Supporting Statement

SUPPORTING STATEMENT

Terrorism Risk Insurance Program – Rebuttal of Control Submission

1. CIRCUMSTANCES NECESSITATING COLLECTION OF INFORMATION

Sections 103(a) and 104 of the Terrorism Risk Insurance Act of 2002 (Pub.L 107-297) (and unchanged by the Terrorism Risk Insurance Extension Act of 2005, Pub.L 109-144) authorize the Department of Treasury to administer and implement the temporary Terrorism Risk Insurance Program established by the Act. The definition of control in 102(3) of the Act provides for Treasury to determine whether an insurer directly or indirectly exercises a controlling influence over the management or policies of another insurer. Among other things, if one insurer controls another insurer, then the insurers are deemed “affiliates” under the Program, and their direct earned premium must be consolidated for purposes of calculating the “insurer deductible” that in turn forms the basis for ascertaining federal payments made by Treasury under the Act as well as applicable surcharges.

Treasury established by interim final rule (68 FR 9804, February 28, 2003), certain rebuttable presumptions of controlling influence. Treasury thereafter published a notice of interim guidance (68 FR 15039, March 27, 2003) explaining the procedure an insurer must use in the event the insurer wished to rebut one or more of these presumptions of controlling influence. The procedure provides an insurer with the opportunity to rebut the presumption by making a written submission to Treasury that contains an explanation or relevant facts and circumstances and other relevant information in support of why the controlling influence presumption should not apply.

On July 11, 2003, Treasury issued a final rule (68 FR 41250) that, in response to comments on the interim final rule, modified the rebuttable presumptions of controlling influence slightly. Treasury replaced the notice of interim guidance by §50.8 in the final rule which provides comparable procedural guidance to an insurer that may wish to rebut a presumption of controlling influence.

2. USE OF DATA

Treasury will use the information submitted by the insurer to evaluate and then make a determination of whether the presumption of controlling influence by an insurer over another insurer has been rebutted for purposes of the Program. As of June 15, 2006, Treasury has received and made determinations on two submissions.

3. USE OF IMPROVED INFORMATION TECHNOLOGY

The rebuttal submission procedure does not require or restrict electronic submissions.

4. EFFORTS TO IDENTIFY DUPLICATION

Complete information necessary to make a determination that a controlling influence presumption has been rebutted is not available from any source other than the affected insurer.

5. METHODS TO MINIMIZE THE BURDEN ON SMALL BUSINESSES OR OTHER SMALL ENTITIES

Not applicable.

6. CONSEQUENCES OF LESS FREQUENT COLLECTION ON FEDERAL PROGRAMS OR POLICY ACTIVITIES

If the rebuttal procedure is not continued then there is no other means under the federal Terrorism Risk Insurance Program by which an insurer may rebut a regulatory presumption of controlling influence and no efficient and effective method by which Treasury (which does not generally regulate these insurers for any purpose other than the temporary Terrorism Risk Insurance Program) may obtain necessary information may obtain necessary information to make a determination of whether there is a controlling influence by one insurer over another if disputed by the affected insurers.

7. SPECIAL CIRCUMSTANCES REQUIRING DATA COLLECTION TO BE INCONSISTENT WITH GUIDELINES IN 5 CFR 1320.5(d)(2)

Not applicable.

8. CONSULTATION WITH INDIVIDUALS OUTSIDE THE AGENCY ON AVAILABILITY OF DATA, FREQUENCY OF COLLECTION, CLARITY OF INSTRUCTIONS AND FORMS AND DATA ELEMENTS

Treasury has closely consulted with the National Association of Insurance Commissioners (NAIC) concerning the statutory definition of control and the regulatory rebuttable presumptions. As described in item number 1, the rebuttal procedure was initially issued as a notice of interim guidance in the Federal Register (68 FR 15039, March 27, 2003). It included language inviting comment on the paperwork burden (see copy attached). No comments were received. The rebuttal procedure was thereafter incorporated as §50.8 of a final rule. The preamble to the final rule also invited comment on the paperwork burden (see copy attached). No comments were received. The Notice separately requesting comment on this information collection (68 FR 51326, August 26, 2003) received no replies.

9. EXPLANATION OF DECISION TO PROVIDE ANY PAYMENT OR GIFT TO RESPONDENTS

Not applicable.

10. ASSURANCE OF CONFIDENTIALITY OF RESPONSES

No assurance of confidentiality has been provided, although applicable exemptions under the Freedom of Information Act could apply, e.g., to any confidential business or trade secret material submitted.

