Filing Procedures for Compliance with the Provisions of the Terrorism Risk Insurance Program Re-authorization Act of 2007

Arkansas Insurance Department

Mike Beebe

Julie Benafield Bowman

Governor

Commissioner

1200 West Third Street, Little Rock, AR 72201-1904 · (501) 371-2600 · (501) 371-2618 fax · www.insurance.arkansas.gov

Information (800) 282-9134 · Consumer Services (800) 852-5494 · Seniors (800) 224-6330 · Criminal Inv. (866) 660-0888

February 1, 2008

BULLETIN NO. 1-2008

TO:

ALL LICENSED PROPERTY AND CASUALTY INURERS, THE

NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS, AND

OTHER INTERESTED PARTIES

FROM:

ARKANSAS INSURANCE DEPARTMENT

SUBJECT:

FILING PROCEDURES FOR COMPLIANCE WITH THE PROVISIONS

OF

THE

TERRORISM

RISK

INSURANCE

PROGRAM

RE-

AUTHORIZATION ACT OF 2007

Congress enacted and the President signed into law in November 2002, the Terrorism Risk

Insurance Act of 2002 to provide a federal backstop for defined acts of terrorism. The Act was

extended for a two-year period covering Program Years 2006 and 2007 and has now been

extended for an additional seven years through December 31, 2014 with the enactment of the

Terrorism Risk Insurance Program Reauthorization Act of 2007.

Several provisions of the initial Act have changed in the 2007 extension. Those 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 through December 31, 2014.

• Requiring clear and conspicuous notice to policyholders of the existence of the one hundred

billion dollar ($100,000,000,000.00) cap.

• Fixing the insurer deductible at twenty percent (20%) of an insurer’s direct earned premium,

and the federal share of compensation at eighty-five percent (85%) of insured losses that

exceed insurer deductibles.

• Fixing the program trigger at one hundred million dollars ($100,000,000.00) for all

additional program years.

• Requiring the U.S

undred

billion dollar ($100,000,000,000.00) cap.

• Fixing the insurer deductible at twenty percent (20%) of an insurer’s direct earned premium,

and the federal share of compensation at eighty-five percent (85%) of insured losses that

exceed insurer deductibles.

• Fixing the program trigger at one hundred million dollars ($100,000,000.00) for all

additional program years.

• Requiring the U.S. Treasury to promulgate regulations for determining pro-rata shares of

insured losses under the program when insured losses exceed one hundred billion dollars

($100,000,000,000.00).

• 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

2

insurance available and issue a report not later than one hundred eighty (180) days after the

enactment of the Terrorism Risk Insurance Program Reauthorization Act of 2007.

• 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.

Other terms of the Act, as amended by the Terrorism Risk Insurance Extension Act of 2005,

remain unchanged. The intent of this bulletin is to advise you of certain provisions of the Act, as

extended, that may require insurers to submit a filing in this state of the disclosure notices, policy

language and the applicable rates as a result of the Act

l share through

policyholders’ surcharges.

Other terms of the Act, as amended by the Terrorism Risk Insurance Extension Act of 2005,

remain unchanged. The intent of this bulletin is to advise you of certain provisions of the Act, as

extended, that may require insurers to submit a filing in this state of the disclosure notices, policy

language and the applicable rates as a result of the Act.

Definition of Act of Terrorism

One of the changes made to the Act with the enactment of the Terrorism Risk Insurance Program

Reauthorization Act of 2007 was a revision to the definition of an act of terrorism that eliminated

the requirement that an individual or individuals who carry out an act of terrorism be acting on

behalf of a foreign person or foreign interest. In short, this means that acts formerly referred to

as “domestic” terrorism may now be certified as an act of terrorism under the Act.

Section 102(1) defines an act of terrorism for purposes of the Act. The revised Section

102(1)(A) defines the term “act of terrorism” as any act that is certified by the Secretary of the

Treasury, the Secretary of State, and the Attorney General of the United States:

1. To be an act of terrorism;

2. To be a violent act or an act that is dangerous to human life, property, or infrastructure;

3. To have resulted in damage within the United States (or outside the United States in the

case of an air carrier, flag vessel, or premises of a United States mission); and

4. To have been committed by an individual or individuals, as part of an effort to coerce the

civilian population of the United States or to influence the policy or affect the conduct of

the United States Government by coercion.

