BULLETIN NO. 02-02

TO: ALL PROPERTY & CASUALTY INSURERS

FROM: DONALD BRYAN, ACTING COMMISSIONER

RE: VOLUNTARY EXPEDITED FILING PROCEDURES FOR EXCLUSIONS RELATED TO ACTS OF TERRORISM

The purpose of this Bulletin is to inform you of the decision of the Department of Banking and Insurance (Department) to approve certain limited exclusions for acts of terrorism and to provide a voluntary procedure for insurers to use to expedite the filing and timely review of these limited exclusions. There has been much uncertainty in the markets for commercial lines property and casualty insurance coverage in light of the substantial losses experienced by the industry on September 11, 2001. Soon after the events, many reinsurers announced that they did not intend to provide coverage for acts of terrorism in future reinsurance contracts. This led to a concerted effort on behalf of all interested parties to seek a temporary Federally funded back up program for terrorists risks to address market fears disruption over future terrorists attacks, and the ability of the insurance industry to allocate capital to provide coverage for these unpredictable and potentially catastrophic events. However, such a Federal program has not yet been established.

The National Association of Insurance Commissioners (NAIC) recently adopted a motion that "if the Congress adjourns without enacting federal terrorism legislation, the states should grant conditional approval to commercial lines endorsements that exclude coverage for acts of terrorism consistent with the exclusion framework developed by ISO. To the extent permitted by state law, such approvals would sunset or be withdrawn 15 business days after the President signs into law a federal backstop to address insurance losses attributed to acts of terrorism, or be subject to other conditions on the approval consistent with state law." The Department believes that such action balances the need of insurers to have some certainty related to solvency concerns with the business owners’ concerns that their businesses not be subject to uninsured events.

To date, many unacceptable exclusions have been filed by insurers to be attached to commercial lines insurance products. These endorsements have been and will be disapproved for use in this State as inconsistent with the interests of public policy, and inconsistent with N.J.S.A. 17:29AA-10 and 17:29AA-11. Rather than permitting very broad total exclusions of coverage for acts of terrorism, the Department intends to allow exclusions that are substantially similar to the series of optional endorsements developed by the Insurance Services Office, Inc. (ISO). These endorsements include the following:

COMMERCIAL PROPERTY INTERLINE ENDORSEMENT: IL 09 40 01 02 (Applies in Standard Fire Policy States)

COMMERCIAL PROPERTY INTERLINE ENDORSEMENT: IL 09 42 01 02 (Applies in Standard Fire Policy States)

COMMERCIAL GENERAL LIABILITY ENDORSEMENT: CG 21 69 0102

COMMERCIAL GENERAL LIABILITY ENDORSEMENT: CG 31 42 01 02

COMMERCIAL GENERAL LIABILITY ENDORSEMENT: CG 31 43 01 02

COMMERCIAL LIABILITY UMBRELLA ENDORSEMENT: CU 21 29 01 02

BUSINESSOWNERS ENDORSEMENT: BP 05 12 02 (Applies in Standard Fire Policy States)

BUSINESSOWNERS ENDORSEMENT: BP 05 13 01 02

FARM LIABILITY ENDORSEMENT: FL 10 30 01 02

For these limited purposes, ISO has indicated that it will permit the use of its copyrighted language by any insurer, including one that is not a current licensee of ISO for policy forms. Insurers that are current licensees of ISO for policy forms can use the new language pursuant to their current ISO agreements and approval by the Department of its forms. If you are properly affiliated with ISO, and have given them authorization to file on your behalf, no further action is needed on your part. However, if you plan to non-adopt or delay the effective date of the ISO filing(s), then you must notify the Department in writing with the specific action requested. The Expedited Filing Application attached to this Bulletin should be used when requesting a delay in the effective date of the ISO filing(s). A letter containing the ISO designation number(s) that are being non-adopted must be included in the non-adoption letter.

Any insurer that does not have a license agreement in effect with ISO for policy forms is required to execute a short, limited license agreement that authorizes the use of the new language. ISO has indicated that there will be no fee for this limited license. You may contact ISO’s Customer Service Department directly for more information at 1-800-888-4ISO(4476) using Option 2. You may also contact ISO at "info@ISO.com." You will be responsible for assuring compliance with this State’s filing requirements; however, you may find the process outlined in this Bulletin to be helpful in receiving prompt action on your filing.

The policy exclusions filed by ISO and accepted by the Department have some significant limitations that provide coverage for acts of terrorism under certain circumstances. For policies providing property insurance coverage, the following limitations apply:

For policies providing liability insurance coverage, the following limitations apply:

The Department will accept the following definition of acts of terrorism or definitions that are more favorable to policyholders:

Terrorism means activities against persons, organizations or property of any nature:

    1. That involve the following or preparation for the following:
      1. Use or threat of force or violence; or
      2. Commission or threat of a dangerous act; or
      3. Commission or threat of an act that interferes with or disrupts an electronic, communication, information, or mechanical system; and

    2. When one or both of the following applies:
      1. The effect is to intimidate or coerce a government or the civilian population or any segment thereof, or to disrupt any segment of the economy; or
      2. It appears that the intent is to intimidate or coerce a government, or to further political, ideological, religious, social or economic objectives or to express (or to express opposition to) a philosophy or ideology.

