Terrorism and catastrophic events

General Information

Terrorism Risk Insurance Act of 2002

As a result of the events of September 11, 2001, Congress passed the Terrorism Risk Insurance Act (TRIA) of 2002, creating a federal backstop for defined "acts of terrorism." This Act did not change the coverage provided by individual workers' compensation policies, but provided reinsurance for insurance companies in the event of a covered loss.

When the Terrorism Risk Insurance Act of 2002 was created, no portion of workers' compensation premium was devoted to the risk of loss associated with foreign terrorism. To fund this exposure, the National Council on Compensation Insurance (NCCI), Oregon's authorized ratemaking organization, filed foreign terrorism risk rating values for each state. The rate was approved by the Oregon Insurance Commissioner and is shown on the Foreign Terrorism Premium (FTP) Endorsement attached to each policy.

Terrorism Risk Insurance Extension Act of 2005

The Terrorism Risk Insurance Act of 2002 was set to expire on December 31, 2005. Since foreign terrorism continued to be an exposure for workers' compensation insurance, Congress passed the Terrorism Risk Insurance Extension Act (TRIEA) of 2005. This Act extended the Terrorism Risk Insurance Act of 2002 with certain amendments to event triggers and reinsurance amounts.

Domestic Terrorism, Earthquakes, and Catastrophic Accidents

After establishing a rate to cover the risk associated with acts of foreign terrorism, NCCI determined the exposure to risk associated with domestic terrorism, earthquakes, and catastrophic industrial accidents was still unfunded. On January 1, 2005, the director of the Department of Consumer and Business Services (DCBS) approved a new premium charge filed by NCCI to cover these exposures. This premium charge is separate from, and in addition to, the premium developed in response to foreign terrorism exposures. The approved rate is shown on the Domestic Terrorism, Earthquakes, and Catastrophic Industrial Accidents (DTEC) Premium Endorsement attached to each policy.

Terrorism Risk Insurance Program Reauthorization Act of 2007

With the expiration of TRIEA on December 31, 2007, Congress passed the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) of 2007, which amends the original Act of 2002 and extends the program until December 31, 2014. TRIPRA also revised the definition of "acts of terrorism" to include domestic terrorism, updated insurer deductible provisions, and set a $100 Billion annual liability cap for insurance companies and the federal government.

The Terrorism Risk Insurance Program Reauthorization Act of 2007 does not change workers' compensation insurance coverage or increase the cost of this insurance.

SAIF's Response

All workers' compensation insurance policies issued with an effective date of January 1, 2008, or later will have the following endorsements attached to the policy:

Additional Resources

Please note that these links go to other websites of other organizations. SAIF does not control their content.

FAQs

Following are some questions and answers regarding the Terrorism Risk Insurance Program Reauthorization Act of 2007, the Terrorism Risk Insurance Extension Act of 2005, the Terrorism Risk Insurance Act of 2002, and the Domestic Terrorism, Earthquakes, and Catastrophic Industrial Accidents filing of 2005.

Why did I receive these endorsements?

The Terrorism Risk Insurance Program Reauthorization Act required that we notify you of the provisions of the Terrorism Risk Insurance Act of 2002 and the Program Reauthorization Act of 2007. These endorsements provide that notification.

Does this change my coverage?

Your coverage is not affected by the endorsements or by the Terrorism Risk Insurance Program Reauthorization Act of 2007.

Will I have to pay more premium?

No. Your premium is not changed by these endorsements.

What are the endorsements that I just received?

Terrorism Risk Insurance Program Reauthorization Act Endorsement Form 205
This endorsement is being issued to all new and renewing policies effective on January 1, 2008. The purpose of the endorsement is to notify all workers' compensation policyholders of the Terrorism Risk Insurance Act of 2002 as amended and extended by the Terrorism Risk Insurance Program Reauthorization Act of 2007, signed into law on December 26, 2007. It explains how an insurance company like SAIF Corporation would be protected by the federal reinsurance program created by the 2002 Terrorism Risk Insurance Act and updated through the Program Reauthorization Act of 2007. The reinsurance created by these Acts is triggered by defined acts of foreign and domestic terrorism.

Policyholder coverage is not impacted by this endorsement. There are no changes in premium charged; the rate for this exposure is found in the Foreign Terrorism Premium Endorsement (see below). The current rate is $0.02 per $100 of remuneration for voluntary customers and $0.03 per $100 for customers in the Assigned Risk plan.

Domestic Terrorism, Earthquakes, and Catastrophic Industrial Accidents Premium Endorsement Form 211
This endorsement was established on January 1, 2005 by the National Council on Compensation Insurance (NCCI) and explains charges for the risk of domestic terrorism and catastrophic events. The endorsement previously on the policy was modified to refer to the Terrorism Risk Insurance Act of 2002.

Policyholder coverage was not impacted. There were no changes in premium charged. The current rate is $0.01 per $100 of remuneration for voluntary customers and $0.02 per $100 for customers in the Assigned Risk plan.

Foreign Terrorism Premium Endorsement Form 212
This endorsement was filed by the National Council on Compensation Insurance (NCCI) and explains the charges to be made for the exposure created by acts of foreign terrorism. The current rate is $0.02 per $100 of remuneration for voluntary customers and $0.03 per $100 for customers in the Assigned Risk plan. There were no changes to this endorsement and it is not being reissued.

I thought we always had terrorism coverage. Why do we have to pay now for something we've always had?

While it's true your workers' compensation policy has always provided coverage for foreign or domestic terrorism and catastrophes, the risk of loss has been considered negligible and was not specifically included in rate-making. NCCI used a recognized national firm specializing in risk assessment modeling to help develop the special foreign terrorism and domestic terrorism and catastrophe rating values for each state.

Do I have to pay this if I don't want foreign terrorism or domestic terrorism and catastrophe coverage?

You cannot elect to forego either foreign terrorism coverage or domestic terrorism and catastrophe coverage on your workers' compensation insurance policy. NCCI made the filings which were approved by the director of the Oregon Department of Consumer and Business Services (DCBS), who is responsible for regulating insurance providers in Oregon.

Is every workers' compensation carrier charging for foreign and domestic terrorism and catastrophes?

To our knowledge, yes. These filings were approved by the director of DCBS for application in Oregon.

How is the domestic terrorism and catastrophic industrial accident charge different from the Terrorism Risk Insurance Extension Act of 2005?

As a result of the passage of the Terrorism Risk Insurance Act of 2002 (TRIA), NCCI filed rates to cover exposure resulting from acts of foreign terrorism. NCCI then recognized that acts of domestic terrorism (outside the scope of TRIA), as well as earthquakes and catastrophic industrial accidents, can also result in losses of extraordinary magnitude and filed a separate rate for these exposures. Neither exposure was previously included in the rate-making process.

Will the charge for this exposure be the same every year?

We do not know. NCCI usually files rates annually to be effective as policies renew on or after January 1 each year. There is no guarantee the rate will stay the same every year.

Who gets to keep the foreign and domestic terrorism and catastrophe premium?

Premium collected to cover the risk of foreign and domestic terrorism or catastrophic losses is kept by the insurance carrier just the same as premium collected to cover any other risk.

Will implementation of the premiums for foreign and domestic terrorism and catastrophic losses have any effect on SAIF's pricing (rate tier selection) of its policies?

No, SAIF will continue its usual underwriting practices.

Who gets the money in the event of certified losses?

Any monies paid by the federal government under the provisions of the Act would be paid only to those insurance carriers who have perfected a claim or claims under the Act.