2.2 Illinois Commercial Property Insurance

Commercial Rate Regulation — File and Use

Illinois is a file-and-use state for property and casualty rates. The insurer files its rates and supporting actuarial data with the Illinois Department of Insurance (DOI) and may begin using them immediately — prior approval is not required. The DOI reviews afterward and can disapprove rates it finds excessive, inadequate, or unfairly discriminatory (the three statutory tests).

Exam trap: "File and use" does not mean unregulated. The DOI retains authority to order a rate withdrawn and to demand justification. Commercial lines also enjoy more rating flexibility than personal lines, including schedule rating credits and debits for individual large risks.

Terrorism Insurance — TRIA

The federal Terrorism Risk Insurance Act (TRIA) is a government backstop that reimburses insurers for losses from a certified act of terrorism above an annual program trigger. It applies in Illinois like every state, and it imposes a mandatory offer at the producer level.

• The insurer must offer terrorism coverage on commercial property and liability policies.
• The offer must disclose the premium attributable to terrorism and the federal share of compensation.
• The insured may accept or reject the coverage — a written rejection (or failure to pay the stated premium) documents the waiver.
• The disclosure must spell out limits, the program cap, and exclusions so the buyer understands the residual gap.

Standard Commercial Property Coverages

Illinois commercial property follows standard ISO commercial property forms, most commonly the Building and Personal Property Coverage Form (BPP, CP 00 10) within a Commercial Package Policy.

Most commercial forms carry a coinsurance clause (often 80%, 90%, or 100%); insuring below the required percentage triggers a penalty at a partial loss. The causes-of-loss form chosen — Basic, Broad, or Special — determines the perils, with Special providing open-perils protection.

Surplus Lines Insurance

When a risk cannot be placed in the admitted (licensed) market, Illinois permits placement with a non-admitted surplus lines insurer through a licensed surplus lines producer. Surplus lines carriers are not backed by the Illinois Insurance Guaranty Fund, so the consumer must be told the coverage is non-admitted.

Placement requirements

Taxes and fees — the exact numbers

• Surplus lines premium tax: 3.5% of premium, remitted by the producer.
• SLAI stamping fee: 0.04% of premium (effective 2023).
• Fire marshal tax: up to 1% on the property portion of fire/allied premium.

Worked example: A $20,000 surplus lines property premium generates roughly $700 in state premium tax (3.5%), about $8 in stamping fee (0.04%), plus any applicable fire marshal tax. The producer collects and remits these — they are not the carrier's obligation.

The Illinois Export List

The DOI maintains an Export List of risk classes deemed generally unavailable in the admitted market, which may be exported directly without the three-declination search. Common entries include:

• Aviation and aircraft liability
• Excess and umbrella liability
• Employment practices liability (EPLI)
• Directors and officers (D&O) liability
• Environmental impairment / pollution liability
• Certain professional liability classes

Time-Element Coverages

Business income (interruption)

Business income coverage replaces net income that would have been earned plus normal continuing operating expenses (such as payroll and mortgage) during the period of restoration — the time it should reasonably take to repair or replace damaged property. Key mechanics:

• A 72-hour waiting period commonly applies before coverage begins.
• An extended period of indemnity endorsement continues coverage while the business rebuilds its customer base after reopening.
• Civil authority coverage pays a limited time when a government order bars access to the premises because of nearby covered damage.

Extra expense

Extra expense covers the additional costs to continue operations after a loss — a temporary location, leased equipment, expedited shipping, or overtime. It carries its own limit separate from business income.

Builders Risk

Builders risk insures structures during construction:

• Written on a completed-value form or a reporting form tied to monthly values.
• Theft of materials usually needs an endorsement; transit and off-site storage can be added.
• Coverage typically ends when the building is occupied, accepted, or the policy expires — the owner's permanent property policy then takes over.

Exam trap: Business income is a time-element coverage — it pays for time lost, not for the physical property itself, and requires a direct physical loss by a covered peril to trigger.