NC DOI Bulletin 15-B-01
TRIA Reauthorization Act of 2015
North Carolina Department of Insurance
Wayne Goodwin, Commissioner
BULLETIN
Number 15-B-01
DATE:
January 29, 2015
TO:
ALL PROPERTY & CASUALTY INSURERS WRITING
COMMERCIAL LINES INSURANCE PRODUCTS
ALL INSURERS ON THE NAIC QUARTERLY
LISTING OF ALIEN INSURERS
RE:
FILING PROCEDURES FOR COMPLIANCE
WITH THE PROVISIONS OF THE TERRORISM RISK INSURANCE
PROGRAM REAUTHORIZATION ACT OF 2015
The purpose of this bulletin is to advise you of certain provisions of the Terrorism Risk Insurance
Program Reauthorization Act of 2015 amending and extending the Terrorism Risk Insurance Act of
2002 (the Act) by reauthorization, which may require insurers to submit a filing in this state of
disclosure notices, policy language, and applicable rates as a result of the Act. For further details related
to the Act, please consult the Act itself.
Background
Uncertainty in the markets for commercial lines property and casualty insurance coverage arose
following the substantial loss of lives and property experienced on September 11, 2001. Soon after these
tragic events, many reinsurers announced that they would no longer 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 federal backstop to facilitate the ability of the insurance industry to continue to provide
coverage for these unpredictable and potentially catastrophic events. As a result, Congress enacted and
the President signed into law in November 2002, the Terrorism Risk Insurance Act of 2002 (The Act).
This federal law provided a federal backstop for defined acts of terrorism and imposed certain
obligations on insurers. The Act was extended for a two-year period covering Program Years 2006 and
2007 and for an additional seven years through December 31, 2014 with the enactment of the Terrorism
Risk Insurance Program Reauthorization Act of 2007
e Terrorism Risk Insurance Act of 2002 (The Act).
This federal law provided a federal backstop for defined acts of terrorism and imposed certain
obligations on insurers. The Act was extended for a two-year period covering Program Years 2006 and
2007 and for an additional seven years through December 31, 2014 with the enactment of the Terrorism
Risk Insurance Program Reauthorization Act of 2007. The Act has now been extended again with the
enactment of the Terrorism Risk Insurance Program Reauthorization Act of 2015.
Several provisions of the Act have changed in the 2015 extension. Those changes include:
Extending the program through December 31, 2020.
Fixing the Insurer Deductible as 20% of an insurer’s direct earned premium of the preceding
calendar year and the federal share of the compensation at 85% of insured losses that exceed
insurer deductibles until January 1, 2016, at which time the federal share shall decrease by 1
percentage point per calendar year until equal to 80%.
Requiring the Secretary of the Treasury certify acts of terrorism in consultation with the
Secretary of Homeland Security.
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Amending the program trigger to apply to certified acts with insured losses exceeding
$100,000,000 for calendar year 2015, $120,000,000 for calendar year 2016, $140,000,000 for
calendar year 2017, $160,000,000 for calendar year 2018, $180,000,000 for calendar year 2019,
and $200,000,000 for calendar year 2020 and any calendar year thereafter.
The mandatory recoupment of the federal share through policyholder surcharges increasing to
140 percent (from 133 percent).
The insurance marketplace aggregate retention amount being the lesser of $27.5 billion,
increasing annually by $2 billion until it equals $37.5 billion, and the aggregate amount of
insured losses for the calendar year for all insurers
d any calendar year thereafter.
The mandatory recoupment of the federal share through policyholder surcharges increasing to
140 percent (from 133 percent).
The insurance marketplace aggregate retention amount being the lesser of $27.5 billion,
increasing annually by $2 billion until it equals $37.5 billion, and the aggregate amount of
insured losses for the calendar year for all insurers. In the calendar following the calendar year
in which the marketplace retention amount equals $37.5 billion, and beginning in calendar year
2020 it is revised to be the lesser of the annual average of the sum of insurer deductibles for all
insurers participating in the Program for the prior 3 calendar years as such sum is determined by
the Secretary of Treasury by regulation.
