Terrorism Risk Insurance Act
The NAIC is committed to working with Congress, the Administration,
state officials, and the industry to develop a long-term plan
to make terrorism insurance available and affordable. President
George W. Bush signed the Terrorism Risk Insurance Program Reauthorization
Act of 2007 (the Act) December 26, 2007.
Several provisions of the initial Act have changed in the 2007
extension. Some of the more significant changes include:
- Revising the definition of a certified act of terrorism
to eliminate the requirement that the individual(s) are acting
on behalf of any foreign person or foreign interest.
- Extending the program by seven years through December 31,
- Requiring clear and conspicuous notice to policyholders
of the existence of the $100 billion cap.
- Fixing the Insurer Deductible at 20% of an insurer’s
direct earned premium, and the federal share of compensation
at 85% of insured losses that exceed insurer deductibles.
- Fixing the program trigger at $100 million for all additional
- Requiring the U.S. Treasury to promulgate regulations for
determining pro-rata shares of insured losses under the program
when insured losses exceed $100 billion.
- Requiring the Comptroller General to study the availability
and affordability of insurance coverage for losses caused by
terrorist attacks involving nuclear, biological, chemical,
or radiological materials and issue a report not later than
one year after the enactment of the Terrorism Risk Insurance
Program Reauthorization Act of 2007.
- Requiring the Comptroller General to determine whether there
are specific markets in the United States where there are unique
capacity constraints on the amount of terrorism insurance available
and issue a report not later than 180 days after the enactment
of the Terrorism Risk Insurance Program Reauthorization Act
- Requiring the President’s Working Group on Financial
Markets to continue an ongoing study of the long-term availability
and affordability of terrorism risk insurance.
- Accelerating the timing of the mandatory recoupment of the
federal share through policyholders surcharges.
In the absence of private market innovations and solutions,
sustaining a viable private market for terrorism insurance depends
on a federal backstop. The NAIC and state insurance commissioners
play an essential role administering the terrorism risk insurance
program—issuing timely guidance to insurers and consulting
with the U.S. Department of the Treasury and its Terrorism Risk
Insurance Program Office.
The NAIC has played an active role in fostering the program
and providing assistance to insurers and the federal government
as the program is implemented. The NAIC and its members have
also testified before both houses of Congress on the need to
extend the program.
The NAIC’s Property and Casualty Insurance Committee
and its Terrorism Insurance Implementation Working Group (TIIWG)
recently adopted a model
bulletin, including an expedited
filing form intended to help state insurance regulators
advise insurers about regulatory requirements related to providing
terrorism insurance under the revised program. The model
bulletin provides guidance to insurers related to
rate filings and policy language that state regulators would
find acceptable to protect U.S. businesses from acts of terrorism.
The model bulletin describes important changes that are contained
in the Act and informs insurers regarding whether rate and policy
form filings might be needed.
On December 19, 2007, the Property and Casualty Insurance Committee
and the Terrorism Insurance Implementation Working Group adopted
the Model Disclosure Forms [Form
2]. Insurers use the forms as drafted, they may
modify the forms to meet individual circumstances or use forms
that are substantially similar. The U.S. Department of the Treasury
worked with the Committee and the Working Group to assure that
the disclosures satisfy the revised disclosure requirements in
The U.S. Department of the Treasury also implements the Terrorism
Risk Insurance Program. Their web site provides updated information
on the Program, including announcements of all rulemakings, interpretive
guidance, and requests for public comments. A link to these can
be found at http://www.treasury.gov/resource-center/fin-mkts/Pages/program.aspx.