Alliance Applauds Additional TRIA Rules
NU Online News Service, April 18, 12:34 p.m. EDT?The U.S. Treasury Department's second set of regulations to implement the Terrorism Risk Insurance Act is getting a favorable review from the Alliance of American Insurers.
The rules released this week clarify disclosure requirements and "make-available" requirements. They also delineate how insurers should calculate their participation of state residual market insurance entities and state workers' comp funds.
Alliance associate vice president of research Roger Kenney said his Downers Grove, Ill.-based trade group has been favorably impressed with Treasury's professionalism in moving forward quickly to implement the Terrorism Risk Insurance Program.
The following is the Alliance summary of this new set of rules, which is consistent with interim guidelines previously issued:
? On the issue of disclosure notices, Treasury declined to specify exclusive forms or language, giving more leeway for insurers. The new rules simply say insurers can use their own notices as long as they are clear and conspicuous.
? Treasury also made clear what constitutes a valid notice as required by TRIA. The new rules specify that after giving initial notice, if the insured refuses full coverage but accepts reduced coverage or a different premium for coverage, the notice would meet the notice requirement.
? In terms of the record-keeping necessary to demonstrate compliance with the "make available" requirement, carriers can use current record-keeping practices.
? Treasury also noted that if an insurer does not cover all types of risks, then it is not required to cover any excluded risks in the policy, such as nuclear, biological and chemical.
? Treasury also made it clear that state regulations regarding coverage are not usurped by TRIA. Specifically, states can refuse to allow exclusions for terrorism coverage. In such cases, insurers cannot offer less than full coverage or coverage with exclusions.
? Treasury also explained how to account for premium by servicing carriers and other insurer participants in residual markets that share their profits and losses with insurers.
An illustration of how insurers that participate in state residual market insurance mechanisms should calculate their "direct earned premium" for purposes of calculating an "insurer deductible" was included in the interim rules.
? The new set of rules also makes it clear that, under TRIA and if allowed by applicable state law, insurers are not required to offer partial coverage if the policyholder declines full coverage.
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