ISO prepares terrorism exclusion wordings in advance of TRIA extension discussions

With the future of the U.S. terrorism risk backstop up in the air, the Insurance Services Office (ISO) has filed conditional wordings for a terrorism insurance policy endorsement.The ISO is asking state regulators to approve the wording if Congress fails to extend the Terrorism Risk Insurance Act (TRIA) past its December, 2005 sunset. “As early as September 2004, insurers will begin taking action on policies with effective dates of Jan. 1, 2005 and later,” the ISO warns. With some of these policies having terms extending beyond the Dec. 31, 2005 sunset, ISO notes, “the disappearance of a federal terrorism insurance backstop will cause insurers to reevaluate their ability to cover terrorism.The exclusions would give insurers some comfort about writing polices beyond that deadline.Among the options provided in the filing are a total terrorism exclusion, an exclusion for acts involving nuclear, biological or chemical terrorism, or coverage for losses up to a sublimit.The Property Casualty Insurers Association of America (PCI) says some state laws require insurers to file policy changes such as exclusions by September 2004 for policies extending into 2006, showing the need for urgent action. “Failure to extend the program in 2004 will confuse policyholders and create uncertainty for insurers,” says Carl Parks, senior vice president at PCI. “We are encouraging Congress and the Treasury to take action to extend the program this year to avoid any potential disruption of the market.”The U.S. Treasury Department is currently asking for input from insurers to help form a report on the status of the terrorism backstop and terrorism coverage availability.