New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

Eliot Spitzer
Governor

Eric R. Dinallo
Superintendent

The Office of General Counsel issued the following opinion on February 25, 2008, representing the position of the New York State Insurance Department.

Re: Terrorism Risk Insurance Policyholder Disclosure Notice

Question Presented:

May a property/casualty insurer that writes insurance lines (other than workers’ compensation) that are subject to the Terrorism Risk Insurance Act of 2002 (“TRIA”) use a terrorism risk insurance policyholder disclosure notice that does not include a section for the policyholder/applicant’s signature, the policyholder/applicant’s printed name, the date, the name of the insurer, and the policy number when the insurer provides free terrorism risk insurance for all applicable insurance policies?

Conclusion:

The U.S. Department of the Treasury (“Treasury”) oversees implementation of the Terrorism Risk Insurance Program pursuant to TRIA. Therefore, the inquirer was instructed to direct to Treasury any inquiries regarding the permissible substance of a terrorism risk insurance policyholder disclosure notice issued pursuant to TRIA.

Facts:

The inquiry is of a general nature, without reference to particular facts.

Analysis:

In 2002, Congress enacted the Terrorism Risk Insurance Act of 2002, which: provides a federal backstop for commercial lines property and casualty insurance that covers acts of terrorism; imposes certain obligations on property/casualty insurers; and seeks to improve the availability and affordability of insurance for losses arising out of certain acts of terrorism. See Circular Letter No. 25 (Dec. 23, 2002). In 2005 and 2007, Congress enacted the Terrorism Risk Insurance Extension Act of 2005 and the Terrorism Risk Insurance Program Reauthorization Act of 2007, respectively, both of which revised the 2002 law.

Treasury is in charge of implementing the Terrorism Risk Insurance Program. To that end, Treasury has promulgated regulations that provide that an insurer that is required to make a disclosure to a policyholder pursuant to 31 C.F.R. § 50.10 (2006) is in compliance with TRIA if the insurer uses the National Association of Insurance Commissioners (“NAIC”) model disclosure forms. See 31 C.F.R. § 50.17 (2006). A review of the NAIC’s model disclosure forms 1 reveals that these forms contain a section for the policyholder/applicant’s signature, the policyholder/applications printed name, the date, the name of the insurer, and the policy number.

However, an insurer is not required to utilize the NAIC’s model disclosure forms, and “may use other means to comply with the disclosure requirement, as long as the disclosure comports with the requirements” of TRIA. See 31 C.F.R. § 50.17(d). Thus, whether a terrorism risk insurance policyholder disclosure notice that does not include a section for the policyholder/applicant’s signature, the policyholder/applicant’s printed name, the date, the name of the insurer, and the policy number complies with TRIA is a question for Treasury.

In addition, the Insurance Department deems acceptable any policyholder disclosure notices that Treasury determines to be in compliance with TRIA. See Circular Letter No. 1 (Jan. 18, 2006) and Circular Letter No. 25 (Dec. 23, 2002). Therefore, if Treasury concludes that a property/casualty insurer that writes insurance lines (other than workers’ compensation) that are subject to TRIA may use a terrorism risk insurance policyholder disclosure notice that does not include a section for the policyholder/applicant’s signature, the policyholder/applicant’s printed name, the date, the name of the insurer, and the policy number when the insurer provides free terrorism risk insurance for all applicable insurance policies, then such a disclosure notice would be acceptable to the Insurance Department.

For further information, you may contact Assistant Attorney Joana Lucashuk at the New York City Office.

____________________________________________________________________________________________________

1 A person may obtain the NAIC’s model disclosure forms by visiting http://www.treas.gov/offices/domestic-finance/financial-institution/terrorism-insurance/resources.shtml