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					The Terrorism Risk Insurance Act of 2002

                                                                                          TRIA Bulletin 1
 Here are the facts as we understand them after issuance of interim guidelines
 by the Department of the Treasury on Tuesday, December 3. Please
 remember this situation is fluid. And the impact of TRIA will be determined in
 large part by the final regulations yet to be issued by that Department:

    President Bush signed the TRIA on November 26, 2002. It was effective
    immediately. It will remain in effect for two years. The Secretary of the
    Treasury has the discretion to extend the act for a third year – through

    TRIA applies ONLY to losses arising from "certified acts of terrorism" when
    such exceed $5 million on an aggregate basis in any one event. In order to
    be certified, an act of "terrorism" must be certified by the Secretary of the
    Treasury, the Secretary of State and the Attorney General.

    The criteria for certification are:

    1. the damages must be the result of an act that is violent or dangerous to
       human life, property or infrastructure and
    2. the damage must occur to property located within the “US” (including
       US territories, missions, and possessions and US territorial waters) or
       to US air carriers or vessels as defined in TRIA irrespective of where
       they are located when the damages occur and
    3. the damage must be committed by or on behalf of a foreign person or
       foreign interest as part of an effort to coerce the US civilian population
       or to influence the policy or affect the conduct of the US Government
       by coercion. TRIA does not apply to domestic terrorism (“non-
       certified terrorism”) or to any acts committed on property located
       outside the US as defined above. If a policyholder needed coverage
       for such acts of terrorism before November 26, they may still need it

    With the exception of workers’ compensation, no act can be certified if it is
    committed as part of the course of a war declared by the US Congress.

    When the President signed the bill, all exclusions applying to "certified
    terrorism" as defined by TRIA were nullified. If there was already a
    terrorism exclusion or limitation on a client's policy before November 26,
    the part of the exclusion or the limitation that pertained to “non-certified
    terrorism” is still in force.

    The nullification applies to policies written by "eligible insurers," at this point
    defined as:

    1. all licensed or admitted insurers,
    2. insurers not licensed or admitted but who are eligible surplus lines
       insurers on the NAIC listing of Alien Insurers,
    3. assigned risk plans and other residual market pools and State workers
       compensation funds, and
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                                                                                 TRIA Bulletin 1
4. entities approved for the purpose of offering property and casualty
   insurance by a Federal agency in connection with maritime, energy or
   aviation activity.

TRIA does not apply to captive insurers or self-insurance schemes (such as
workers compensation self-insurance programs), but the Secretary of the
Treasury has the discretion to bring them under the TRIA provided such is
done prior to a “certified terrorism” loss. As we understand it, if the
Secretary puts these under the Act, his decision will apply to all such
entities uniformly; we do not expect individual captives or self-insurers to
have the discretion to opt in or opt out. From comments made at Tuesday’s
press conference, we believe this determination will be made sooner rather
than later.

All "eligible insurers” must participate in the TRIA program. In order to
qualify for backstop protection, however, these insurers must send
notification of the following to all policyholders:

1. the federal government’s potential share of “certified terrorism” losses
2. the offer of “certified terrorism” coverage and the premium charge
   for same. The policyholder is under no obligation to accept this
   offer of coverage.

    This coverage must not "differ materially from the terms, amounts, and
    other coverage limitations applicable to losses arising from events
    other than acts of "certified terrorism."

The notices mentioned above have already started to appear in
policyholders' mailboxes.

There are three basic categories of notices to policyholders:

1. for policies with effective dates after November 26, 2002: the notice
   must form part of the offer of insurance.
2. for policies in force on November 26, 2002 that include terrorism
   coverage: the insurer must still notify the policyholder of the federal
   government’s share and outline the premium charge applicable to
   “certified terrorism.” The deadline for these notices is February 24,
   2003 (90 days after November 26). We do not believe the
   policyholder has the option to decline the coverage and reduce the
   existing premium in these situations.
3. for policies in force on November 26, 2002 that exclude or limit
   terrorism coverage: such exclusions or limitations are nullified but
   only as respects “certified terrorism.” Insurers have the same 90 days
   to send the notice.

"Eligible insurers” are permitted to apply "certified terrorism" exclusions if
the policyholder either:

1. agrees to such in writing, or
                                                                                                                                 TRIA Bulletin 1
         2. does not pay the premium within 30 days (as a minimum) after receiving
            the notice.

         Notices must specify the date on which the exclusion will be attached or
         reinstated if the policyholder does not accept the offer and/or pay the

         TRIA does not regulate "certified terrorism" insurance rates nor does it affect
         the authority of insurance commissioners to regulate rates except that until
         December 31 2003 rates are subject to retroactive review only.

         In states and territories subject to standard fire policy provisions, even when
         the policyholder declines “certified terrorism” coverage, they cannot decline
         fire following coverage. However, the insurer is eligible for compensation
         under TRIA for such losses.

   We will update this information as further guidelines become available. Please
   refer questions to your Willis Client Advocate.

   Willis TRIA Working Group

   Mary Caizzo, Co-Chair, Nashville, TN USA
   Suzanne Douglass, Co-Chair, New York, NY USA
   Philip Andrea, London, UK
   Robert Barr, London, UK
   Tom Bartleet, London, UK
   Paul Blackmore, London, UK
   James Costner, Nashville, TN USA
   Mark Edwards, Hamilton, Bermuda
   Oliver Goodinge, London, UK
   Michael Mann, Chicago, IL USA
   Craig Simon, New York, NY USAA
   Rod Thaler, New York, NY USA
   Mike Vaughn, Nashville, TN USA
   Paul Yelavich, New York, NY USA

Anyone reading this bulletin is recommended to seek specific advice from a suitably qualified person before dealing with
any situation which may be covered by any information it contains or before embarking on any course of action. The
material in this bulletin is given for general information purposes only and does not constitute legal or professional advice.

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