Terrorism Bill Needs Clarification
Anyone involved in the insurance industry–underwriter, seller or buyer–is familiar with chaos theory firsthand. No matter how certain you are that all contingencies are accounted for, the theory goes, unforeseen events might still allow chaos to ultimately prevail.
Implementation of the Terrorism Risk Insurance Act is no exception. After President Bush signed the compromise bill presented to him by a lame duck Congress, it was left to the Treasury Department to figure out how to implement it. It is no surprise that there are many more questions than answers facing Treasury at this point.
One of the biggest points of confusion is whether insurers must offer terrorism coverage on all risks. Interim guidance released by the Treasury Department indicates that is not the case. Indeed, Treasury said that depending on the law of a particular state, insurers might not be required to write terrorism coverage for nuclear, biological or chemical events.
If that's the case, what is the point of the law? If you exclude the so-called NBC threats in a terrorist's portfolio, buyers are practically back to being uninsured, as they often found themselves before the law passed.
Some in the industry speculate that the language will be clarified when the Treasury Department drafts its formal rules. In the meantime, however, insurers and buyers are once again left in a state of uncertainty in an already very uncertain world.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, December 16, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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