NAIC Issues Terror Risk Act Model Forms

By Mark E. Ruquet

NU Online News Service, Nov. 27, 2:10 p.m.EST?The National Association of Insurance Commissionershas issued a model bulletin and disclosure notice for insurers tohelp them comply with the Terror Insurance Risk Act signed into lawyesterday by President George W. Bush.

In a statement, Terri Vaughan, the Kansas City, Mo.-basedassociation president and Iowa Insurance Commissioner, saidinsurers are under a tight deadline to comply with the act, and themodels give them an explanation of their responsibilities andobligations.

The action, NAIC said, followed several days of meetings betweenregulators and industry representatives.

Those models, available on the NAIC Web site at www.naic.org, lay out the noticeregulators would send to insurers and the disclosure forms forpolicyholders.

The bulletin recognizes that 46 states have allowed some limitson terrorism and five have not. It is intended to address theconcerns of all regulators, allowing them to use those sectionsthat they feel apply to them.

The models also contain forms for policyholders to inform themof the act, its premium cost to them, and an agreement to purchaseterrorism insurance where it has been excluded.

Though the act took affect yesterday, the Treasury Departmentstill needs to issue regulations on the acts procedures.

Under the act, the U.S. government would cover 90 percent oflosses up to $100 billion after a deductible, based on premiumsearned, is met.

The deductible schedule rises over the three-year period thelegislation will be in force and is based upon total industrylosses. Acts of terrorism would be defined by the Secretary of theTreasury, the Secretary of State, and the Attorney General.

The program does not cover acts of domestic terrorism, only actsof those representing the interests of a foreign source.

Ms. Vaughn said the NAIC would continue its consultative rolewith Treasury on implementation issues.