For an insurer to receive expedited treatment of its exclusions for commercial lines insurance coverages, the exclusionary endorsements must comply with the terms and conditions set forth in this Bulletin and be submitted in accordance with the instructions specified below. Further, the insurer must certify that it is either using the ISO endorsements or using an endorsement that provides coverage at least as broad as the accepted ISO endorsements. In addition, the insurer must acknowledge that the filing will be withdrawn 15 business days after the President of the United States signs legislation establishing a Federally funded back up program for terrorists risks. In the event the enacted Federal back up program appears insufficient to address legitimate solvency concerns, then either the present form of exclusion could be continued or a revised form of exclusion developed and filed. Fifteen business days appears to provide a reasonable timeframe for analysis of the Federal legislation and either the processing of a request to continue the previously approved exclusion or to develop and file a revised form, without lapse.

 

Forms with Instructions

Attached to this Bulletin is a uniform filing transmittal form that has been agreed upon by this Department and other state insurance departments. An insurer wishing to receive expedited treatment of its filing shall complete the EXPEDITED FILING—COMMERCIAL LINES TERRORIST EXCLUSIONS APPLICATION as directed. In addition, the insurer(s) submitting this filing must certify that it is either using one or more of the ISO endorsements or has developed its own exclusionary language that provides coverage at least as broad as the permitted ISO endorsement with respect to coverage granted to policyholders. Further, the insurer(s) must certify that the reason for filing these endorsements is that it is unable to obtain reinsurance coverage for acts of terrorism. Certification is made by signing the appropriate blank on the transmittal form.

To be complete, a form filing must include the following:

  1. A completed, certified Form Filing Transmittal Header with each filing.
  2. One copy of each endorsement, unless you have given ISO authorization to file them on your behalf.
  3. A postage-paid, self-addressed envelope large enough to accommodate the return.

1/8/2002 /s/ Donald Bryan

Date Donald Bryan

Acting Commissioner

EXPEDITED FILING COMMERCIAL LINES TERRORIST EXCLUSIONS APPLICATION

Ed. 12/21/01

This page applies to the following state(s) ___________

Department Use only

Company Name(s)

Domicile

NAIC #

FEIN #

       
       

Contact Info for Filer

Name and address of Filer(s)

Telephone #

FAX #

e-mail

 

 

 

 

     

Filing information

Line of Insurance (see attachment)

 

Company Program Title (Marketing title) (if applicable)

 

Filing Type ** see note below

 

This application is used with:

 

Effective Date Requested

 

Filing date

 

Company Tracking Number

 

Date filing approved in domiciliary state

 

Component/Form Name /Description/Synopsis

Form #)

Include edition date

Replacement

Or withdrawn?

If replacement,

give form #

it replaces

Previous State

Filing Number,

if required

by state

01

[ ] Replacement

[ ] Withdrawn

[ ] Neither

02

[] Replacement

[ ] Withdrawn

[ ] Neither

To be complete, a form filing must include the following:

The insurer(s) submitting this filing certifies that it is:

___________________________

___________________________

___________________________

Signature

Print Name

Title

COMPLETED SAMPLE FORM

EXPEDITED FILING—COMMERCIAL LINES TERRORIST EXCLUSIONS APPLICATION

Ed. 12/21/01

This page applies to the following state(s) ___________

Department Use only

Company Name(s)

Domicile

NAIC #

FEIN #

ABC Insurance Company

NY

0000-99999

99-1234567

       

Contact Information for Filer

Name and address of Filer(s)

Telephone #

FAX #

e-mail

John Doe (Form Filing)

Regulatory Compliance

ABC Insurance Co.

12345 Fifth Ave

New York, NY 10234

501-555-5555

501-555-5551

John.doe@abcins.com

Filing information

Line of Insurance (see attachment)

Commercial General Liability

Company Program Title (Marketing title) (if applicable)

General Liability Program

Filing Type ** see note below

Form (Endorsement)

This application is used with:

(Insert policy form number to which the application attaches)

Effective Date Requested

01-01-02 (Enter your desired effective date)

Filing date

(Date Company sends filing)

Company Tracking Number

ABC-EP-2001-01 (Enter your filing tracking number, if applicable)

Date filing approved in domiciliary state

Not approved yet. Filed on same date as this filing.

Component/Form Name /Description/Synopsis

Form #)

Include edition date

Replacement

Or withdrawn?

If replacement,

give form #

it replaces

Previous State

Filing Number,

if required

by state

01

War or Terrorism Exclusion

CG 21 69 01 02

[ ] Replacement

[ ] Withdrawn

[x] Neither

02

[ ] Replacement

[ ] Withdrawn

[ ] Neither

To be complete, a form filing must include the following:

The insurer(s) submitting this filing certifies that it is:

___________________________

___________________________

___________________________

Signature

Print Name

Title