Requiring the Secretary of the Treasury, not later than 9 months after the date of enactment of
the Act, to conduct and complete a study on the certification process, including the establishment
of a reasonable timetable by which the Secretary must make an accurate determination on
whether to certify an act as an act of terrorism.
Requiring insurers participating in the Program to submit to the Secretary of Treasury for a
Congressional report to be submitted on June 30, 2016 and every June 30 thereafter, information
regarding insurance coverage for terrorism losses in order to evaluate the effectiveness of the
Program. The information to be provided includes; lines of insurance with exposure to terrorism
losses, premiums earned on coverage, geographical location of exposures, pricing of coverage,
the take-up rate for coverage, the amount of private reinsurance for acts of terrorism purchased
and such other matters as the Secretary considers appropriate. This information may be collected
by a statistical aggregator and in coordination with State insurance regulatory authorities
ure to terrorism
losses, premiums earned on coverage, geographical location of exposures, pricing of coverage,
the take-up rate for coverage, the amount of private reinsurance for acts of terrorism purchased
and such other matters as the Secretary considers appropriate. This information may be collected
by a statistical aggregator and in coordination with State insurance regulatory authorities.
Requiring the Comptroller General of the United States to complete a study on the viability and
effects of the Federal Government assessing and collecting upfront premiums and creating a
capital reserve fund.
Requiring the Secretary of Treasury to conduct a study not later than June 30, 2017 and every
June 30 thereafter to identify competitive challenges small insurers face in the terrorism risk
insurance marketplace.
Requiring the Secretary of the Treasury to appoint an Advisory Committee on Risk-Sharing
Mechanisms to provide advice, recommendations and encouragement with respect to the creation
and development of nongovernmental risk-sharing mechanisms. The Advisory Committee will
be composed of 9 members who are directors, officers, or other employees of insurers, reinsurers
or capital market participants.
Changing the terms “program year” and “transition period” to “calendar year” throughout.
Definition of Act of Terrorism
Section 102(1) defines an act of terrorism for purposes of the Act. Please note that the unmodified
reference to “the Secretary” refers to the Secretary of the Treasury
are directors, officers, or other employees of insurers, reinsurers
or capital market participants.
Changing the terms “program year” and “transition period” to “calendar year” throughout.
Definition of Act of Terrorism
Section 102(1) defines an act of terrorism for purposes of the Act. Please note that the unmodified
reference to “the Secretary” refers to the Secretary of the Treasury. The revised Section 102(1)(A)
states, “The term “act of terrorism” means any act that is certified by the Secretary, in consultation with
the Secretary of Homeland Security, and the Attorney General of the United States—(i) to be an act of
terrorism; (ii) to be a violent act or an act that is dangerous to—(I) human life: (II) property; or (III)
infrastructure; (iii) to have resulted in damage within the United States, or outside the United States in
the case of—(I) an air carrier or vessel described in paragraph (5)(B); or (II) the premises of a United
States mission; and (iv) to have been committed by an individual or individuals acting on behalf of any
foreign person or foreign interest, as part of an effort to coerce the civilian population of the United
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States or to influence the policy or affect the conduct of the United States Government by coercion.”
Section 102(1)(B) states, “No act shall be certified by the Secretary as an act of terrorism if—(i) the act
is committed as part of the course of a war declared by the Congress, except that this clause shall not
apply with respect to any coverage for workers’ compensation; or (ii) property and casualty insurance
losses resulting from the act, in the aggregate, do not exceed $5,000,000.” Section 102(1)(C) and (E)
specify that the determinations are final and not subject to judicial review and that the Secretary of the
Treasury cannot delegate the determination to anyone
xcept that this clause shall not
apply with respect to any coverage for workers’ compensation; or (ii) property and casualty insurance
losses resulting from the act, in the aggregate, do not exceed $5,000,000.” Section 102(1)(C) and (E)
specify that the determinations are final and not subject to judicial review and that the Secretary of the
Treasury cannot delegate the determination to anyone.
