Federal Register, Volume 74, Number 75, April 21, 2009, Pages 18115-18284 Page: 18,135
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Federal Register/Vol. 74, No. 75/Tuesday, April 21, 2009/Rules and Regulations
DEPARTMENT OF THE TREASURY
31 CFR Part 50
RIN 1505-AB93
Terrorism Risk Insurance Program;
Terrorism Risk Insurance Program
Reauthorization Act Implementation
AGENCY: Departmental Offices, Treasury.
ACTION: Final rule.
SUMMARY: The Department of the
Treasury (Treasury) is issuing this final
rule as part of its implementation of
amendments made by the Terrorism
Risk Insurance Program Reauthorization
Act of 2007 (Reauthorization Act) to
Title I of the Terrorism Risk Insurance
Act of 2002 (TRIA, or Act), as
previously amended by the Terrorism
Risk Insurance Extension Act of 2005
(Extension Act). The Act established a
temporary Terrorism Risk Insurance
Program (Program) that was scheduled
to expire on December 31, 2005, under
which the Federal Government shared
the risk of insured losses from certified
acts of terrorism with commercial
property and casualty insurers. The
Extension Act extended the Program
through December 31, 2007, and made
other changes. The Reauthorization Act
extended the Program through
December 31, 2014, revised the
definition of an "act of terrorism," and
made other changes. This final rule
contains regulations that Treasury is
issuing to implement certain aspects of
the Reauthorization Act. In particular,
the rule addresses mandatory
availability ("make available") and
disclosure requirements. An interim
final rule with request for comments
was published in the Federal Register
on September 16, 2008, and generally
incorporated the substance of interim
guidance previously issued by Treasury
and published in the Federal Register.
Since no comments were received
regarding the interim final rule, this
final rule adopts the text of the interim
final rule without revision.
DATES: This final rule is effective May
21, 2009.
FOR FURTHER INFORMATION CONTACT:
Howard Leikin, Deputy Director,
Terrorism Risk Insurance Program (202)
622-6770 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
I. Background
A. Terrorism Risk Insurance Act of 2002
On November 26, 2002, the President
signed into law the Terrorism Risk
Insurance Act of 2002 (Pub. L. 107-297,
116 Stat. 2322). The Act was effectiveimmediately. The Act's purposes are to
address market disruptions, ensure the
continued widespread availability and
affordability of commercial property
and casualty insurance for terrorism
risk, and allow for a transition period
for the private markets to stabilize and
build capacity while preserving State
insurance regulation and consumer
protections.
Title I of the Act establishes a
temporary Federal program of shared
public and private compensation for
insured commercial property and
casualty losses resulting from an act of
terrorism which, as defined by the Act,
is certified by the Secretary of the
Treasury, in concurrence with the
Secretary of State and the Attorney
General. The Act authorizes Treasury to
administer and implement the
Terrorism Risk Insurance Program (the
Program), including the issuance of
regulations and procedures.
Each entity that meets the Act's
definition of insurer must participate in
the Program. The amount of Federal
payment for an insured loss resulting
from an act of terrorism is determined
by insurance company deductibles and
excess loss sharing with the Federal
Government as specified in the Act and
Treasury's implementing regulations.
An insurer's deductible is calculated
based on the value of direct earned
premiums collected over certain
prescribed calendar periods. Once an
insurer has met its individual
deductible, the Federal payments cover
a percentage of the insured losses above
the deductible, all subject to an annual
industry aggregate limit of $100 billion.
The Act gives Treasury authority to
recoup Federal payments made under
the Program through policyholder
surcharges. The Act reduces the Federal
share of compensation for insured losses
that have been covered under any other
Federal program. The Act also contains
provisions designed to manage certain
litigation arising from or relating to a
certified act of terrorism. Section 107 of
the Act creates an exclusive Federal
cause of action, provides for claims
consolidation in Federal court, and
contains a prohibition on Federal
payments for punitive damages under
the Program. The Act provides the
United States with the right of
subrogation with respect to any
payment or claim paid by the United
States under the Program.
The Program was originally set to
expire on December 31, 2005. On
December 22, 2005, the President signed
into law the Terrorism Risk Insurance
Extension Act of 2005 (Pub. L. 109-144,
119 Stat. 2660), which extended the
Program through December 31, 2007,and made other significant changes to
TRIA that included a revised definition
of property and casualty insurance and
creation of a new Program trigger that
prohibits payment of Federal
compensation by Treasury unless the
aggregate industry insured losses
resulting from a certified act of terrorism
exceed a certain amount ($100 million
in 2007 and any Program Year
thereafter).
B. Terrorism Risk Insurance Program
Reauthorization Act of 2007
Under the Extension Act, the Program
was set to expire on December 31, 2007.
On December 26, 2007, the President
signed into law the Terrorism Risk
Insurance Program Reauthorization Act
of 2007 (Pub. L. 110-160, 121 Stat.
1839), which extended the Program
through December 31, 2014 (i.e., added
additional Program Years to the
Program). Other provisions of the
Reauthorization Act:
* Revise the definition of "act of
terrorism" to remove the requirement
that the act of terrorism be committed
by an individual acting on behalf of any
foreign person or foreign interest in
order to be certified as an act of
terrorism for purposes of the Act.
* Define "insurer deductible" for all
additional Program Years as the value of
an insurer's direct earned premiums for
commercial property and casualty
insurance for the immediately preceding
calendar year multiplied by 20 percent.
* Set the Federal share of
compensation for insured losses (subject
to a $100,000,000 Program trigger) for
all additional Program Years at 85
percent of that portion of the amount of
insured losses that exceeds the
applicable insurer deductible.
* Require Treasury to submit a report
to Congress and issue final regulations
for determining the pro rata share of
insured losses to be paid under the
Program when aggregate insured losses
exceed $100,000,000,000.
* Require the Secretary of the
Treasury to notify Congress not later
than 15 days after the date of an act of
terrorism as to whether aggregate
insured losses are estimated to exceed
$100,000,000,000.
* Require for policies issued after the
date of enactment, that insurers provide
clear and conspicuous disclosure to the
policyholder of the existence of the
$100,000,000,000 cap at the time of
offer, purchase, and renewal of a policy
(in addition to current disclosure
requirements).
* Revise the recoupment provisions
of the Act. For purposes of recouping
the Federal share of compensation
under the Act, the "insurancemarketplace aggregate retention
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United States. Office of the Federal Register. Federal Register, Volume 74, Number 75, April 21, 2009, Pages 18115-18284, periodical, April 21, 2009; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc132937/m1/27/: accessed April 24, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.