“Specifically, the Treasury has responded positively to the Councils request for clarification that premiums collected for terrorism coverage under the federal backstop program are indeed premiums and not surcharges (subject to broker intermediation),” said Ken A. Crerar, president of the Washington-based Council.

He said that within weeks of the enactment of the terrorism insurance legislation, the Council received anecdotal reports that some insurers were characterizing the premiums inappropriately and asked Treasury for guidance on the issue.

Mr. Crerar said that the problem appears to have largely disappeared in the past two months, and the new Treasury guidance now assures that brokers will not be disadvantaged by the program.

According to a legal analysis produced by the Council, the interim regulations addressed three other issues of interest to brokers.

First, the regulations clarify that coverage can include limits that are permissible under state law. Thus, exclusions for nuclear, biological or chemical events that are permitted by state law are also permitted for the terrorism component.

Second, the regulations clarify that required disclosures must be made at the time of offer, purchase and renewal of a policy.

Third, the regulations note that Treasury is still considering whether the mandatory offer requirements should be extended to Dec. 31, 2005.

Reproduced from National Underwriter Edition, April 28, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.