Act of Terrorism Endorsements Exempt Filing Notification

CHAPTER 5, SUBCHAPTER L, ARTICLE 5.96

ADOPTION OF AMENDMENTS TO THE

TEXAS AUTOMOBILE RULES AND RATING MANUAL,

NEW ENDORSEMENT TE 99 87, EXCLUSION OF ACTS OF TERRORISM AS DEFINED IN THE FEDERAL TERRORISM RISK INSURANCE ACT OF 2002, AND

NEW ENDORSEMENT TE 99 88, CAP ON LOSSES FROM ACTS OF TERRORISM PURSUANT TO THE FEDERAL TERRORISM RISK INSURANCE ACT OF 2002

The Commissioner of Insurance is adopting amendments proposed by Staff to the Texas Automobile Rules and Rating Manual (the Manual), by adding new Endorsement TE 99 87, Exclusion of Acts of Terrorism as Defined in the Federal Terrorism Risk Insurance Act of 2002, and new Endorsement TE 99 88, Cap on Losses from Acts of Terrorism Pursuant to the Federal Terrorism Risk Insurance Act of 2002. The purposes of these amendments are to provide a possible option for commercial automobile policyholders with respect to the terrorism risk insurance coverage that is required to be made available by insurers pursuant to the Terrorism Risk Insurance Act of 2002 (the federal Act), and to disclose to commercial automobile policyholders that the Texas Department of Insurance-promulgated commercial automobile policy forms containing coverage for acts of terrorism are subject to the cap on liability for payment for insured losses pursuant to the federal Act. Staff´s petition (Ref. No. A-0203-04-I) was published in the February 28, 2003 issue of the Texas Register (28 TexReg 1901).

An insurer may offer Endorsement TE 99 87, Exclusion of Acts of Terrorism as Defined in the Federal Terrorism Risk Insurance Act of 2002, to each applicant or insured regarding the commercial automobile policies named in the endorsement.

Endorsement TE 99 88, Cap on Losses from Acts of Terrorism Pursuant to the Federal Terrorism Risk Insurance Act of 2002, may be attached to the promulgated commercial automobile policies that provide terrorism insurance coverage.

Commissioner´s Bulletin No. B-0074-02, concerning the federal Act, sets forth in pertinent part:

The Act preserves the Texas Department of Insurance's (Department) jurisdiction and regulatory authority over rates and forms except for the period from the date of enactment of the Act through December 31, 2003, rates and forms for certain terrorism coverage shall not be subject to prior approval or a waiting period. However, it should be noted that this exception to Texas' filing laws applies only to coverage that is applicable to losses covered under the Federal program. As a means of providing policyholders with an option respecting the coverage made available under the Act, the Department will consider endorsements excluding coverage for acts of terrorism as defined by the Act. The Act preserves the Department's authority to disapprove any rates pertaining to such losses if it finds them to be excessive, inadequate or unfairly discriminatory.

To the extent that the promulgated commercial automobile policies provide coverage for acts of terrorism and in accord with Insurance Code Article 5.06, there is a need to promulgate the endorsements as a means of providing policyholders a possible option with respect to the coverage made available under the federal Act and to inform policyholders that such coverage is subject to caps on losses as provided in the federal Act.

The Commissioner of Insurance has jurisdiction over this matter pursuant to Insurance Code Articles 5.06, 5.10, 5.96, and 5.98.

This notification is made pursuant to Insurance Code Article 5.96, which exempts it from the requirements of the Government Code, Chapter 2001 (Administrative Procedure Act).

Consistent with Insurance Code Article 5.96(h), the Department will notify all insurers writing automobile insurance of this adoption by letter summarizing the Commissioner's action.

IT IS THEREFORE THE ORDER of the Commissioner of Insurance that the Manual is amended as described herein, and the amendments are adopted to become effective on the 15 ^th day after publication of the notification of the Commissioner´s action in the Texas Register.

EXHIBIT A

TE 99 87

EXCLUSION OF ACTS OF TERRORISM

AS DEFINED IN THE TERRORISM RISK INSURANCE ACT OF 2002

This endorsement modifies insurance provided under the following:

ALL PARTS OF THE COVERAGE FORM

Notwithstanding any other provision of this coverage form to the contrary, this insurance does not apply to any loss, cost, expense, damage, injury or economic detriment, whether arising by contract, operation of law or otherwise, that in any way, directly or indirectly, arises out of an "act of terrorism," as defined in the Terrorism Risk Insurance Act of 2002 ("the Act").

A. Under the Act, an "act of terrorism" means any act that is certified by the Secretary of the Treasury, in concurrence with the Secretary of State, and the Attorney General of the United States:

1. to be an act of terrorism;
2. to be a violent act or an act that is dangerous to:
   1. human life;
   2. property; or
   3. infrastructure;
3. to have resulted in damage within the United States, or outside of the United States in the case of:
   1. an air carrier (as defined in 49 U.S.C. § 40102) or a United States flag vessel (or vessel based principally in the United States, on which United States income tax is paid and whose insurance coverage is subject to regulation in the United States), regardless of where the loss occurs; or
   2. the premises of a United States mission; and
4. to have been committed by an individual or individuals acting on behalf of any foreign person or foreign interest, as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States Government by coercion.

B. Under the Act, no act will be certified as an "act of terrorism" if:

1. the act is committed as part of the course of a war declared by the Congress; or

2. property and casualty insurance losses resulting from the act, in the aggregate, do not exceed $5,000,000.

C. loss resulting from an act that is not certified as an "act of terrorism" is a covered loss unless excluded elsewhere in the policy.

D. Any certification of, or determination not to certify, an act as an "act of terrorism" under the Act will be final, and will not be subject to judicial review.

EXHIBIT B

TE 99 88

CAP ON LOSSES FROM ACTS OF TERRORISM Pursuant To

The Federal Terrorism Risk Insurance Act Of 2002

This endorsement modifies insurance provided under the following:

With respect to coverage provided by this endorsement, the provisions of the Coverage Form apply unless modified by the endorsement.

With respect to any "act of terrorism" (one or more), we will not pay any amounts for which we are not responsible under the terms of the federal Terrorism Risk Insurance Act of 2002 (the Act) (including subsequent acts of Congress pursuant to the Act) due to the application of any clause which results in a cap on our liability for payments for terrorism losses.

A. Under the Act, an "act of terrorism" means any act that is certified by the Secretary of the Treasury, in concurrence with the Secretary of State, and the Attorney General of the United States:

1. to be an act of terrorism;
2. to be a violent act or an act that is dangerous to:
   1. human life;
   2. property; or
   3. infrastructure;
3. to have resulted in damage within the United States, or outside of the United States in the case of:
   1. an air carrier (as defined in 49 U.S.C. § 40102) or a United States flag vessel (or vessel based principally in the United States, on which United States income tax is paid and whose insurance coverage is subject to regulation in the United States), regardless of where the loss occurs; or
   2. the premises of a United States mission; and
4. to have been committed by an individual or individuals acting on behalf of any foreign person or foreign interest, as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States Government by coercion.

B. Under the Act, no act will be certified as an "act of terrorism" if:

1. the act is committed as part of the course of a war declared by the Congress; or
2. property and casualty insurance losses resulting from the act, in the aggregate, do not exceed $5,000,000.

C. loss resulting from an act that is not certified as an "act of terrorism" is a covered loss unless excluded elsewhere in the policy.

D. Any certification of, or determination not to certify, an act as an "act of terrorism" under the Act will be final, and will not be subject to judicial review.