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WHEATON, Ill., June 24, 2004--The American
Association of Insurance Services (AAIS) is preparing a countrywide
filing of new terrorism endorsements insurers can use in anticipation of
the scheduled termination of the federal terrorism reinsurance program.
AAIS is a national insurance advisory organization
that develops policy forms and rating information used by more than 600
property/casualty companies nationwide. AAIS's new terrorism
endorsements were finalized following a conference call involving AAIS
product specialists plus representatives of state insurance departments,
the National Association of Insurance Commissioners (NAIC), and the U.S.
Department of the Treasury.
The Treasury Department administers the Terrorism
Risk Insurance Program (TRIP), which is currently scheduled to
"sunset" on Dec. 31, 2005. In anticipation of that, AAIS has
prepared a series of commercial lines endorsements with exclusions that
would take effect if the program terminates or is substantially changed.
Equivalent endorsements have been prepared with respect to commercial
coverages provided under farm policies.
In all of the endorsements, the definition of
"terrorism" would, upon termination of the federal program,
automatically revert back to the definition that prevailed before the
program was created. This means that the new endorsements would make no
distinction between domestic acts of terrorism and those carried out by
foreigners or on behalf of foreign interests.
The new endorsements fall into two basic categories:
"conditional" terrorism exclusions and "post-TRIP"
terrorism exclusions.
"Conditional" terrorism exclusions could
be attached to policies that run from 2005 into 2006. These endorsements
would exclude coverage for terrorism losses if the federal program
terminates as scheduled. They would also take effect if the program is
changed to redefine "terrorism," increase a carrier's
exposure, or impose requirements for terrorism coverage that differ from
terms that otherwise govern coverage, and if current requirements to
make coverage available no longer apply.
For each policy, carriers could choose a conditional
exclusion that excludes losses from all types of terrorist acts, or one
that excludes only losses from terrorist acts involving nuclear,
biological, or chemical (NBC) attacks.
The post-TRIP terrorism exclusions provide the same
choice between excluding all terrorism losses or only NBC losses. The
post-TRIP exclusions are for use with polices that would take effect
after the federal program terminates or is changed as described above.
There are versions of the conditional and post-TRIP
exclusions that preserve coverage for physical damage from fire that
results from terrorist acts, as required in certain states.
If the federal program is continued as currently
structured, certain exclusions within the new AAIS endorsements will not
take effect. Existing language developed to meet requirements under the
federal program will continue to be in effect.
For information on affiliating with AAIS for use of
any of its insurance line programs, contact Joyce Tignino, vice
president of marketing and industry relations, at joycet@AAISonline.com,
or by calling 800/564-AAIS.
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