CONN. TERROR EXCLUSION SIGNING:

The American Insurance Association (AIA) has urged Connecticut Gov. John Rowland (R) to sign the legislation (HB 5200) passed on April 30 by the state legislature to create a terrorism exclusion in the Standard Fire Policy. “This change will help to stabilize the insurance marketplace by removing an unpredictable and potentially infinite risk in the form of a terrorist attack,” said Paul Moran, AIA vice president, northeast region. “This bill recognizes that there is a threat that no one thought about before September 11, 2001.” AIA worked with the Insurance Association of Connecticut, which led the effort, to pass this legislation. Louisiana, Michigan, Minnesota, Nebraska, New Hampshire, Oklahoma and Virginia have already provided some form of terrorism exclusion to the SFPs in their states. Without the exclusion, insurers would have to pay for losses from a fire following a terrorist act, even if the policyholder had rejected the terrorism coverage available under the federal Terrorism Risk Insurance Act. Meanwhile, Insurance Services Office Inc. (ISO) has asked state regulators to approve conditional commercial policy contract language to address terrorism coverage should Congress not extend the federal terrorism insurance backstop beyond its Dec. 31, 2005, “hard ending.” The endorsements provide insurers several options including: a total exclusion of losses from acts of terrorists; an exclusion for losses resulting from acts involving nuclear, biological or chemical terrorism, and a means to cover terrorism losses not otherwise excluded up to a sublimit. These optional endorsements will be available for use on policies with terms that extend beyond Dec. 31, 2005. If the federal backstop expires, the terms of the endorsements become applicable on Jan. 1, 2006, and would apply to any losses that occur on or after that date. The endorsements will also take effect if the backstop is extended but with an increase in insurers’ share of losses from terrorism events.

Topics Catastrophe