As previously reported, the Terrorism Risk Insurance Act (“TRIA” or the “Program”) was re-authorized and signed into law on January 12, 2015 (the “Reauthorization Act”).
On February 4, 2015, the Department of Treasury (“Treasury”) issued Interim Guidance Concerning the Terrorism Risk Insurance Act Reauthorization of 2015 (the “Interim Guidance”), which may be relied upon until superseded by amended regulations or additional guidance, to address implementation of the TRIA Reauthorization. The Interim Guidance addresses documentation of TRIA coverage, disclosures, and new offers of coverage.
Recognizing that insurers may require additional time to provide disclosures and offers of coverage that comply to with state insurance rate and form laws, the Interim Guidance establishes an April 13, 2015 deadline for insurers to provide required disclosures and coverage offers.
The Interim Guidance provides the following advice concerning insurer disclosures:
- National Association of Insurance Commissioner (NAIC) Model Disclosure Forms Nos. 1 and 2, as amended in 2015, are consistent with the disclosure requirements required under current TRIA regulations and the Reauthorization Act. Insurers may use these forms pursuant to Interim Section 50.17(c) of the Program regulations.
- Insurers are no longer required to provide to a policyholder certain disclosures at the time of a policy’s purchase; however, insurers must provide such disclosures at the time of offer and renewal The timing of an insurer’s disclosures may conform with either subpart B of the Program’s regulations or Section 103(b)(2) of TRIA, as amended by the Reauthorization Act.
- Insurers that offered coverage for insured losses prior to January 12, 2015, using the then-current NAIC Model Disclosure Form No. 1, NAIC Model Disclosure Form No. 2, or other disclosures consistent with Program regulations, are not required to provide a revised disclosure to the policyholder.
- Disclosures on or after January 12, 2015 provided in connection with a new or mid-term offer of coverage for insured losses should be based on Program regulations and the Reauthorization Act.
New Offers of Coverage
The Interim Guidance expects an insurer to make a new offer of coverage for insured losses with respect to any in-force policy that does not provide coverage for insured losses, except where:
- The policy incorporates a conditional exclusion or change of terms and conditions relating to coverage for insured losses and, because the Program is in effect, the insurer forbears effective January 1, 2015 (or as of the effective date of the policy, if later) on the exercise of the conditional exclusion or change in terms and conditions. The insurer should provide the policyholder written notice no later than April 13, 2015, of the insurer’s forbearance or written notice of the insurer’s withdrawal of any previous exercise of the conditional exclusion or change in terms and conditions. In the written notice, the insurer should state that the insurer’s forbearance or withdrawal, as applicable, is effective January 1, 2015 (or as of the effective date of the policy, if later); or
- The policyholder declined coverage for insured losses, so long as the insurer’s offer did not materially differ in price from that which the insurer would have offered following enactment of the Reauthorization Act.
The Interim Guidance further advises that if a policyholder declined coverage for insured losses but the insurer’s offer materially differed in price from that which the insurer would have offered following enactment of the Reauthorization Act, then the insurer should consider making a new offer to that policyholder.
In response to the Reauthorization Act and the Interim Guidance, the NAIC developed a Model Bulletin to expedite communication of implementation issues concerning the Reauthorization Act. Several states, such as Alabama, Kentucky, Louisiana, Maryland, North Carolina, Oklahoma, Rhode Island, and Wyoming have issued the Model Bulletin tailored to existing state regulatory requirements for each jurisdiction. It is anticipated that additional jurisdictions will issue similar bulletins or memoranda concerning compliance with the Reauthorization Act.