Most State Terror Insurance Regs Follow NAIC

"We were hoping that more states would have issued bulletins by now, but it's encouraging that most states are following the NAIC model," said Roger Kenney, associate vice president of research at the Alliance in Downers Grove, Ill.

"The NAIC model bulletin outlines the terrorism bill that was passed by the Congress. It explains what the bill does, how it affects state laws and how it overrides certain state filing requirements–the model explains how the law overrides certain state laws regarding prior approval of rates and any waiting periods," Mr. Kenney said.

So far, he said, Florida is the only state that has issued a bulletin that diverges significantly from the NAIC model.

"Florida is taking the position in its bulletin that there are no additional forms for insurers to file in their state because the state has not permitted exclusions for terrorism," Mr. Kenney noted.

Although Florida regulators said they have not permitted exclusions for terrorism, reinstatements of exclusions may be permitted on surplus lines risks and large commercial risks.

The state has also developed a system where insurers can immediately implement prospective rate changes for coverage of insured losses related to terrorism acts as defined in the new law, Mr. Kenney explained.

Additionally, a number of NAIC model-based, state-issued bulletins contain small variations for compliance with individual state regulations and law.

Under the suggested NAIC model, for instance, companies can file rates-and-forms filings within 30 days after they are implemented, but a few states have said that rates and forms actually have to be filed before companies can use them.

Another minor variation involves disclosure forms–some states are requesting that they be filed for informational purposes on the state level, while some states do not ask them at all. The following are some examples from different state bulletins:

? The Connecticut bulletin provides for an expedited filing but requires that forms be filed on or before they are used. Insurers are also required to file the disclosure notices for informational purposes.

? The Massachusetts Division of Insurance states that the current in-force policies that contain terrorism exclusions or limitations are considered approved and enforceable for any coverage for losses due to acts that are not certified "acts of terrorism."

It further states that insurers should file a new endorsement that clearly distinguishes the coverage available or limited between certified and non-certified acts of terrorism.

The Division reserves the right to subsequently review rate filings and invalidate a rate as excessive, inadequate, or unfairly discriminatory. It also will not impose the statutory 30-day filing provisions for form filings.

? The North Dakota bulletin states that supporting documentation for rates do not have to be filed if the rate for terrorism coverage is three percent or less. Insurers are given 30 days to file forms under an expedited process. Disclosure forms are to be filed for informational purposes.

? The Oklahoma bulletin states that rates and forms used this year can be implemented on a use-and-file basis. Beginning next year, however, they are on a file-and-use basis including disclosure notices. The prior approval of workers' compensation rates is waived for the first year of the law.

? Oregon will not enforce the requirement for timely rate and form filings until the beginning of 2003. Until then, insurers can use rates and forms on a use-and-file basis. Beginning next month, rates and policy forms must not be used before they are filed.