Submission of Rates, Policy Form Language and Disclosure Notices
If an insurer relies on an advisory organization to file loss costs and related rating systems on its behalf,
no rate filing is required unless an insurer plans to use a different loss cost multiplier than is currently on
file for coverage for certified losses. The rate filing should provide sufficient information for the
reviewer to determine what price would be charged to a business seeking to cover certified losses. This
state will accept filings that contain a specified percentage of premium to provide for coverage for
certified losses. Insurers may also choose to use rating plans that take into account other factors such as
geography, building profile, proximity to target risks and other reasonable rating factors. The insurer
should state in the filing the basis that it has for selection of the rates and rating systems that it chooses
to apply. The supporting documentation should be sufficient for the reviewer to determine whether the
rates are excessive, inadequate or unfairly discriminatory. For the convenience of insurers, this state
will waive its requirements for supporting documentation for rates for certified losses for filings that
apply an increased premium charge of between 0% and 3% and do not vary by application of other
rating factors.
This state will not allow exclusions of coverage for acts of terrorism that fail to be certified losses solely
because they fall below the $5,000,000 threshold in Section 102(1)(B) on any policy that provides
coverage for acts of terrorism that fail to be certified
for filings that
apply an increased premium charge of between 0% and 3% and do not vary by application of other
rating factors.
This state will not allow exclusions of coverage for acts of terrorism that fail to be certified losses solely
because they fall below the $5,000,000 threshold in Section 102(1)(B) on any policy that provides
coverage for acts of terrorism that fail to be certified. Insurers required to file policy forms may submit
language containing coverage limitations for certified losses that exceed $100 billion in the aggregate.
Insurers subject to policy form regulation must submit the policy language that they intend to use in this
state. The policy should define acts of terrorism in ways that are consistent with the Act, state law and
the guidance provided in this bulletin. The definitions, terms and conditions should be complete and
accurately describe the coverage that will be provided in the policy. Insurers may conclude that current
filings are in compliance with the Act, state law and the requirements of this bulletin.
A change introduced in the Terrorism Risk Insurance Program Reauthorization Act of 2007 was a
disclosure requirement for any policy issued after the enactment of the Act. Specifically, in addition to
other disclosure requirements previously contained in TRIA, insurers since 2007 have had to provide
clear and conspicuous disclosure to the policyholder of the existence of the $100,000,000,000 cap under
Section 103(e)(2), at the time of offer, purchase, and renewal of the policy.
The Commissioner requests that the disclosure notices be filed for informational purposes, along with
the policy forms, rates and rating systems as they are an integral part of the process for notification of
policyholders in this state and should be clear and not misleading to business owners in this state. The
disclosures should comply with the requirements of the Act, as amended, and should be consistent with
the policy language and rates filed by the insurer
ormational purposes, along with
the policy forms, rates and rating systems as they are an integral part of the process for notification of
policyholders in this state and should be clear and not misleading to business owners in this state. The
disclosures should comply with the requirements of the Act, as amended, and should be consistent with
the policy language and rates filed by the insurer.
Given that the provisions of the Terrorism Risk Insurance Program Reauthorization Act of 2015 are
already in effect, and insurers and advisory organizations must accelerate filing activity in order to
achieve compliance with the revised provisions of TRIA, this state will permit insurers and advisory
4
organizations to place new rates, policy forms and disclosure notices into immediate use without
receiving prior approval from the Commissioner. [NOTE: if state law requires a waiting period for
filings, that can also be waived by using the following phrase: “…into immediate use without waiting
for the tolling of the statutory waiting period.”]
If an insurer wants to take advantage of this voluntary speed to market initiative for revised terrorism
products, it should complete the attached Expedited Filing Transmittal Document for Terrorism Risk
Insurance Forms and Pricing, and certify on the form that it is in compliance with the terms of the
Terrorism Risk Insurance Program Reauthorization Act of 2015 and the laws of this state. Completion of
the Expedited Filing Transmittal will also relieve an insurer from having to complete any other filing
form or supplementary exhibit that is normally required to accompany filings.
We encourage filers to take advantage of the SERFF system for submitting such filings. Filers should
only use the term “TRIA2015” in the product name field in SERFF to indicate a filing related to
terrorism, made in connection with the Terrorism Risk Insurance Program Reauthorization Act of 2015
te any other filing
form or supplementary exhibit that is normally required to accompany filings.