11. JUSTIFICATION OF SENSITIVE QUESTIONS

Not applicable.

12. ESTIMATED BURDEN OF INFORMATION COLLECTION

The number of insurers that may seek to rebut a presumption of control is not known but based on available information we estimate the number to be 10. We estimate that the hour burden for each submission will be 40 hours.

13. ESTIMATED TOTAL ANNUAL COST TO RESPONDENTS

The cost to submitters will depend on many factors, including the availability of information, size of the ownership structure of the insurer, whether counsel is used to prepare the submission, etc.

14. ESTIMATED COST TO THE FEDERAL GOVERNMENT
Not applicable.

15. REASON FOR CHANGE IN BURDEN

Not applicable.

16. PLANS FOR TABULATION, STATISTICAL ANALYSIS AND PUBLICATION

Not applicable.

17. REASONS WHY DISPLAYING THE OMB EXPIRATION DATE IS INAPPROPRIATE

Not applicable.

18. EXCEPTIONS TO CERTIFICATION REQUIREMENT OF OMB FORM 83-I

Not applicable.

[Federal Register: February 28, 2003 (Volume 68, Number 40)]

[Rules and Regulations]

[Page 9803-9814]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr28fe03-36]

[[Page 9803]]

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Part V

Department of the Treasury

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31 CFR Part 50

Departmental Offices; Terrorism Risk Insurance Program; Interim Final

Rule and Proposed Rule

[[Page 9804]]

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DEPARTMENT OF THE TREASURY

31 CFR Part 50

RIN 1505-AA96

Departmental Offices; Terrorism Risk Insurance Program

AGENCY: Departmental Offices, Treasury.

ACTION: Interim final rule with request for comments.

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SUMMARY: The Department of the Treasury (Treasury) is issuing this

interim final rule as part of its implementation of Title I of the

Terrorism Risk Insurance Act of 2002 (Act). That Act established a

temporary Terrorism Risk Insurance Program (Program) under which the

Federal Government will share the risk of insured loss from certified

acts of terrorism with commercial property and casualty insurers until

the Program sunsets on December 31, 2005. This interim final rule sets

forth the purpose and scope of the Program and key definitions that

Treasury will use in implementing the Program. In general, this interim

final rule incorporates interim guidance previously issued by Treasury

concerning these definitions. However, the preamble indicates those

areas in which Treasury has modified the interim guidance. This interim

final rule is the first of a series of regulations Treasury will issue

to implement the Program.

DATES: This interim rule is effective February 28, 2003. Written

comments on this interim final rule may be submitted to the Treasury

Department on or before March 31, 2003.

ADDRESSES: Submit comments (if hard copy, preferably an original and

two copies) to Office of Financial Institutions Policy, Attention:

Terrorism Risk Insurance Program Public Comment Record, Room 3160

Annex, Department of the Treasury, 1500 Pennsylvania Ave., NW.,

Washington, DC 20220. Because paper mail in the Washington, DC area may

be subject to delay, it is recommended that comments be submitted by

electronic mail to: [email protected]. Please include your

name, affiliation, address, e-mail address and telephone number in your

comment. All comments should be captioned with ``February 28, 2003 TRIA

Comments.'' Comments will be available for public inspection by

appointment only at the Reading Room of the Treasury Library. To make

appointments, call (202) 622-0990 (not a toll-free number).

FOR FURTHER INFORMATION CONTACT: Mario Ugoletti, Deputy Director,

Office of Financial Institutions Policy (202) 622-2730 or Martha

Ellett, Attorney-Advisor, Office of the Assistant General Counsel

(Banking & Finance), (202) 622-0480 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

I. Background

A. Terrorism Risk Insurance Act of 2002

On November 26, 2002, President Bush signed into law the Terrorism

Risk Insurance Act of 2002 (Public Law 107-297, 116 Stat. 2322). The

Act was effective immediately. 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 as defined in the Act and 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, including the issuance

of regulations and procedures. The Program will sunset on December 31,

2005.

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 to allow for a

transition period for the private markets to stabilize and build

capacity while preserving State insurance regulation and consumer

protections.

The amount of Federal payment for an insured loss resulting from an

act of terrorism is to be determined based upon the insurance company

deductibles and excess loss sharing with the Federal Government, as

specified by the Act. Thus, the Program provides a Federal reinsurance

backstop for a temporary period of time. The Act also provides Treasury

with authority to recoup Federal payments made under the Program

through policyholder surcharges, up to a maximum annual limit.

