, the act requires a clear and conspicuous disclosure of:
1. the premium charged for insured losses covered by the Terrorism Risk Insurance Program, and
2. the federal share of compensation for insured losses under the program.
Three groups of policies affected. Three groups of policies are affected by these disclosure requirements:
(1) Group (1): Existing (in-force) policies issued before the enactment date: disclosure must be made not later
than 90 days after Nov. 26, 2002. You can identify these notices because they apply to in-force policies that are
not up for renewal between Nov. 26, 2002, and Feb. 24, 2003.
(2) Group (2): Policies issued (includes renewals) within 90 days of Nov. 26, 2002: disclosure must be made at
the time of offer, purchase and renewal. You will be able to identify these notices because they affect new
business (or renewals) issued between Nov. 26, 2002, and Feb. 24, 2003.
(3) Group (3): Policies issued more than 90 days after Nov. 26, 2002: a "separate line item" in the policy is
required at the time of offer, purchase and renewal. Treasury, on Jan. 22, 2003, issued interim guidelines on
how to accomplish the "separate line item" requirement. It affects new and renewal policies issued on and after
Feb. 25, 2003.
In-force policies in group (1) with NO change in premium. In most cases, there should be no additional
midterm premium charge for the coverage mandated by the act (New York, in Circular Letter 25, says that, for
New York policies, no additional premium may be charged.) Treasury said it will deem the use of NAIC Model
Form No. 2 to comply with the act's notice requirements. Your companies may use this form "as is," or adapt it.
You can view this form at: http://www.naic.org/pressroom/releases/disclose_two_final.pdf.
Note: This form contains a line stating, "The portion of your annual premium that is attributable to coverage for
acts of terrorism is: $ _____."
Where NO additional premium is being charged, a zero (0) may appear in this line, or you may see wording
such as: "No separate premium is attributable to coverage for acts of terrorism."
Also note that this NAIC form contains an acknowledgment statement that requires the signature of the
policyholder. So, even in these cases, where no actual coverage election is involved, you may well be asked by
some companies to help collect the signed acknowledgment statement. Other companies we have seen have
decided to delete this acknowledgment signature.
In-force policies in group (1) where there IS a change in premium. You may or may not encounter this
situation in your agency. The act itself does not seem to preclude companies from imposing an additional
premium midterm for coverage mandated by the act—even when that coverage already had been a part of the
policy. However, Treasury, in its Dec. 3, 2002, guidance, does not provide any "safe harbor" notice procedure
for making such charges. While some insurers have announced that they will make no such midterm premium
charges, where no pre-existing exclusion was present, others appear to be adding a charge in this situation. It is
difficult to know how these insurers justify the additional premium; nevertheless they are charging it. Moreover,
they are not necessarily giving policyholders a choice as to whether to pay it or not. In other words, they are not
necessarily allowing policyholders to REJECT the coverage already provided in their policies; they are just
taking this opportunity to charge more for it.
(Only New York has given clear guidance that such midterm premium charges on in-force policies are NOT
permissible. New York's Circular Letter 25 [2002] states: "For policies where terrorism coverage had been
included, the notice should indicate what portion of the premium was attributable to the terrorism coverage and
NO ADDITIONAL PREMIUM MAY BE CHARGED. If no separately identifiable premium is attributable to
terrorism coverage, the notice should so indicate" [emphasis added]. Circular Letter 25 clearly applies to
admitted New York companies [e.g., Section 3426 prohibits midterm premium increases except for additional
exposure units]. Excess lines companies may dispute this provision as being inapplicable to them.)
According to PIA National, "We're seeing a number of carriers waiving additional premium on in-force
policies. When a carrier DOESN'T do this, we're asking them to be satisfied with a reasonable and diligent
effort by the producer for the current policy to collect the additional premium."
Clearly, this is a bad situation, and one that should cause utmost vigilance on the part of the agency. Only a tiny
minority (or none) of your in-force policies may be affected by this (an additional midterm charge where there
was no terrorism exclusion to begin with). However, these policies may possibly be exposed to midterm
nonpayment cancellation if the insured fails to pay. Each policy in this category may require special handling.