We encourage filers to take advantage of the SERFF system for submitting such filings. Filers should
only use the term “TRIA2015” in the product name field in SERFF to indicate a filing related to
terrorism, made in connection with the Terrorism Risk Insurance Program Reauthorization Act of 2015.
Please do not add any additional verbiage to “TRIA2015” in the product name field. The SERFF system
alleviates the need to provide additional information in support of a request for expedited review,
although some states may have additional requirements.
Optional Provision for Standard Fire Policy States
In this state, the requirements for fire coverage are established by law and where applicable, must meet
or exceed the provisions of the Standard Fire Policy. These legal requirements cannot be waived. Thus,
a business cannot voluntarily waive this statutorily mandated coverage.
Provision for Workers’ Compensation Policies
Workers compensation insurance coverage is statutorily mandated for nearly all U.S. employers and
exemptions are barred in all states. Thus, a business cannot voluntarily waive workers compensation
insurance (or terrorism coverage provided by a workers compensation insurance policy) nor can an
insurer exempt terrorism risk from a workers compensation policy.
Effective Date
This bulletin shall take immediate effect and shall expire on December 31, 2020, unless Congress
extends the duration of the Act.
Any questions can be addressed to Tim Johnson, Operations Manager, Property and Casualty Division at
timothy.johnson@ncdoi.gov and (919) 807-6084.
can an
insurer exempt terrorism risk from a workers compensation policy.
Effective Date
This bulletin shall take immediate effect and shall expire on December 31, 2020, unless Congress
extends the duration of the Act.
Any questions can be addressed to Tim Johnson, Operations Manager, Property and Casualty Division at
timothy.johnson@ncdoi.gov and (919) 807-6084.
5
Disclosure No. 1
POLICYHOLDER DISCLOSURE
NOTICE OF TERRORISM
INSURANCE COVERAGE
You are hereby notified that under the Terrorism Risk Insurance Act, as amended, you have a right to purchase insurance coverage for losses
resulting from acts of terrorism. As defined in Section 102(1) of the Act: The term “act of terrorism” means any act or acts that are certified by
the Secretary of the Treasury—in consultation with the Secretary of Homeland Security, and the Attorney General of the United States—to be
an act of terrorism; to be a violent act or an act that is dangerous to human life, property, or infrastructure; to have resulted in damage within
the United States, or outside the United States in the case of certain air carriers or vessels or the premises of a United States mission; and to
have been committed by an individual or individuals as part of an effort to coerce the civilian population of the United States or to influence the
policy or affect the conduct of the United States Government by coercion.
YOU SHOULD KNOW THAT WHERE COVERAGE IS PROVIDED BY THIS POLICY FOR LOSSES RESULTING FROM CERTIFIED
ACTS OF TERRORISM, SUCH LOSSES MAY BE PARTIALLY REIMBURSED BY THE UNITED STATES GOVERNMENT UNDER A
FORMULA ESTABLISHED BY FEDERAL LAW. HOWEVER, YOUR POLICY MAY CONTAIN OTHER EXCLUSIONS WHICH
MIGHT AFFECT YOUR COVERAGE, SUCH AS AN EXCLUSION FOR NUCLEAR EVENTS
ited States Government by coercion.
YOU SHOULD KNOW THAT WHERE COVERAGE IS PROVIDED BY THIS POLICY FOR LOSSES RESULTING FROM CERTIFIED
ACTS OF TERRORISM, SUCH LOSSES MAY BE PARTIALLY REIMBURSED BY THE UNITED STATES GOVERNMENT UNDER A
FORMULA ESTABLISHED BY FEDERAL LAW. HOWEVER, YOUR POLICY MAY CONTAIN OTHER EXCLUSIONS WHICH
MIGHT AFFECT YOUR COVERAGE, SUCH AS AN EXCLUSION FOR NUCLEAR EVENTS. UNDER THE FORMULA, THE UNITED
STATES GOVERNMENT GENERALLY REIMBURSES 85% THROUGH 2015; 84% BEGINNING ON JANUARY 1, 2016; 83%
BEGINNING ON JANUARY 1, 2017; 82% BEGINNING ON JANUARY 1, 2018; 81% BEGINNING ON JANUARY 1, 2019 and 80%
BEGINNING ON JANUARY 1, 2020, OF COVERED TERRORISM LOSSES EXCEEDING THE STATUTORILY ESTABLISHED
DEDUCTIBLE PAID BY THE INSURANCE COMPANY PROVIDING THE COVERAGE. THE PREMIUM CHARGED FOR THIS
COVERAGE IS PROVIDED BELOW AND DOES NOT INCLUDE ANY CHARGES FOR THE PORTION OF LOSS THAT MAY BE
COVERED BY THE FEDERAL GOVERNMENT UNDER THE ACT.
