2.2 Colorado Commercial Property Insurance

Rate Regulation: File-and-Use

Colorado is a competitive-rating state. For most commercial property and casualty lines, insurers operate under a file-and-use system: the insurer files its rates and supporting data with the Colorado Division of Insurance (DOI) and may begin using them without waiting for prior approval. The Commissioner can later disapprove a rate found to be excessive, inadequate, or unfairly discriminatory.

Key rating principles tested on the exam:

• A rate is excessive if it is unreasonably high for the coverage and a reasonable degree of competition does not exist.
• A rate is inadequate if it is so low it threatens solvency or tends to create monopoly.
• A rate is unfairly discriminatory if price differences do not reflect differences in expected loss or expense.

Contrast: "File-and-use" is not the same as "prior approval." In prior-approval states the regulator must bless the rate before use. Colorado generally lets competitive market forces set commercial rates and intervenes after the fact.

Terrorism Coverage Under TRIA

The Terrorism Risk Insurance Act (TRIA) is a federal backstop (administered by the U.S. Treasury) that requires commercial property and casualty insurers to make available coverage for certified acts of terrorism. Colorado insurers must follow TRIA's disclosure and offer rules.

Mandatory disclosures on a commercial policy

• A clear statement that terrorism coverage is being offered, with its separate premium.
• The federal share of compensation and the program's annual cap ($100 billion aggregate).
• The definition of a certified act of terrorism (certified jointly by the Secretary of the Treasury).
• The insured's right to accept or reject the coverage in writing.

If the insured rejects terrorism coverage, the policy may exclude losses from certified acts. The mandatory-offer-and-disclosure duty is the most-tested point.

Commercial FAIR Plan Coverage

The Colorado FAIR Plan is not limited to homes. It also writes basic commercial property for businesses the admitted market has declined:

Exam tie-in: Like the residential plan, the commercial FAIR Plan is a residual market — a producer must show the risk could not be placed in the admitted market first.

Surplus Lines and Specialty Coverages

When no admitted (licensed) insurer will write a risk, it may be placed with an eligible non-admitted (surplus lines) insurer. Colorado tightened its surplus lines disclosure, eligibility, and SLIP+ electronic-filing rules in early 2026, but the premium tax rate stayed at 3%.

Business Income and Extra Expense

Business income (interruption) coverage replaces lost net income plus normal continuing operating expenses during the period of restoration — the time to repair or replace the damaged property and resume operations. Coverage usually has a 72-hour waiting period and may extend under an extended period of indemnity.

Worked example: A retailer earning $20,000/month net income suffers a covered fire and is closed three months. Business income pays roughly the lost net income plus payroll and rent that continue; extra expense separately funds the pop-up location that limited the downtime.

Admitted vs. Non-Admitted and the Guaranty Association

Producers must understand why surplus lines matters to a commercial buyer. An admitted (licensed) insurer is authorized by the Colorado DOI, files its rates and forms, and its policyholders are protected by the Colorado Insurance Guaranty Association (CIGA) if the carrier becomes insolvent. A non-admitted (surplus lines) insurer is not licensed in Colorado and is not backed by CIGA — a fact the producer must disclose to the insured in writing.

Surplus lines is appropriate for unusual exposures (a fireworks warehouse), very high values, or risks every admitted carrier declined — which is exactly when the diligent search documentation becomes essential.

Coinsurance on Commercial Property

Most commercial property forms include a coinsurance clause (commonly 80%, 90%, or 100%) requiring the insured to carry a limit equal to at least that percentage of the property's value, or share in a partial loss.

Worked example: A building worth $1,000,000 carries an 80% coinsurance clause, so the insured should carry at least $800,000. If it insures only $600,000 and suffers a $200,000 loss, the recovery is reduced by the ratio (did/should = $600,000/$800,000 = 0.75): 0.75 × $200,000 = $150,000, minus the deductible. The insured absorbs the coinsurance penalty for under-insuring.