Conn. Implements Fire Policy Terror Exemption

August 13, 2004

The Connecticut Department of Insurance has issued a bulletin establishing limited commercial lines exemption from terrorism liability under the state’s standard fire insurance policy.

Public Act 04-140’s limited exclusion applies only when a commercial policyholder has rejected federal TRIA coverage and will end when TRIA expires on Dec. 31, 2005. If the federal Terrorism Risk Insurance Act (TRIA) is not reauthorized or extended, the exclusion will not apply for any subsequent events and revised filings will be required.

Commercial lines insurers using the limited exclusion must also provide a credit or premium reduction to reflect any savings projected from the exclusion. Additionally, insurers must provide the policyholder either with a notice of nonrenewal or a conditional renewal notice with a prominent disclosure of the new exclusion. This notice must comply with the same 60-day advance notice requirements of any policy nonrenewal notification, accoroding to the rules announced by Commissioner Susan Cogswell.

Of the 28 states with standard fire policies, eight including Connecticut have adopted commercial lines exclusion for terrorism risks.

“We’re pleased that Commissioner Cogswell acted quickly to implement this important legislation,” said Richard Stokes, regional manager and counsel for the Property Casualty Insurers Association of America (PCI). “Although the provision is tied to the expiration of the federal Terrorism Risk Insurance Act (TRIA), it will provide a safeguard for Connecticut commercial lines insurers and help stabilize the

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