Section 102(1)(B) states that no act shall be certified by the Secretary of the Treasury as an act of

terrorism if (a) the act is committed as part of the course of a war declared by the Congress,

except that this clause shall not apply with respect to any coverage for workers’ compensation, or

s or to influence the policy or affect the conduct of

the United States Government by coercion.

Section 102(1)(B) states that no act shall be certified by the Secretary of the Treasury as an act of

terrorism if (a) the act is committed as part of the course of a war declared by the Congress,

except that this clause shall not apply with respect to any coverage for workers’ compensation, or

(b) aggregate property and casualty insurance losses resulting from the act do not exceed five

million dollars ($5,000,000.00). Sections 102(1)(C) and (D) specify that the determinations are

final and not subject to judicial review and that the Secretary of the Treasury cannot delegate the

determination to anyone.

The Terrorism Risk Insurance Act, as amended, contains in Section 103(1)(B) a program trigger

of one hundred million dollars ($100,000,000.00) in aggregate industry insured losses resulting

from a certified act of terrorism before federal reimbursement is triggered.

This state will not allow exclusions of coverage for acts of terrorism that fail to be certified

losses solely because they fall below the five million dollars ($5,000,000.00) threshold in Section

102(1)(B) on any policy that provides coverage for acts of terrorism that fail to be certified.

3

Insurers required to file policy forms may submit language containing coverage limitations for

certified losses that exceed one hundred billion dollars ($100,000,000,000.00) in the aggregate.

Submission of Rates, Policy Form Language and Disclosure Notices

If an insurer relies on an advisory organization to file loss costs and related rating systems on its

behalf, no rate filing is required unless an insurer plans to use a different loss cost multiplier than

is currently on file for coverage for certified losses. Insurers that develop and file rates

independently may choose to maintain their currently filed rates or submit a new filing

otices

If an insurer relies on an advisory organization to file loss costs and related rating systems on its

behalf, no rate filing is required unless an insurer plans to use a different loss cost multiplier than

is currently on file for coverage for certified losses. Insurers that develop and file rates

independently may choose to maintain their currently filed rates or submit a new filing. The rate

filing should provide sufficient information for the reviewer to determine what price would be

charged to a business seeking to cover certified losses. This state will accept filings that contain

a specified percentage of premium to provide for coverage for certified losses. Insurers may also

choose to use rating plans that take into account other factors such as geography, building

profile, proximity to target risks and other reasonable rating factors. The insurer should state in

the filing the basis that it has for selection of the rates and rating systems that it chooses to apply.

The supporting documentation should be sufficient for the reviewer to determine if the rates are

excessive, inadequate or unfairly discriminatory.

Insurers subject to policy form regulation must submit the policy language that they intend to use

in this state. The policy should define acts of terrorism in ways that are consistent with the Act,

as amended, state law and the guidance provided in this bulletin. The definitions, terms and

conditions should be complete and accurately describe the coverage that will be provided in the

policy. Insurers may conclude that current filings are in compliance with the Act, as amended,

state law and the requirements of this bulletin. However, if policy forms make a distinction

between acts of a foreign person or foreign interest and a domestic person or domestic interest, it

is likely that a filing is required

lete and accurately describe the coverage that will be provided in the

policy. Insurers may conclude that current filings are in compliance with the Act, as amended,

state law and the requirements of this bulletin. However, if policy forms make a distinction

between acts of a foreign person or foreign interest and a domestic person or domestic interest, it

is likely that a filing is required.

Another change introduced in the Terrorism Risk Insurance Program Reauthorization Act of

2007 is a new disclosure requirement for any policy issued after the enactment of the Act.

Specifically, in addition to other disclosure requirements previously contained in the Act,

insurers must now also provide clear and conspicuous disclosure to the policyholder of the

existence of the one hundred billion dollar ($100,000,000,000.00) cap under Section 103(e)(2) at

the time of offer, purchase and renewal of the policy.

The Insurance Commissioner requests that the disclosure notices be filed for informational

purposes, along with the policy forms, rates and rating systems as they are an integral part of the

process for notification of policyholders in this state and should be clear and not misleading to

business owners in this state. The disclosures should comply with the requirements of the Act,

as amended, and should be consistent with the policy language and rates filed by the insurer.