Each entity that meets the definition of ``insurer''(well over

2,000 firms) must participate in the Program. From the date of

enactment of the Act through the last day of Program Year 2 (December

31, 2004), insurers under the Program must ``make available'' terrorism

risk insurance in their commercial property and casualty insurance

policies and the coverage must not differ materially from the terms,

amounts and other coverage limitations applicable to commercial

property and casualty losses arising from events other than acts of

terrorism. The Act permits Treasury to extend the ``make available''

requirement into Program Year 3, based on an analysis of factors

referenced in the study required by section 108(d)(1) of the Act, and

not later than September 1, 2004.

An insurer's deductible increases each year of the Program, thereby

reducing the Federal government's involvement prior to sunset of the

Program. An insurer's deductible is based on ``direct earned premiums''

over a statutory Transition Period and the three Program Years. Once an

insurer has met its deductible, the Federal payments cover 90 percent

of insured losses above the deductible, subject to an aggregate annual

cap of $100 billion. The Act prohibits duplicative payments for insured

losses that have been covered under any other Federal program.

As conditions for Federal payment under the Program, insurers must

provide clear and conspicuous disclosure to the policyholders of the

premium charged for insured losses covered by the Program, and must

submit a claim and certain certifications to Treasury. Treasury will be

prescribing claims procedures at a later date.

The Act also contains specific provisions designed to manage

litigation arising from or relating to a certified act of terrorism.

Section 107 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. This section

also provides the United States with the right of subrogation with

respect to any payment or claim paid by the United States under the

Program.

B. Previously Issued Interim Guidance

To assist insurers, policyholders and other interested parties in

complying with immediately applicable and time sensitive requirements

of the Act prior to the issuance of these and future regulations,

Treasury issued interim guidance in three separate notices. Treasury

publicly released these interim guidance notices on its Program Web

site, http://www.treasury.gov/trip, and published each notice in the

site, http://www.treasury.gov/trip, and published each notice in the

Federal Register.

Treasury released the first notice of Interim Guidance on December

3, 2002, within a week of the Act's enactment (Interim Guidance I).

Interim Guidance I was published at 67 FR 76206 on December 11, 2002

and addressed several issues pertaining to immediately applicable

provisions of the Act, including statutory disclosure obligations of

insurers as conditions for Federal payment under the Program and the

requirement that an insurer ``make

[[Page 9805]]

available'' terrorism risk insurance. The disclosure guidance in

Interim Guidance I references certain model forms of the National

Association of Insurance Commissioners (NAIC) and provides safe harbor

for those insurers that make use of such forms prior to the issuance of

regulations, but Interim Guidance I stated that these forms are not the

exclusive means by which insurers could comply with the disclosure

conditions prior to the issuance of regulations. Interim Guidance I

also provided guidance concerning the ``direct earned premium'' on

lines of property and casualty insurance to enable insurers to

calculate their ``insurer deductible'' and enable insurers to price and

disclose their premiums for terrorism risk insurance to policyholders

within statutory time periods.

On December 18, 2002, Treasury issued a second notice of interim

guidance. This interim guidance was published at 67 FR 78864 on

December 26, 2002 (Interim Guidance II). Interim Guidance II further

addressed the statutory categories of ``insurers'' that are required to

participate in the Program, including their ``affiliates''; provided

clarification on the scope of ``insured loss'' covered by the Program

and provided additional guidance to enable eligible surplus line

carriers listed on the Quarterly Listing of Alien Insurers of the NAIC

or federally approved insurers to calculate their insurer deductible

for purposes of the Program.

On January 22, 2003, Treasury issued a third notice of interim

guidance, published at 68 FR 4544 on January 29, 2003 (Interim Guidance

III). Interim Guidance III further clarified certain disclosure and

certification questions, issues for non-U.S. insurers, and the scope of

the term ``insured loss'' under the Act.

In issuing each notice of Interim Guidance, Treasury stated that

the Interim Guidance may be relied upon by insurers until superseded by

regulations or a subsequent notice. Treasury provided safe harbors for

actions by those insurers taken in accordance with, and in reliance on,

the interim guidance for the time period prior to the issuance of

regulations. Treasury now is issuing an interim final rule with request

for comment. The interim final rule addresses certain general Program

provisions and Program definitions. Treasury is also issuing a

companion proposed rule with request for comment.

II. Analysis of the Interim Final Rule

The interim final rule establishes a new Part 50 in Title 31 of the

Code of Federal Regulations, 31 CFR Part 50. Part 50 eventually will

include other regulations deemed necessary by Treasury to implement the

Program. Subpart A of new Part 50 contains certain general provisions

and definitions of Program terms.