New and renewal policies in group (2). For policies issued (includes renewals) within 90 days of Nov. 26,
2002, disclosure must be made at the time of offer, purchase and renewal. Either of the NAIC forms referenced
above may be modified as appropriate by insurers for the particular policy and used for policies issued (or
renewed) within 90 days of enactment.
The Jan. 22, 2003, Treasury guidance states: "Treasury deems an insurer to be in compliance with these
disclosure requirements 'at the time of offer, purchase and renewal' if the insurer makes the required clear and
conspicuous disclosures to the policyholder or applicant no later than at the time that the insurer first formally
offers to provide insurance coverage or renew a policy for a current policyholder, and makes clear and
conspicuous reference back to that disclosure as well as the final terms of terrorism insurance coverage at the
time the transaction is completed. The required disclosures can be communicated by the use of channels,
methods and forms of communication normally used to communicate similar policyholder information."
Policies in group (3). For policies issued on and after Feb. 25, 2003, the act's disclosure requirements include a
"separate line item" provision. The Jan. 22, 2003, Treasury guidance states: "Treasury deems an insurer to be in
compliance with the separate line item requirement . . . if it makes the required 'clear and conspicuous'
disclosure: i) on the declarations page of the policy; ii) elsewhere within the policy itself; or iii) in any rider or
endorsement that is made a part of the policy, as long as the disclosure is clear and conspicuous and otherwise
meets the requirements of [the act] and previous interim guidance."
How will insurers document compliance? The Jan. 22, 2003 interim guidance addresses the issue of how
insurers would certify compliance with required disclosures, as a condition for payment by the federal
government under the act's financial backstop provisions. It states: "With regard to an insurer's certification of
its compliance with the disclosure requirements in Subsection 103(b)(2), Treasury expects to propose
regulations that will require an insurer to certify that it complied with the required disclosure(s) to the
policyholder on the underlying claim or claims submitted by the insurer for federal payment under the
program." While this is not detailed guidance, it may suggest to insurers that they should be in a position to
document compliance with respect to an individual risk, if the need were to arise.
Developing a company-specific terrorism implementation matrix: guidance from PIA
National
The following is a summary of guidance provided to PIA members on Dec. 2, 2002, by PIA National. It
suggests how to develop an implementation matrix for each of your carriers.
You will be looking especially for the agency's role in four areas:
1) What is the carrier doing directly, or directing the producer to do regarding providing notice, the opt-in or
opt-out sign-off and billing?
2) What is the producer's role in ensuring the client takes the necessary action in getting back to the insurer, so
the insurer knows that the insured took action within the required timeframe?
3) What is the producer's role in billing/collecting and remitting the additional premium, if any?
4) Given the carrier's set procedures, what must you do to protect yourself from E&O exposure, while still
conforming to the company's instructions. (In other words, do what you have always done in similar
circumstances: document the offer and the client's decision.)
Create company-specific files. It is important for PIA members, in writing or by e-mail, to request each of
their carriers' written instructions, as well as copies of the forms and notices each carrier is sending to current
policyholders. Thoroughly review the published bulletin on this subject for each of your carriers—do not rely
on verbal explanations.
Find out the name and e-mail address of the carrier's designated contact person for terrorism issues, so the
agency can e-mail questions or information requests, and be sure to request written (includes e-mail) responses
from this representative of the carrier.
Be sure to have carriers state that the procedures they are directing you to complete are in compliance with both
the federal law and state insurance statutes, regulations and rules in affected states for this coverage.
Create a file for each carrier that will contain copies of ALL documents related to the act. These files also
should include the copies of statements and explanations of coverage that each carrier is issuing to insureds.
This will provide a central reference point for agency personnel to review the details of company procedures,
including any newly issued endorsements.
Check any newly issued endorsements to determine the meaning of the coverage they provide or eliminate from
the policy. Be sure to note any differences in procedure or coverage that apply to existing, in-force business as
opposed to new offers and/or renewals.
