Primary Carriers Note Restrictions on Personal Lines Terrorism Reinsurance

Property & Casualty insurers are reporting that reinsurers are imposing a number of the same types of terrorism exclusions and limitations in personal lines that are being put into action for commercial lines.

The findings evolve from a recent study conducted by the American Association of Insurance Services (AAIS), which took place to offer information to the Legal Affairs Ad Hoc Group of the National Association of Insurance Commissioners (NAIC).

Among the findings:

* 47 of the 60 primary companies reporting, accounting for more than $5 billion in personal lines premium, stated that some form of restriction coverage for terrorism losses in personal lines had been or would be incorporated into their reinsurance contracts.

* Of the 47 companies noting restrictions, 30 of them stated that those restrictions turned out to be broader in scope than those applying to nuclear, biological, and chemical events only.

In a letter to NAIC staff counsel, Susan Luecke, AAIS director of personal lines, said that, “We believe that the use of terrorism exclusions and restrictions in reinsurance contracts is even more widespread. Nonetheless, the fact that companies accounting for more than $5 billion in personal lines premium reported restrictions in reinsurance coverage demonstrates the magnitude of the problem.”

However, only 11 of the companies stated that the overall amount, or capacity, of personal lines reinsurance available to them had been reduced.