AAIS Holds Off On N.Y., Calif. Policy Revisions

"We're monitoring the development of the regulatory position there and will submit a filing when we know what they will look favorably upon," said an AAIS representative, Joseph S. Harrington.

AAIS also said it will be discussing personal lines coverage and exclusions for terrorism in a teleconference this week at a meeting called by the National Association of Insurance Commissioners.

Mr. Harrington said AAIS would be listening to the concerns of the regulators and "expressing what we know of the companies we've talked to." He said they hoped to find a solution "to find the appropriate balance to control the exposure."

There is "concern by small companies about certain events that fall under the NAIC threshold that may involve very large losses for them," Mr. Harrington said.

The AAIS original commercial terrorism exclusions were filed in November 2001. AAIS said that past action came in response to requests from its member companies, which reported that their reinsurers planned to exclude coverage for terrorism in contracts up for renewal on Jan. 1, 2002.

The latest AAIS countrywide revisions to those filings came in response to a late December policy recommendation by the NAIC, the company said.

AAIS said that filings adopt a definition of "terrorism" that is unique to the insurance industry, in place of the definition derived from federal statutes used in the original AAIS filings.

The new endorsements, in addition to incorporating an exception to the exclusion for terrorist events that cause $25 million or less in total insured damages, also exempt from the exclusion events with 50 or fewer deaths and injuries.

In states that require it, the revised language incorporates an exception to the exclusion for direct physical damage that results from fire caused by a terrorist act. Exceptions to exclusions maintain coverage under the specified conditions.

Copies of the endorsements and the AAIS bulletin explaining them can be seen at the AAIS Web site, www.AAISonline.com. Notice of state approvals will be posted on the Web site.

To date, no new filings have been made in New York and California–two states whose insurance departments have not approved Insurance Services Office terrorism exclusions based on the NAIC recommendation.

AAIS is a national insurance advisory organization based in suburban Chicago. More than 600 property-casualty insurers nationwide use AAIS's policy forms, manual rules, and loss cost rating information.