U.S. state regulators deny ISO terrorism exclusions

New York’s insurance superintendent, Gregory Serio, today rejected terrorism exclusion wordings that would have pegged maximum insured losses per event at US$25 million. This rejection of the exclusion wordings, which were recently issued by the Insurance Services Office (ISO) and approved by the National Association of Insurance Commissioners (NAIC) after U.S. Congress failed to pass legislation last year to create a government reinsurance facility for terrorism exposures, was also recently denied by California’s insurance regulator.Joanna Rose, a spokesperson for Serio’s office, says the ISO exclusion language, particularly the US$25 million peg on losses, would have left most downtown commercial property owners without adequate insurance cover. "That [the exclusions] would pretty much be every commercial building in New York…"The ISO says that, following approval of its terrorism exclusion wordings by NAIC, roughly 36 state regulators have followed suit. However, many of these do not have a concentration of high-level, high-value buildings in densely populated centers. The ISO exclusion wordings limit the total property damage from an incident of terrorism to US$25 million, as well as excluding any incident involving biological, chemical or radioactive materials. The ISO wordings also limit liability exposure to events where less than 50 people sustain serious bodily injury. "By failing to reach a consensus on the exclusion issue, insurance regulators are laying the groundwork for a coverage continuity nightmare for consumers and insurers," says the National Association of Independent Insurers (NAII) vice president Robert Zeman.