The provisions of the Terrorism Risk Insurance Program Reauthorization Act of 2007 are

already in effect, and insurers and advisory organizations must accelerate filing activity in order

to achieve compliance with the revised provisions of the Act. Accordingly, with the exception of

coverage for workers’ compensation, this state will permit insurers and advisory organizations to

place new rates, policy forms and disclosure notices into immediate use without receiving prior

approval from the Insurance Commissioner.

ory organizations must accelerate filing activity in order

to achieve compliance with the revised provisions of the Act. Accordingly, with the exception of

coverage for workers’ compensation, this state will permit insurers and advisory organizations to

place new rates, policy forms and disclosure notices into immediate use without receiving prior

approval from the Insurance Commissioner.

4

If an insurer wants to take advantage of this voluntary speed to market initiative for revised

terrorism products, it should complete the attached Expedited Filing Transmittal Document for

Terrorism Risk Insurance Forms and Pricing and certify on the form that it is in compliance with

the terms of the Terrorism Risk Insurance Program Reauthorization Act of 2007 and the laws of

this state. Completion of the Expedited Filing Transmittal will also relieve an insurer from

having to complete any other filing form or supplemental exhibit that is normally required to

accompany filings.

This voluntary expedited filing system shall remain in place until April 1, 2008. If an insurer

does not want to take advantage of the expedited filing system or cannot file prior to April 1,

2008, then it must submit a normal filing, subject to regular filing requirements, including any

prior approval or waiting period.

Miscellaneous

This bulletin shall take immediate effect and shall expire on December 31, 2014, unless

Congress extends the duration of the Act. The expedited filing procedures discussed in this

bulletin shall expire on April 1, 2008.

This bulletin is intended to, and hereby does, repeal Department Bulletin 13-2002.

Questions concerning this Bulletin should be directed to the Arkansas Insurance Department’s

Property and Casualty Division at (501) 371-2800 or via e-mail to insurance.PnC@arkansas.gov

extends the duration of the Act. The expedited filing procedures discussed in this

bulletin shall expire on April 1, 2008.

This bulletin is intended to, and hereby does, repeal Department Bulletin 13-2002.

Questions concerning this Bulletin should be directed to the Arkansas Insurance Department’s

Property and Casualty Division at (501) 371-2800 or via e-mail to insurance.PnC@arkansas.gov.

(signed by Julie Benafield Bowman)

_______________________________

JULIE BENAFIELD BOWMAN

INSURANCE COMMISSIONER

STATE OF ARKANSAS

(February 1, 2008

______________________________

DATE

5

EXPEDITED FILING TRANSMITTAL DOCUMENT

FOR TERRORISM RISK INSURANCE FORMS AND PRICING

This page applies to the following state(s) ___________

Indicate Type of Filing

Department Use only

ڤFiling Related to Certified Losses

ڤFiling Related to Non-Certified Losses

ڤFiling Applicable to Both Certified and Non-Certified

Losses

Company Name(s)

Domicile

NAIC #

FEIN #

Contact Info for Filer

Name and address of Filer(s)

Telephone #

FAX #

e-mail

Filing information

Line of Insurance (see attachment)

Company Program Title (Marketing

title) (if applicable)

Filing Type ** see note below

This application is used with:

Effective Date Requested

Filing date

Company Tracking Number

Date filing approved in domiciliary

state, if applicable

Component/Form Name

/Description/Synopsis

Form # or Rate Page

Include edition date

Replacement

Or withdrawn?

If replacement,

give form # or rate

page(s) it replaces

Previous State

Filing Number,

if required

by state

01

[ ] Replacement

[ ] Withdrawn

[ ] Neither

02

[ ] Replacement

[ ] Withdrawn

[ ] Neither

To be complete, a filing must include the following:

•

A completed Expedited Filing Transmittal Document for each insure

dition date

Replacement

Or withdrawn?

If replacement,

give form # or rate

page(s) it replaces

Previous State

Filing Number,

if required

by state

01

[ ] Replacement

[ ] Withdrawn

[ ] Neither

02

[ ] Replacement

[ ] Withdrawn

[ ] Neither

To be complete, a filing must include the following:

•

A completed Expedited Filing Transmittal Document for each insurer or advisory organization.

•

One copy of each endorsement, disclosure form or other policy language, unless the insurer has given an advisory

organization authorization to file them on its behalf.

•

A copy of the rates, rating systems and supporting documentation.

•

The appropriate filing fees, if required

•

A postage-paid, self-addressed envelope large enough to accommodate the return.

The insurer(s) submitting this filing certifies that it:

Is in compliance with the terms of the Terrorism Risk Insurance Act, as amended, and the laws of this state; and

Is in compliance with the requirements of the bulletin containing the voluntary expedited filing procedures.

Signature

Print Name:

Title: