Reference Bulletin: 01-0663

This Bulletin provides information about recently updated filings of the AAIS War and Terrorism Exclusions endorsements. This Bulletin and the attached endorsements, which are compatible for use with AAIS products, are being posted to the AAIS open web site at www.AAISonline.com. Status reports that provide information regarding approved filings will also be posted to www.AAISonline.com in the near future.

TERRORISM EXCLUSION -- LIMITATIONS

The War and Terrorism exclusions developed and filed for AAIS commercial lines of insurance have been revised to comply with the terms recommended by the National Association of Insurance Commissioners (NAIC). The AAIS War and Terrorism Exclusions filings submitted in late 2001 have been updated to reflect the revised language.

In order to comply with the exclusionary language recommended by the NAIC, the revised terrorism exclusions will apply only when one or more criteria are met. Those criteria are summarized below; refer to the attached endorsements for the actual policy language.

--   The terrorism exclusion will apply whenever an act of terrorism involves the use, release, or escape of nuclear materials; results in nuclear reaction, nuclear radiation, or radioactive contamination; or involves the dispersal or application of or results in the release of biological or chemical materials that are pathogens, toxins, or poisons.

--   When an act of terrorism does not involve events of a nuclear, biological, or chemical nature, the terrorism exclusion will apply only to acts of terrorism in which the total insured property damage exceeds $25,000,000. The magnitude of the property damage will be measured to include the amount of insured damage to property of all persons and entities affected by the act of terrorism and the business interruption losses sustained by owners or occupants of the damaged property. Multiple acts of terrorism that occur within a 72-hour period will be considered a single act of terrorism if collaboration is apparent or if it appears that the acts shared a related purpose, goal, or common leadership.

--   The terrorism exclusion pertaining to liability coverages can also be triggered when fifty or more persons sustain death or serious physical injury.

The terrorism exclusion filed for property coverages in many states also includes an exception for direct loss or damage by fire to covered property. This exception does not apply to any Income Coverage, Earnings Coverage, or Extra Expense Coverage.

ENDORSEMENTS -- WAR AND TERRORISM EXCLUSIONS

A listing of the latest endorsements that have been filed to revise or introduce the war exclusion and to introduce the terrorism exclusion are listed below.

AAIS FILING ACTION

Forms and Endorsements

The endorsements attached to this Bulletin have been filed as optional endorsements for the lines of insurance shown in the table above. The proposed effective date, in most instances, remains January 1, 2002. In most states, endorsement UM 0311 12 01 has been filed on an advisory basis for use under the Commercial Umbrella Program and the remaining endorsements have been filed on behalf of companies that have given AAIS filing authority for the respective lines of insurance.

We are not pursuing the approval of terrorism exclusions in the states of California or New York at this time, based on the positions currently established by the insurance departments in those states.

The endorsements identified in the "No Fire Exception" column have been filed only in the jurisdictions listed below. The endorsements identified in the "Fire Exception" column have been filed in all other jurisdictions, except California and New York.

Rules and Rating Information

AAIS is not filing any countrywide rule changes at this time. We have, however, revised the Virginia manual rules filed to address the use of the various endorsements.

Current loss costs do not reflect the exposure presented by acts of terrorism or war. Companies that wish to effect rate level changes for policies that do not exclude loss resulting from terrorism may wish to consider taking independent filing action.

NON-FILED INLAND MARINE CLASSES (Inland Marine Guide)

Endorsements CL 0468 12 01 and CL 0469 12 01 are compatible for use with the traditional non-filed Inland Marine classes that are described in the AAIS Inland Marine Guide. Those endorsements have not been filed on behalf of companies affiliated with AAIS for the Inland Marine Guide, nor has AAIS filed those endorsements on an advisory basis. The filing requirements for the traditional non-filed Inland Marine classes are provided in the AAIS State Filings Guide.

For those states where filing is not a requirement for non-filed Inland Marine classes, forms and endorsements must still be in compliance with state statutes and regulations. For the traditional non-filed classes, AAIS recommends waiting until approval of the War and Terrorism Exclusions endorsement submitted for the filed Commercial Inland Marine Program before implementing the same endorsement for the traditional non-filed classes in states where there is no filing requirement or before filing in those states, where required.

APPROVAL INFORMATION

A number of states have indicated that approval of terrorism exclusions will be granted only to the extent that the exclusions will 'sunset' or be withdrawn shortly after a federal mechanism is established to provide reinsurance for loss caused by acts of terrorism.

More information regarding state approvals of the endorsements described in this Bulletin will be posted on the AAIS open web site at www.AAISonline.com. The status reports will summarize any company action required to adopt the AAIS filing and provide information regarding effective dates, filing numbers, and special state requirements. State-specific Bulletins will be issued to announce approval of the War and Terrorism Exclusions endorsements only when it is necessary to convey more information than can be included in the web site status reports.

Visitors to the AAIS open web site will be able to find the status reports described above in the section of www.AAISonline.com that includes this Bulletin and the attached endorsements.

ATTACHMENTS

AP 0686    12 01,  War and Terrorism Exclusions
AP 0687    12 01,  War and Terrorism Exclusions
BP 0674    12 01,  War and Terrorism Exclusions
BP 0675    12 01,  War and Terrorism Exclusions
CL 0468    12 01,  War and Terrorism Exclusions
CL 0469    12 01,  War and Terrorism Exclusions
GL 0985    12 01,  War and Terrorism Exclusions
GS 0194    12 01,  War and Terrorism Exclusions
UM 0311   12 01,  War and Terrorism Exclusions  

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AAISDIRECT AND E-MAIL BULLETIN SUMMARIES

All AAIS bulletins, forms, manuals, and other resource information for all lines of insurance are now available online. For a two-week trial of our new Internet service, AAISdirect, or a cost quote, contact Bob Schnoll. E-mail BobS@AAISonline.com or call 800/564-AAIS.

A separate service provides e-mail summaries of bulletins to anyone at your company at no charge. Unlike AAISdirect, you can subscribe to e-mail notices for any line, whether your company is affiliated or not.

While valuable as a stand-alone service, e-mail bulletin summaries are an ideal complement to AAISdirect. The service informs you of new information posted weekly on AAISdirect and is directly linked to the site so that you can quickly access the complete bulletin.

For more information and to sign up, go to www.AAISonline.com or contact Nancy Bengford at NancyB@AAISonline.com.

2002 AAIS Annual Conference, April 14-16, Naples, Florida

Register now for the 2002 AAIS Annual Conference, April 14-16 in Naples, Florida. You'll hear expert speakers address current trends in reinsurance, investment income, e-commerce coverage, and other important topics. You'll also enjoy the elegance and luxury of The Registry Resort. Don't forget your golf clubs. For information and to register go to www.AAISonline.com or call Debra Petges at 800/564-AAIS.