2.2 Ohio Commercial Property Insurance

Rate Regulation: File-and-Use

Ohio regulates most commercial property rates under a file-and-use system. The insurer files its rates and supporting data with the Ohio Department of Insurance (ODI) and may begin using them immediately — no prior approval is needed. ODI reviews afterward and can disapprove a rate that is excessive, inadequate, or unfairly discriminatory (the three statutory rate standards). Compare the alternatives the exam tests:

Exam trap: "File-and-use" does NOT mean rates escape review. ODI can order a rate withdrawn after the fact; an inadequate rate (too low, threatening solvency) is just as disapprovable as an excessive one.

Terrorism Insurance and TRIA

The Terrorism Risk Insurance Act (TRIA) is a federal backstop in which the U.S. Treasury shares catastrophic terrorism losses with insurers after a certified act. TRIA requires insurers to make available (offer) terrorism coverage on commercial property/casualty policies. Ohio commercial producers must deliver the required disclosures:

• The portion of premium attributable to terrorism coverage (the premium must be stated separately).
• The existence of the federal share and any program cap on aggregate losses.
• The insured's right to accept or reject terrorism coverage in writing.

If the insured rejects, the policy may exclude certified acts of terrorism. Worked example: a $4,000 commercial package premium lists a separate $150 terrorism charge. The insured signs a rejection; the carrier removes the $150 and adds the terrorism exclusion. Failure to offer the coverage is itself a violation, regardless of whether the insured wanted it.

TRIA only responds to a certified act of terrorism above a program trigger; ordinary vandalism or a non-certified event is handled under standard policy perils, not TRIA. Producers should not tell a commercial client that TRIA covers "any" violent event — it is a narrow, federally certified backstop.

Surplus Lines (Excess and Surplus Market)

When a risk cannot be placed with an admitted (licensed) insurer, the producer turns to the surplus lines market — non-admitted insurers that are eligible but not licensed in Ohio. Surplus lines insurers are not protected by the Ohio guaranty fund, so the producer must disclose that the carrier is non-admitted.

Worked example: a $20,000 surplus lines premium generates a $1,000 surplus lines tax (20,000 × 5%), which the broker collects from the insured and remits to the state. The tax applies to all surplus lines premium, including export-list risks.

Ohio export list

Some risks are so specialized that a diligent search would be pointless. Ohio maintains an export list — coverages that may go directly to surplus lines without proving three declinations, such as unique or unusual property exposures, certain excess and umbrella liability, and hard-to-place professional liability classes. Export-list status waives the diligent-search proof, not the 5% tax or the disclosure.

Commercial Property Coverage Forms

Ohio commercial property follows standard ISO forms. Core coverages:

Business income, extra expense, and builders risk

Business income coverage responds during the period of restoration — the time to repair or replace, beginning after any waiting period (often 72 hours) and ending when the property should reasonably be restored. Civil authority coverage extends business income when a government order bars access to the premises. Extra expense carries its own limit so it does not erode the business income limit.

Builders risk insures structures under construction (completed-value or reporting form); theft and transit of materials usually require endorsement, and soft costs coverage handles financing and permit losses from construction delays.

Business income worked example and traps

Suppose a manufacturer earns $30,000/month net income plus continuing payroll. A covered fire shuts it down; the period of restoration runs 3 months, and the policy has a 72-hour waiting period. Business income pays the lost income and continuing expenses across the restoration period (subject to the limit), but not the first 72 hours of downtime. If a city order keeps customers away for an extra week after repairs finish, the extended period of indemnity endorsement is what continues coverage while revenue ramps back up.

Exam trap: Business income and extra expense are different. Business income replaces lost earnings during shutdown; extra expense pays the added cost to avoid or shorten the shutdown (renting a temporary plant). On a combined form they share a limit only if written that way — separate limits protect both.