New insurance catastrophe provisions effective in 32 states

Risk & Insurance, March 17, 2003 by Nancy Grover

Employers may see a new fee on their workers' compensation insurance policies. A separate charge is now being added to cover terrorism. The Terrorism Risk Insurance Act, signed into law in December, requires insurers to notify policyholders the amount they're charged for possible losses due to terrorist attacks. Since workers' comp insurance is inclusive, there has been no separate charge.

The National Council on Compensation Insurance (NCCI) recently filed catastrophe provisions with 33 states. The Florida-based company helps determine workers' comp rates for those states. The rate filings allowed insurers to implement the catastrophe fees Dec. 20, 2002, for voluntary policies, and Jan. 1 for policies in the assigned risk market.

"Insurers can immediately implement rate changes for coverage of insured losses related to acts of terrorism as defined in the Act," according to the NCCI filing. "However, insurers are cautioned that loss cost/rate and form filings are subject to subsequent state regulatory review based upon all applicable laws and regulations not specifically preempted by the Act."

So far, Florida is the only state to say it may reject the filing. Following a conference call between NCCI staff and Florida workers' comp regulators, the Florida Department of Insurance said it would disapprove the NCCI filing as excessive.

Regulators in the District of Columbia reduced NCCI terrorism loss costs from 7 percent to 5 percent in the voluntary market, and from 10 percent to 7 percent in the assigned risk market.

The Nevada Department of Insurance is "reviewing the appropriateness of the catastrophe provisions." Vermont's newly installed insurance commissioner is also reviewing the NCCI filing. NCCI is responding to questions from regulators in Illinois, Kansas and New Hampshire. NCCI officials were scheduled to brief the Oklahoma Property and Casualty Rates Board in late January.