1. Forms
2. CG
3. CG-21-72

What the form is

The CG 21 72 11 02 endorsement, titled "Nuclear, Biological Or Chemical Terrorism Exclusion (Other Than Certified Acts of Terrorism); Cap On Losses From Certified Acts of Terrorism Endorsement," was developed by the Insurance Services Office (ISO) in response to the Terrorism Risk Insurance Act of 2002 (TRIA). Its primary purpose is to modify Commercial General Liability (CGL) policies to address coverage for acts of terrorism involving nuclear, biological, or chemical (NBC) materials. The form excludes coverage for bodily injury or property damage arising from NBC terrorism events that are not certified as "acts of terrorism" by the U.S. Secretary of the Treasury under TRIA. However, if an NBC event is certified as an act of terrorism under TRIA, this endorsement clarifies that any ensuing coverage will be subject to the applicable statutory cap on losses provided by TRIA.

Classes of business it applies to

This endorsement is broadly applicable to most classes of business that carry a Commercial General Liability insurance policy. Given the widespread concern about terrorism risk following 2001, it was relevant across numerous sectors. Examples include, but are not limited to:

• Real estate: Owners and managers of commercial properties such as office buildings, shopping centers, and apartment complexes.
• Manufacturing: Industrial facilities that could be targets or suffer widespread contamination.
• Retail and Hospitality: Businesses with high public footfall, like department stores, hotels, and restaurants.
• Public Entities: Governmental organizations and public services.
• Transportation and Logistics: Companies involved in the movement of goods or people.
• Any business with significant public exposure or located in areas perceived as higher risk for terrorism events.

Special considerations

• TRIA Context: This endorsement is a direct result of TRIA, which created a federal backstop for insurance claims related to certified acts of terrorism. It was one of a series of forms ISO introduced to help insurers comply with TRIA and manage terrorism exposures.
• Certified vs. Non-Certified Acts: A critical aspect of this endorsement is its differentiation between "certified acts of terrorism" (which meet specific criteria under TRIA, including a minimum loss amount and foreign involvement) and other acts of NBC terrorism. Non-certified NBC events are generally excluded.
• Scope of Exclusion: The exclusion for non-certified NBC terrorism is significant. It means that unless an NBC event meets the stringent TRIA certification criteria, there would likely be no coverage for resulting bodily injury or property damage under the CGL policy with this endorsement attached.
• Regulatory Landscape: While intended for broad, countrywide use, these forms were subject to review and approval by individual state insurance regulators. There could be state-specific variations, or states might have had different timelines or conditions for its adoption. For instance, the form was noted as withdrawn in North Carolina in early 2003.

Key information for agents and underwriters

• Risk Assessment: Underwriters must still assess an insured's overall terrorism exposure. While this form excludes non-certified NBC acts, the potential for certified acts (which would be capped) remains. The nature of the insured's operations and location are key factors.
• Coverage Clarification: Agents have a crucial role in explaining the endorsement's impact to policyholders. Insureds need to understand the narrow scope of NBC terrorism coverage (i.e., only if TRIA-certified and then capped) and the broad exclusion for non-certified NBC events.
• Pricing Implications: The pricing of terrorism coverage, including aspects addressed by this endorsement, is influenced by TRIA's framework, the insurer's reinsurance arrangements for terrorism, and the specific risk profile of the insured.
• TRIA Compliance and Program Structure: This endorsement helps align the CGL policy with the TRIA structure, particularly regarding the cap on losses for certified events. Underwriters should be familiar with the prevailing TRIA requirements and how they interact with this and other terrorism-related endorsements.
• Potential for Gaps: Businesses with significant NBC exposures not covered under TRIA (e.g., domestic NBC terrorism falling below certification thresholds) would face a coverage gap for such events under a policy with this endorsement. Alternative risk transfer solutions or specialized coverages might need to be explored for such scenarios.