Since the Terrorism Risk Insurance Program Reauthorization Act was signed into law by President Obama on January 12, many have been waiting on guidance from the U.S. Treasury Department regarding implementation of the new program. The property and casualty insurance industry is awaiting interim direction from the Department, through the Federal Insurance Office (“FIO”), regarding some of the confusion surrounding continuity of coverage and various administrative uncertainties. The Department’s guidance generally details the statute and explains its terms. In the meantime, the FIO will release interim guidance in order to assist the insurance industry until the final rules are in place. Historically, the interim guidance is issued fairly close to the reauthorization date. Some say that the guidance may come as early as sometime in the next two weeks.
The fact that there was a short period between the expiration of TRIA on December 31 of last year and the reauthorization of the act on January 12 is causing confusion and disagreement among many in the insurance industry. Much of this confusion is regarding whether or not the reauthorized act is retroactive to January 1, leaving no gap in coverage. If the reauthorization is not deemed retroactive, the gap in coverage could affect the status of policies that have been written and premiums that have been collected by insurance carriers to cover the potential for a terrorism risk without a government program. There is also an administrative concern regarding the make-available requirement in the reauthorized law because if there is a gap under some insurance carriers’ conditional exclusion policies, mandatory disclosures would be triggered that would not be required if insurance coverage for the entire term of the policy was offered under the act. Many in the industry hope for guidance on this topic as they would like to ignore or disregard these exclusions, but are unsure if doing so would place them in violation of the make-available provision.
During a January 26 conference call, the NAIC adopted a Bulletin that discussed some of the administrative aspects of the act. The bulletin details filing procedures for compliance with the reauthorized TRIA, but emphasized that states differ on coverage limitation for non-certified terrorism acts affected by the reauthorization. The NAIC Bulletin highlights that the reauthorization may require insurance companies to file disclosure notices, submit their policies’ language and applicable rates. The Bulletin included language permitting states to immediately allow advisory organizations and insurance companies to start placing new policy forms, disclosure notices and rates without receiving pre-approval. State regulators who were on this conference call emphasized the concerns regarding whether the FIO’s interim guidance will address the crucial question of whether the reauthorization would be retroactive. Until interim guidance is issued, important questions will remain regarding the implementation of the reauthorized TRIA.
The bulletin can be accessed here