From each carrier's materials, you must be able to determine:
•
•
•
•
the various forms of coverage that you have placed with the carrier;
for each coverage, what the carrier's stated position or coverage directive is to you: i.e., is there
coverage, limited coverage or no coverage for terrorism;
any variation by class of business;
whether this directive supercedes and either confirms or modifies earlier directives.
For agencies doing business in multiple states, and for multi-state risks, determine whether there are any
differences in each carrier's implementation matrix for different states, as well as any market actions (e.g., new
business moratoriums) that might apply in a given state.
Develop an implementation matrix for each carrier. In addition to creating the individual company files,
containing the carrier-provided documentation, develop an easy reference matrix as a centralized reference
point for all staff, listing implementation details for each of your carriers. Some sample questions you may want
to use to develop the matrix are found below (see "sample checklist items for company terrorism
implementation").
Referencing the carrier's implementation matrix, you may want to:
•
•
•
add the terrorism coverage issue to your proposal outline to review with clients and prospects;
create a check-off documenting that you have discussed the coverage to determine if this is something
the client desires or requires;
educate the client or prospect on whether the act's terrorism exposure has been (or is going to be)
included or excluded, and what the possibilities (if any) and potential costs are for securing separate
coverage for this exposure.
From this point forward, the agency's general E&O prevention procedures, applicable to the review of proposals
and client or prospect check-off (indicating that coverage was offered and declined), will apply to the offer of
terrorism coverage.
Some wording examples from company notices
PIA members have supplied us with copies of their carriers' terrorism information. Here are a few examples that
illustrate points discussed above.
New and renewal policies. A notice to an agency states: "For new and renewal policies, the required disclosure
notice procedures we will be using are not finalized . . . . Please note that we expect that notification at time of
offer will be required, which will require you and/or us to provide a notice with each quote" (Jan. 3).
Comment: reading this, the agency person preparing the implementation matrix would note and follow up on
the fact that these procedures are not yet set, but may well require the agency to provide notices.
PIA expects that the Jan. 22 guidance will result in more carriers finalizing their procedures with respect to
these policies in coming days.
Timeframes. Here are some samples of wording where a terrorism exclusion has been nullified and the insured
must pay an additional premium to avoid reinstatement:
In a cover letter to an agency that accompanied a copy of the policyholder notice: "If the choice of the insured is
to elect terrorism coverage, it is expected that the additional premium due the company, as shown on this
invoice, be paid within 30 days of the date of this letter."
In instructions to an agent from a different carrier: "The customer will have 30 days from the date of the notice
to pay the additional premium."
Still a different carrier states: "The act requires that policyholders be given a minimum of 30 days to make their
decision. We also will provide an additional 10 days mailing time."
These examples illustrate that some carriers may be giving more actual time than others for the client to
respond. Disclosure notices are required by the act to state the date as of which the premium must be paid to
avoid reinstatement of a pre-existing terrorism coverage. So, check the actual date shown in the disclosure
notice rather than assuming that all carriers will be uniform in how they are implementing the 30-day minimum.
Be sure to note if an insurer is NOT including the due-by date on its notice. We have seen yet another
policyholder notice that DOES NOT include this date in the document itself; but rather states, "If we do not
receive the premium within 30 days of the billing date, the terrorism exclusion will be reinstated in its entirety
as of Nov. 26, 2002." In this case, the due date is not displayed but must be determined by looking at a separate
piece of paper, the bill. Note also that this wording clearly voids any "temporary" coverage that was afforded
pending the insured's election, retroactively back to the enactment date.
Moreover, the act imposes a 30-day timeframe ONLY for this limited circumstance. There is no similar
timeframe prescribed by the act for offers associated with new or renewal business. You can't assume—you
should specifically ask each carrier—what timeframes apply to these circumstances.
Caution: PIA has seen suggested sample agency notices for use in the case of pre-existing terrorism exclusions
that state: "You must make your decision and pay any premium by the premium due date—30 days plus five
days for mailing—to be covered." This wording, by introducing the concept of "five days for mailing," causes
PIA grave concerns. Some carriers may be providing additional time to account for mailing; others are not.
Stick to the actual premium due date shown in company documents.
Agent responsibilities. One company states, "Please work closely with your policyholders to ensure that they
respond within the timeframe required once they have been notified . . . . In cases where the prospective
premium charge is zero, no action is required of you or the policyholder."
Although this letter to agents, dated Dec. 9, 2002, states that more information will be provided in coming
weeks, it clearly imposes a duty on the agent to ensure the policyholder responds within the timeframe. It also,
apparently, signals that the policyholder WON'T be required to sign an acknowledgment that the act's required
notification has been provided. (This raises the question of how you will document your own files for E&O
purposes.) Other insurers WILL want you to pursue these acknowledgments.
Another company's three-page letter states: "I am writing to advise you of your role in [the company's] new
procedures for meeting these responsibilities." The letter attaches references and descriptions for no fewer than
22 company-specific form numbers that will be used in various circumstances. Comment: this is an example of
a company trying to provide full information to its agents. To the extent you have not seen anything this
elaborate from a given carrier, you will need to ask yourself, based on the information in this resource kit,
"what's missing?"
Pricing
So far we have said little about pricing. However, in the real world, carriers' pricing decisions will be of major
importance. A recent IRMI Update issue contained pricing observations from several sources. ("Seems the
market's approach to terrorism is just as confusing as whether clients should or not select the coverage," one
observer says.)
One source reports, "Pricing is all over the board. Seemingly low risk, low target area accounts are seeing
moderate charges for coverage (5-15 percent), while others in the same risk profile have seen 40 percent and
higher charged regardless of risk factors. In one case involving a major metro area account, the account moved
from one carrier to another because of significant differences in capacity and charges for terrorism coverage."
An insured reports: "Our U.S. operations qualify as a large account, although we do not have locations in cities
most likely to be targeted. Et, our insurer charges 100 percent of our current annual premium for terrorism on
the Jan. 1, 2003, renewal. This is excessive by any definition."
And this from a risk manager: "I have seen rates for 'statute'-based terrorism coverage be anywhere from 1 cent
per $100 of value, to 60 percent of the p/c premium. The pricing is all over the place. We have also seen no
charge for the current policy period, which is encouraging."
Other PIA terrorism resources
Be sure to check PIA's terrorism update link on our Web site at www.piaonline.org, which provides members
direct links to a wealth of terrorism-related documents.
Also, you will want to read PIA's QuickSource document No. 90283, which provides the basic information on
the act that you will need in order to take full advantage of this subsequent resource kit.
Sample checklist items for company terrorism implementation
Company name: _______________
Company has provided instructions to agency on terrorism implementation; has verified that their procedures
comply with the act
Yes (dates) _______ No _______
1. Policies in-force that DID contain a terrorism exclusion as of Nov. 26, 2002.
(For these policies, notice is required between Nov. 26, 2002, and Feb. 24, 2003; see text of this kit for details.)
Company sent notices to affected insureds (dates) _________
Agency has copies of individual notices _______________
Timeframe, date(s) by which insureds must pay additional premium _________
Company procedures for billing, payment and documenting election (describe):
Any specific duties (follow-up, billing, etc.) delegated to agency (describe)?
Agency is documenting insured's election choice (describe how):
2. Policies in-force that DID NOT contain a terrorism exclusion as of Nov. 26, 2002.
(For these policies, notice is required between Nov. 26, 2002, and Feb. 24, 2003; see text of this kit for details.)
