Issue: Terrorism Insurance Legislative and Regulatory response.

March 31, 2002

Background: After the September 11th terrorist attacks, reinsurance for large commercial property and casualty needs began to disappear from the marketplace. A few insurance companies are now offering some commercial reinsurance in limited form. Congress began to work on terrorism "backstop" for the insurance industry last year. The GAC Committee discussed this issue on January 30, 2002, and decided to monitor the legislation.

The Terrorism Risk Insurance Act of 2002 [pdf] was signed into law on October 26, 2002 (PL-107-56). The legislation essentially provides that the Federal government will share the risk of loss from future terrorist attacks with the commercial property and casualty insurance marketplace for a temporary period of time.

Outside counsel has advised us that the law does not cover title insurance. With respect to captive insurers, prior to a triggering event, the Secretary of the Treasury, may in consultation with the NAIC or other state regulatory authorities, apply the program to those and other self-insured entities. Accordingly, the Vermont Captives Association is working with counsel to obtain clarification and exclusion from the Treasury Department. Passage of the act effectively voids pre-existing exclusions of coverage without affirmative action by the insured. While the US Department of Housing and Urban Development has indicated that it will not require terrorism coverage on FHA-insured loans, other capital providers may require coverage on large projects, or those in areas of "significant risk," such as New York City or Washington, DC. While the price of such insurance is now uncertain, the federal subsidy should at least deepen the market and increase the availability of coverage.

On November 26, the Department of Treasury issued interim guidance to insurers on the disclosures to policyholders of the premium charged for insured losses covered by the Terrorism Risk Insurance Program.

Status Update March 2003: The final terrorism insurance rules [pdf] , issued on February 28, 2003, exempt title insurance from the lines covered by the terrorism insurance tax.

ALTA Staff contact: Ann vom Eigen- Title insurance

Contact ALTA at 202-296-3671 or

North American Title Insurance Company (NATIC) is a seasoned title insurance underwriter, helping title agents to achieve their individual business goals for more than 50 years. Today, the company conducts real estate settlement services in 39 states and the District of Columbia through a network of experienced, independent agents.