YOU SHOULD ALSO KNOW THAT THE TERRORISM RISK INSURANCE ACT, AS AMENDED, CONTAINS A $100 BILLION CAP
THAT LIMITS U.S. GOVERNMENT REIMBURSEMENT AS WELL AS INSURERS’ LIABILITY FOR LOSSES RESULTING FROM
CERTIFIED ACTS OF TERRORISM WHEN THE AMOUNT OF SUCH LOSSES IN ANY ONE CALENDAR YEAR EXCEEDS $100
BILLION. IF THE AGGREGATE INSURED LOSSES FOR ALL INSURERS EXCEED $100 BILLION, YOUR COVERAGE MAY BE
REDUCED.
Acceptance or Rejection of Terrorism Insurance Coverage
I hereby elect to purchase terrorism coverage for a prospective premium of $_____________.
I hereby decline to purchase terrorism coverage for certified acts of terrorism. I understand that I will have no
coverage for losses resulting from certified acts of terrorism.
_________________________
___________________________
Policyholder/Applicant’s Signature
Insurance Company
_________________________
___________________________
Print Name
Policy Number
_________________________
Date
certified acts of terrorism. I understand that I will have no
coverage for losses resulting from certified acts of terrorism.
_________________________
___________________________
Policyholder/Applicant’s Signature
Insurance Company
_________________________
___________________________
Print Name
Policy Number
_________________________
Date
6
Disclosure No. 2
POLICYHOLDER DISCLOSURE
NOTICE OF TERRORISM
INSURANCE COVERAGE
Coverage for acts of terrorism is included in your policy. You are hereby notified that under the Terrorism Risk Insurance
Act, as amended in 2015, the definition of act of terrorism has changed. As defined in Section 102(1) of the Act: The term
“act of terrorism” means any act or acts that are certified by the Secretary of the Treasury—in consultation with the Secretary
of Homeland Security, and the Attorney General of the United States—to be an act of terrorism; to be a violent act or an act
that is dangerous to human life, property, or infrastructure; to have resulted in damage within the United States, or outside the
United States in the case of certain air carriers or vessels or the premises of a United States mission; and to have been
committed by an individual or individuals as part of an effort to coerce the civilian population of the United States or to
influence the policy or affect the conduct of the United States Government by coercion. Under your coverage, any losses
resulting from certified acts of terrorism may be partially reimbursed by the United States Government under a formula
established by the Terrorism Risk Insurance Act, as amended. However, your policy may contain other exclusions which
might affect your coverage, such as an exclusion for nuclear events
fect the conduct of the United States Government by coercion. Under your coverage, any losses
resulting from certified acts of terrorism may be partially reimbursed by the United States Government under a formula
established by the Terrorism Risk Insurance Act, as amended. However, your policy may contain other exclusions which
might affect your coverage, such as an exclusion for nuclear events. Under the formula, the United States Government
generally reimburses 85% through 2015; 84% beginning on January 1, 2016; 83% beginning on January 1, 2017; 82%
beginning on January 1, 2018; 81% beginning on January 1, 2019 and 80% beginning on January 1, 2020, of covered
terrorism losses exceeding the statutorily established deductible paid by the insurance company providing the coverage. The
Terrorism Risk Insurance Act, as amended, contains a $100 billion cap that limits U.S. Government reimbursement as well as
insurers’ liability for losses resulting from certified acts of terrorism when the amount of such losses exceeds $100 billion in
any one calendar year. If the aggregate insured losses for all insurers exceed $100 billion, your coverage may be reduced.
The portion of your annual premium that is attributable to coverage for acts of terrorism is __________, and does not include
any charges for the portion of losses covered by the United States government under the Act.
