Key Takeaways
- Arizona commercial property insurance uses file and use rate regulation
- Commercial policies must disclose terrorism coverage options under TRIA
- Arizona allows surplus lines placement after diligent effort to place in admitted market
- Surplus lines tax in Arizona is 3% of premium plus stamping fee
- Business interruption and extra expense coverage follow standard commercial forms
Arizona Commercial Property Insurance
Arizona regulates commercial property insurance with specific requirements for rates, surplus lines, and coverage availability.
Rate Regulation
Under Arizona file and use system, commercial property insurance rates:
- May be used immediately upon filing
- Subject to DIFI review after implementation
- Must not be excessive, inadequate, or unfairly discriminatory
- Can be disapproved if DIFI finds violations
Commercial Rate Filing
| Requirement | Details |
|---|---|
| Filing | Required before use |
| Approval | Not required before use |
| Review | DIFI reviews after implementation |
| Disapproval | DIFI can disapprove after review |
Terrorism Insurance
TRIA (Terrorism Risk Insurance Act)
- Federal program providing terrorism insurance backstop
- Arizona insurers must offer terrorism coverage
- Policyholder can accept or reject terrorism coverage
- Disclosure of coverage terms required
Required Disclosures
- Coverage limits for terrorism
- Premium for terrorism coverage
- Right to accept or reject
- Exclusions and limitations
Commercial Property Coverage
Arizona commercial property follows standard forms:
Coverage Types
| Coverage | Description |
|---|---|
| Building | Structure and permanently attached items |
| Business Personal Property | Contents, inventory, equipment |
| Business Income | Lost income during restoration |
| Extra Expense | Additional costs to continue operations |
Surplus Lines Insurance
Arizona allows surplus lines insurance for risks not available in the admitted market:
Surplus Lines Requirements
| Requirement | Details |
|---|---|
| Diligent Effort | Must attempt to place with admitted insurers |
| Export List | Some risks pre-approved for export |
| Surplus Lines Agent | Must use licensed SL broker |
| Surplus Lines Tax | 3% of premium |
| Stamping Fee | Additional fee |
| Disclosure | Must disclose SL status to insured |
Diligent Effort
Unlike some states requiring a specific number of declinations, Arizona requires:
- Good faith effort to place coverage in admitted market
- Documentation of efforts
- Certain risks on Export List may bypass this requirement
Export List Risks
Arizona maintains a list of risks that can be placed directly with surplus lines insurers:
- Unique or unusual risks
- Certain commercial coverages
- Risks with no admitted market
Business Interruption Insurance
Arizona commercial policies include business interruption provisions:
Key Provisions
- Coverage for lost income during restoration period
- Waiting/deductible period clearly defined
- Period of restoration established
- Extended period of indemnity available
- Civil authority coverage for government-ordered closures
Extra Expense Coverage
- Covers costs to continue operations during restoration
- Separate limit from business interruption
- Examples: temporary location, expedited repairs
Arizona-Specific Commercial Issues
Monsoon and Weather Coverage
- Monsoon season creates unique risks
- Water damage coverage important
- Dust storm damage considerations
- Heat-related equipment breakdown
What is the Arizona surplus lines tax rate?
What does Arizona require before placing a risk in the surplus lines market?
Under TRIA, what must Arizona insurers do regarding terrorism coverage?