1. Forms
2. IL
3. IL-09-85

What the form is

The IL 09 85 is a mandatory disclosure form titled "Disclosure Pursuant to Terrorism Risk Insurance Act". Its primary purpose is to inform policyholders about the Terrorism Risk Insurance Act (TRIA) and its impact on their insurance coverage. This form itself does not grant any coverage or change the terms and conditions of any coverage under the policy. It typically includes information about the premium attributable to coverage for certified acts of terrorism and how losses from such acts may be shared between the insurer and the federal government under TRIA. The disclosure also explains that the United States Government, Department of the Treasury, will pay a share of terrorism losses insured under the federal program, and that if aggregate insured losses attributable to terrorist acts certified under TRIA exceed $100 billion in a calendar year, the Treasury shall not make any payment for any portion of the amount of such losses that exceeds $100 billion, and losses up to that amount may be subject to pro rata allocation.

Classes of business it applies to

This disclosure is generally required for most commercial lines of insurance, as TRIA applies broadly to commercial property and casualty insurance. It is used across various industries and business types that purchase commercial insurance policies. Examples include, but are not limited to:

• Commercial Package Policies for businesses like manufacturing plants or retail stores.
• Commercial Property policies for real estate owners.
• Commercial General Liability policies for contractors or service providers.
• Commercial Auto policies.
• Workers' Compensation policies (though TRIA has specific rules and forms that may apply in addition to or instead of IL 09 85 for WC).
• Inland Marine policies.
• Equipment Breakdown policies.
• Commercial Umbrella or Excess Liability policies.
• Policies for public entities.

Special considerations

• TRIA Reauthorizations: TRIA has been extended multiple times by Congress. The details of the federal program, such as the insurer's deductible and the federal share of compensation, can change with these reauthorizations. The edition date of the IL 09 85 (e.g., 12 20) often reflects updates related to TRIA reauthorizations.
• Premium Disclosure: The form will state the portion of the premium, if any, that is for certified acts of terrorism. This information may be shown in the schedule of the endorsement or in the policy Declarations.
• $100 Billion Cap: It explains that if aggregate insured losses from certified acts of terrorism exceed $100 billion in a calendar year and the insurer has met its deductible, the insurer shall not be liable for losses exceeding this amount, and insured losses up to that amount are subject to pro rata allocation.
• Coverage Rejection: Policyholders may have the option to reject terrorism coverage. This decision is typically documented on a separate, specific rejection form. The IL 09 85 disclosure is generally provided regardless of whether coverage is accepted or rejected.
• Standard Form: While IL 09 85 is a standard Insurance Services Office (ISO) form, insurers might have their own proprietary versions, or it might be accompanied by state-specific terrorism disclosure notices.

Key information for agents and underwriters

• Compliance: Ensure this disclosure is provided to all applicable commercial policyholders at policy inception and renewal, as required by TRIA.
• Accurate Premium Disclosure: The terrorism premium amount must be accurately disclosed on the form or in the policy declarations as indicated by the form. This premium is determined by the insurer's rating plan for terrorism coverage.
• Client Education: Agents should be prepared to explain the basics of TRIA and this disclosure to their clients. This includes explaining what constitutes a "certified act of terrorism" and the mechanism of the federal backstop.
• Documentation of Coverage Decision: While this form is a disclosure, it is crucial to properly document the insured's decision if they are offered and choose to reject TRIA coverage (typically on a separate rejection form). The IL 09 85 itself is not the rejection form.
• Underwriting Considerations: Underwriters must be aware of the current TRIA program specifics, including the insurer's retention and the federal share, as these impact the company's overall exposure. The pricing of TRIA coverage should reflect the assessed risk.
• Record Keeping: Maintain records demonstrating that this disclosure was provided to the insured.