Bulletin #22: Terrorism Coverage, Fire Marshal Tax and
Surplus Line Policies
General Bulletin #22
TERRORISM COVERAGE, FIRE MARSHAL TAX AND SURPLUS LINE
POLICIES
A number of producers have contacted us recently with questions about the
applicability of the 1% Fire Marshal tax to terrorism coverage provided under
the Terrorism Risk Insurance Act of 2002 ("TRIA"). The Illinois Department of Insurance has today issued guidance regarding the applicability of Fire Marshal
tax to surplus line TRIA coverage as follows:
1. For a stand-alone terrorism policy, the 1%
Fire Marshal tax is charged against the full premium.
2. For terrorism coverage attaching to a policy
covering other lines, one should consider how Fire Marshal tax would be charged
if the policy did not include the TRIA coverage and apply the same rule to the
terrorism premium.
For instance, if terrorism coverage is added to a
general liability policy, Fire Marshal tax should not be charged since general
liability coverage is not subject to the tax. If terrorism coverage is added to
an all-risk, real property policy, the terrorism premium would be subject to the
Fire Marshal tax at the same rate as the rest of the premium for the policy
(i.e. 50% of the premium is subject to the 1% Fire Marshal tax).
Obviously, surplus line tax and stamping fee apply to TRIA premium just as
they do to any other surplus line premium.
Please feel free to contact the Association if you have any questions
regarding this bulletin.
26-Feb-2003
| 