Company sent notices (date) ______________
Company IS NOT charging additional premium ________
Company IS charging AP for existing terrorism coverage ________
Company charging AP for some lines only (describe) __________
Timeframe, date(s) for paying any AP charged ______________
Company instructions as to effect of nonpayment of AP (cancellation? elimination of terrorism
coverage?) ____________________
Company IS requiring acknowledgment by insured of receipt of notice _________
Company IS NOT requiring acknowledgment of receipt of notice _______
If AP is charged, company is requiring election form declining coverage if not paid _________
Company is prepared to attach new terrorism exclusion mid-term if AP not paid _____________
Agency has seen, analyzed a copy of such terrorism exclusion __________
Agency has been delegated specific responsibilities in connection with these notices (describe):
Agency is documenting insured's election to pay additional premium, if any; or decline coverage
(describe how):
3. New policies issued on and after Nov. 26, 2002:
(For these policies, notice is required at the time of offer, purchase and renewal; if issued after Feb. 24, 2003, a
"separate line item" is required; see text for details.)
Company is notifying insureds of availability of terrorism coverage (describe how):
Company IS NOT charging an AP for including terrorism coverage ____________
Company IS charging an AP for including terrorism coverage __________
Company is charging AP for some lines only (describe) __________
Timeframe for decision, payment on election of terrorism coverage? __________
Company IS requiring acknowledgment by insured of receipt of notice _________
Company IS NOT requiring acknowledgment of receipt of notice _______
If AP is charged, company is requiring election form sign-off declining coverage if not paid _________
Company instructions as to effect of nonpayment of AP (cancellation? elimination of terrorism
coverage?) ____________________
Company is prepared to attach terrorism exclusion to new policy if AP not paid _____________
Agency has seen, analyzed a copy of such terrorism exclusion __________
Agency has been delegated specific responsibilities in connection with these notices, e.g., quoting,
binding, billing (describe):
Agency is documenting insured's election to pay additional premium, if any; or decline coverage
(describe how):
4. Renewal policies issued on and after Nov. 26, 2002:
(For these policies, notice is required at the time of offer, purchase and renewal; if issued after Feb. 24, 2003, a
"separate line item" is required; see text for details.)
Company is notifying insureds of availability of terrorism coverage (describe how):
Company is complying with any applicable state-required commercial lines notice requirements
regarding renewals subject to premium increases, changes in coverage, etc. (describe how):
Company IS NOT charging an AP for including terrorism coverage at renewal ____________
Company IS charging an AP for including terrorism coverage at renewal __________
Company is charging AP for some lines only (describe) __________
Timeframe for decision, payment on election of terrorism coverage __________
Company IS requiring acknowledgment by insured of receipt of notice _________
Company IS NOT requiring acknowledgment of receipt of notice _______
If AP is charged, company is requiring election form sign-off declining coverage if not paid _________
Company instructions as to effect of nonpayment of AP (cancellation? elimination of terrorism
coverage?) ____________________
Company is prepared to attach terrorism exclusion to new policy if AP not paid _____________
Agency has seen, analyzed a copy of such terrorism exclusion __________
If last year's policy had a pre-existing terrorism exclusion, company has a different terrorism exclusion
form (referencing the act's coverage) for use with renewals if terrorism coverage is not wanted; and has
explained to insureds the difference ________________
Agency has been delegated specific responsibilities in connection with these notices (describe):
Agency is documenting insured's election to pay additional premium, if any; or decline coverage
(describe how):
(This information is general in nature. It is not intended to provide advice about individual legal, business or other questions, to
recommend a course of legal action or to constitute a promise of action by any party. It addresses selective topics and does not claim
to be a complete summary of the act or any of its provisions. Consult the act for more details or your attorney for legal advice.)
2/3/03
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With respect to all information found in this communication, PIA of Florida and its directors, officers, members, or employees make no warranty, express or implied, or
assume any legal liability or responsibility for the accuracy, completeness, or usefulness of any information contained therein. PIA of Florida does not warrant that the
information or services will meet any specific requirements; nor will it be error-free or uninterrupted; nor shall PIA of Florida be liable for any indirect, incidental, or
consequential damages sustained or incurred in connection with the use of information in this communication. Under no circumstances will PIA of Florida be liable for
any loss or damage caused by anyone's reliance on information contained in this communication. 1-05