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February 14, 2003
DISR Reaches Agreement with ISO on Terrorism Loss Costs (cont'd)
Commissioner Mirel stated, “The cooperation we have had from ISO has been great. ISO recognized that a lack of historical data about foreign terrorism attacks on the US made it extremely difficult to project future losses—either the frequency or the severity of such attacks. I think ISO understood our problem and came a long way toward meeting our concerns.”
The Federal Terrorism Risk Insurance Act signed into law by President Bush late last year requires companies to begin by February 24 to offer coverage for potentially catastrophic losses due to foreign terrorist attack. The federal government agreed to cover 90 percent of damages in excess of $10 billion, up to $100 billion. The challenge to DISR is to allow insurance companies that do business in the District of Columbia to charge enough for terrorism coverage in Washington, DC so that they will feel comfortable continuing to write commercial coverage in the city, without making it so expensive that businesses will not be able to afford to pay for that coverage.
ISO had indicated that its evaluation is not a static, one-time process. ISO expects to do further review of its rating structure reflecting the developing science and information base. This process will take from two to six months, and the structure described above will be effective in the meantime. The agreement described above is for commercial property only. There are other terrorism related coverages that will be offered including commercial liability and commercial contents.
The New York Insurance Department also objected to ISO’s initial loss costs and worked with the District of Columbia to develop different rates. With an agreement struck between ISO and DC, New York is expected to follow suit.
The DC Department of Insurance and Securities Regulation (DISR) has two missions, (1) to provide fair, efficient and fast regulatory supervision of the insurance and securities businesses for the protection of the people of the District of Columbia, and (2) to create conditions that will retain and attract national and international insurance and other financial businesses to the District.
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