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Homeowners Left In The Lurch

April 25, 2002

Homeowner?s Insurance Policies No Longer Protect Against Terrorist Acts

By Bridget McCrea
Inman News Features

Homeowners in at least five states now are receiving notices that their homeowner?s insurance policies no longer include coverage for terrorist acts.

The notices started going out when insurers in those states received approval from insurance regulators to exclude terrorism coverage from their homeowners? policies.

The states affected so far are Arizona, Colorado, North Dakota, South Dakota and Kentucky, according to Dave Dasgupta of Insurance Services Office, a Jersey City, N.J.-based supplier of information about the property/casualty insurance industry.

North Dakota insurance commissioner Jim Poolman said the state has approved terrorism insurance exclusions for four small insurers that were being pressured by reinsurance companies that essentially insure the insurers.

The National Association of Insurance Commissioners as a whole is against such exclusions, except in certain extenuating circumstances, Poolman said.

"We have some small, domestic insurance firms here whose reinsurers told them they don?t have reinsurance coverage for acts of terror," Poolman said. "Because of the size of those companies, we could not in good conscience ask them to front that kind of risk."

Poolman said the acts of terrorism exclusions could increase competition among insurers in the state, mainly among the four that no longer include terrorism insurance and the rest that still do.

But Poolman said so far there have been "very few, if any" calls from concerned homeowners regarding the notices they?re receiving about acts of terrorism being excluded from their homeowner?s insurance policies.

Asked whether terrorism is a factor in a homeowner?s insurance policy, Poolman said the issue is up for debate.

"We?re living in a completely different society than we were six to eight months ago, and the risk is greater than it ever was," said Poolman.

What the exclusions prove, he said, is the continued need for Congress to act on a Federal reinsurance backstop, so regulators aren?t forced to approve such exclusions.

"As regulators we don?t want to have to exclude any type of coverage," said Poolman, "but we want to make sure the insurers selling the policies are solvent and able to pay more common claims."

Copyright: Inman News Service

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