BUSH ENACTS TERRORISM INSURANCE LAW; TREASURY ISSUES GUIDANCE.

As the president signed the Terrorism Risk Insurance Act of 2002 into law Nov. 26, state and federal government officials quickly stepped up to provide guidance to property/casualty insurers as they readied themselves to meet the new law's requirement they make terrorism insurance coverage available and disclose the costs of such coverage to their policyholders.

"Insurers have a tight deadline to meet in complying with certain provisions of the federal act," said Therese M. Vaughan, president of the National Association of Insurance Commissioners and Iowa insurance commissioner, referring to the 90-day deadline for insurers to notify policyholders of any policy changes.

A few hours after the president signed the bill into law, Vaughan issued NAIC's guidelines to assist state regulators in determining insurers' compliance with the law's disclosure requirements.

"Today's adoption of the model bulletin and disclosure notices is the first of what we expect will be many actions to make this a workable and seamless solution for insurers and our nation's economy," she said.

Vaughan then joined Treasury Under Secretary for Domestic Finance Peter R. Fisher Dec. 3 when he announced the department's interim compliance guidance for the insurance industry.

Fisher said Treasury's guidelines followed those issued earlier by the NAIC but added NAIC's model disclosure forms were not the exclusive means by which insurers could comply with the law's disclosure requirements.

He said Treasury would rely "upon the state insurance oversight mechanism to monitor insurance companies' implementation of, and compliance with, many of the program's requirements" and state regulators would continue to consult with the department on implementation issues.

In response to the law's requirement that Treasury conduct a study of the impact of terrorism risk on group life insurers and on the availability of group life insurance coverage, he issued a request for public comment.

He said he expected Treasury to provide guidance or regulations in the near future on how it intends to apply the law to captive insurers and other self-insurance arrangements.

Until this guidance is provided, he said, insurers are to make available in all property and casualty insurance policies coverage for losses resulting from acts of terrorism that does not differ materially from the terms, amounts and other coverage limitations offered to policyholders for losses from events other than acts of terrorism.

He introduced Wayne Abernathy, who was sworn in as assistant secretary for financial institutions on Dec. 2, saying, "Wayne has arrived just in time to lead the implementation of the Terrorism Risk Insurance Program."

He also announced information on implementation of the new law was available on the Treasury's website, www.treasury.gov/trip.

The NAIC's model bulletin -- outlining regulators' expectations regarding filing of rates, policy form language and disclosure notices to policyholders -- is posted on the NAIC website, www.naic.org.

As property/casualty insurers have only 90 days to tell policyholders how much terrorism coverage will cost and only a few companies have previously offered terrorism coverage, insurers said they expected some initial difficulty in determining the initial cost of the coverage but anticipate the market will determine in the long-run what a reasonable cost would be.

Although all property/casualty insurers are required to participate in the program, their policyholders have the option of declining the coverage if they consider it too costly.