I ACKNOWLEDGE THAT I HAVE BEEN NOTIFIED THAT UNDER THE TERRORISM RISK INSURANCE ACT, AS
AMENDED, ANY LOSSES RESULTING FROM CERTIFIED ACTS OF TERRORISM UNDER MY POLICY
COVERAGE MAY BE PARTIALLY REIMBURSED BY THE UNITED STATES GOVERNMENT AND MAY BE
SUBJECT TO A $100 BILLION CAP THAT MAY REDUCE MY COVERAGE, AND I HAVE BEEN NOTIFIED OF
THE PORTION OF MY PREMIUM ATTRIBUTABLE TO SUCH COVERAGE
ct.
I ACKNOWLEDGE THAT I HAVE BEEN NOTIFIED THAT UNDER THE TERRORISM RISK INSURANCE ACT, AS
AMENDED, ANY LOSSES RESULTING FROM CERTIFIED ACTS OF TERRORISM UNDER MY POLICY
COVERAGE MAY BE PARTIALLY REIMBURSED BY THE UNITED STATES GOVERNMENT AND MAY BE
SUBJECT TO A $100 BILLION CAP THAT MAY REDUCE MY COVERAGE, AND I HAVE BEEN NOTIFIED OF
THE PORTION OF MY PREMIUM ATTRIBUTABLE TO SUCH COVERAGE.
_________________________
Policyholder/Applicant’s Signature
_________________________
Print Name
_________________________
Date
Name of Insurer: ____________________
Policy Number: _____________________
7
Ed. 01/26/2015
EXPEDITED SERFF FILING TRANSMITTAL DOCUMENT
FOR TERRORISM RISK INSURANCE FORMS AND PRICING
Indicate Type of Filing
Filing Related to Certified Losses
Filing Related to Non-Certified Losses
Filing Applicable to Both Certified and Non-Certified Losses
This abbreviated filing transmittal document should be used in conjunction with a SERFF filing only.
To be complete, a filing must include the following:
A completed Expedited Filing Transmittal Document.
One copy of each endorsement, disclosure form and/or or other policy language, unless the insurer has given an advisory
organization authorization to file them on its behalf.
A copy of the rates, rating systems and supporting documentation, if applicable.
The appropriate filing fees, if applicable
The insurer(s) submitting this filing certifies that it:
Is in compliance with the terms of the Terrorism Risk Insurance Act, as amended, and/or the laws of this state
Is in compliance with state’s requirements with respect to terrorism coverage; and
Is in compliance with the requirements of the bulletin containing the voluntary expedited filing procedures.
Electronic Signature: [This would be
replaced with a prompt for an Adobe
electronic signature.]
e terms of the Terrorism Risk Insurance Act, as amended, and/or the laws of this state
Is in compliance with state’s requirements with respect to terrorism coverage; and
Is in compliance with the requirements of the bulletin containing the voluntary expedited filing procedures.
Electronic Signature: [This would be
replaced with a prompt for an Adobe
electronic signature.]
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COMPLETED SAMPLE FORM
Ed. 01/26/2015
EXPEDITED SERFF FILING TRANSMITTAL DOCUMENT
FOR TERRORISM RISK INSURANCE FORMS AND PRICING
Indicate Type of Filing
Filing Related to Certified Losses
Filing Related to Non-Certified Losses
Filing Applicable to Both Certified and Non-Certified Losses
This abbreviated filing transmittal document should be used in conjunction with a SERFF filing only.
To be complete, a filing must include the following:
A completed Expedited Filing Transmittal Document for each insurer or advisory organization.
One copy of each endorsement, disclosure form or other policy language, unless the insurer has given an advisory organization
authorization to file them on its behalf.
A copy of the rates, rating systems and supporting documentation.
The appropriate filing fees, if required
The insurer(s) submitting this filing certifies that it:
Is in compliance with the terms of the Terrorism Risk Insurance Act, as amended, and the laws of this state; and
Is in compliance with the requirements of the bulletin containing the voluntary expedited filing procedures.
Electronic Signature: [This would be
replaced with an actual Adobe
electronic signature.]
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