2.2 Georgia Commercial Property Insurance

Rate Regulation: File-and-Use

Georgia regulates commercial property rates under a file-and-use system administered by the Office of Commissioner of Insurance and Safety Fire (OCI). Under file-and-use:

• The insurer files rates and supporting data with the OCI and may use them immediately (or after a short waiting period) without waiting for affirmative approval.
• The standard remains that rates may not be excessive, inadequate, or unfairly discriminatory — the three statutory prohibitions a candidate must memorize.
• The Commissioner reviews after the fact and may order a rate disapproved or corrected if it violates the standard.

Exam Tip: Commercial lines = file-and-use; personal lines (auto, homeowners) = prior approval. Reversing these is the most common rate-regulation trap on the Georgia exam.

Terrorism Coverage — TRIA

The federal Terrorism Risk Insurance Act (TRIA), reauthorized through 2027, provides a federal backstop for certified acts of terrorism. Georgia commercial insurers must:

1. Make an offer of terrorism coverage to every commercial policyholder.
2. Disclose the premium attributable to terrorism coverage separately.
3. Allow the insured to accept or reject in writing — rejection must be documented in the file.
4. State the federal share and the program cap so the insured understands losses above the cap are not paid.

Surplus Lines Insurance

When no admitted (licensed) insurer will write a risk, a licensed surplus lines broker may place it with an eligible non-admitted insurer. Georgia law (OCGA Chapter 33-5) sets strict conditions:

The diligent-effort rule is the crux: the broker must make a good-faith search of the admitted market, document the carriers that declined, and file the required export/affidavit before binding. Skipping this is an unlicensed-placement violation, even if the coverage is otherwise sound.

Exam Tip: Surplus lines policies are NOT backed by the Georgia guaranty association. If the non-admitted insurer becomes insolvent, the insured has no state safety net — a key disclosure point and a frequent test item.

Business Income, Extra Expense, and Builders Risk

Georgia commercial property follows standard ISO forms. Candidates must distinguish the time-element coverages:

• Business Income (BI): pays lost net income plus continuing normal operating expenses (including payroll, if covered) during the period of restoration — the time to rebuild/repair with reasonable speed. A waiting period (often 72 hours) applies before BI begins.
• Extra Expense: pays the additional cost to keep operating (temporary location, expedited shipping, rented equipment) so the business minimizes downtime; it carries its own limit.
• Civil Authority: extends BI when a government order prohibits access to the premises because of damage to nearby property.
• Extended Period of Indemnity: continues BI for a set time after repairs finish, while revenue ramps back up.

Builders risk insures structures under construction:

• Written on a completed-value or reporting basis as the project's value rises.
• Covers materials at the site (and often in transit/storage) — theft of materials may need an endorsement.
• Soft costs (lost rents, extra interest, re-permitting) can be added when a covered loss delays completion.

Worked Example and Exam Traps

A Georgia manufacturer buys a commercial property policy with a $1,000,000 building limit and a business income limit, then receives a surplus lines quote for a flammable-finishing operation no admitted carrier will write. The broker must first document declinations from the admitted market, then place the risk with an eligible non-admitted insurer and remit the 4% surplus lines tax — on a $50,000 premium that is $2,000 of tax, collected by the broker, not the retail agent.

When a fire later idles the plant for ten weeks, business income pays the lost net income and continuing payroll during the period of restoration after the 72-hour waiting period; extra expense pays to lease a substitute facility; and if the city bars access to an undamaged neighboring block, civil authority extends limited business income coverage.

Key traps tested on the Georgia exam:

• 4% vs. 4.85%: Georgia's surplus lines tax is 4%. A 4.85% answer is Texas's rate and is a deliberate distractor.
• Diligent effort is mandatory: placing surplus lines without documenting admitted-market declinations is an unlicensed-placement violation even if the risk was truly uninsurable.
• No guaranty-fund protection: surplus lines insureds are NOT covered by the Georgia Insurers Insolvency Pool, and this must be disclosed.
• Offer vs. force: TRIA requires insurers to offer terrorism coverage and disclose its premium; it does not force the insured to buy it — written rejection is allowed and must be filed.
• Rate system: commercial = file-and-use; personal = prior approval. Do not flip them.

Finally, distinguish business income (replaces lost earnings + continuing expenses) from extra expense (extra cost to keep operating). Many candidates conflate the two; the exam often rewards recognizing that a temporary rental cost is extra expense, while lost profit during downtime is business income.