Some of the definitions are taken virtually verbatim from the Act

because they do not need further clarification and are included in the

interim final regulations primarily for ease of reference. In addition,

the interim final rule generally incorporates the interim guidance

provided previously by Treasury as it pertains to Program terms, for

example, the terms ``insurer,'' ``affiliate'', ``property and casualty

insurance'' and ``direct earned premium.'' In several areas, the

interim final regulation makes clarifying modifications to, or

supplements, the interim guidance. For example, the interim final rule

clarifies and emphasizes that the Program covers only commercial lines

of property and casualty insurance, subject to the inclusions and

exclusions of certain lines of insurance as set forth in the definition

of property and casualty insurance in section 102(12) of the Act. The

Program does not cover personal lines of property and casualty

insurance, even if the latter are reported by an insurer on the NAIC's

Exhibit of Premiums and Losses (commonly known as Statutory Page 14).

In implementing the Program, Treasury has been guided by several

goals. First, we strive to implement the Act in a transparent and

effective manner that, for example, treats comparably those insurers

required to participate in the Program and that provides necessary

information to policyholders in a useful and efficient manner. Second,

Treasury seeks to rely as much as possible on the State insurance

regulatory structure. In that regard, Treasury is closely coordinating

with the NAIC in implementing definitions and other aspects of the

Program. Third, to the extent possible within statutory constraints,

Treasury seeks to allow insurers to participate in the Program in a

manner consistent with their normal course of business. Finally, given

the temporary and transitional nature of the Program, Treasury is

guided by the Act's goal for insurers to develop their own capacity,

resources and mechanisms for terrorism risk insurance coverage when the

Program expires.

Key Program definitions contained in the interim final regulation

are analyzed below.

A. What is an ``Act of Terrorism'' Under the Program?

The Program definition of ``act of terrorism'' in the interim final

rule is the same definition that is contained in section 102(1) of the

Act. Section 106(a)(2) of the Act provides that the Act's definition is

the exclusive definition of the term ``act of terrorism'' for purposes

of compensation for insured losses under the Act. The Act's definition

requires a certification by the Treasury Secretary, in concurrence with

the Secretary of State and the Attorney General of the United States,

that an act is an act of terrorism within the statutory parameters.

These parameters include an act that is violent or dangerous to human

life, property or infrastructure; that has resulted in damage within

the United States, or outside the United States in the case of certain

air carriers or vessels or if on the premises of a U.S. mission; and

that has been committed by individual(s) on behalf of any foreign

person or foreign interest, as part of an effort to coerce the U.S.

civilian population or to influence the policy or affect the conduct of

the U.S. government by coercion.

Thus, for example, acts of domestic civil disturbance would not be

covered by the Act's definition of ``act of terrorism'' or therefore,

by the Program. As in the Act, the interim final rule provides that the

Secretary's determination or certification with regard to an act is

final and is not subject to judicial review. An act of terrorism must

meet a $5,000,000 de minimis aggregate loss requirement before it may

be certified. The Act also provides that an act is not certifiable if

committed as part of a course of war declared by Congress, except with

respect to workers compensation coverage.

B. What Entities Must Participate in the Program (``Affiliate'',

``Control'', ``Insurer'')?

1. Mandatory Participation of Insurers

The general provisions of the interim final rule incorporate the

Act's requirement in section 103(a)(3) that each entity meeting the

definition of ``insurer'' under the Act must participate in the

Program.

2. ``Insurer''

The interim final rule incorporates the statutory definition of

``insurer'' and generally incorporates the guidance set forth in

Interim Guidance II concerning

[[Page 9806]]

the categories of insurer and the definition of affiliate. To

participate in the Program, an entity, including an affiliate of an

insurer, must itself meet all of the requirements of section 102(6)(A),

(B) and, as the Treasury may prescribe, (C). This means that to be an

insurer, an entity must (1) fall within one of the categories in

section 102(6)(A) described below, and (2) must receive direct earned

premiums as required by section 102(6)(B) and (3) must meet any

additional criteria established by Treasury pursuant to section

102(6)(C).

a. Must Fall Within a Category of Insurers in Section 102(6)(A)

First, an insurer must fall within at least one of the following

several categories set forth in section 102(6)(A):

(i) Licensed or admitted to engage in the business of providing

primary or excess insurance in any State (``State'' includes the

District of Columbia and territories of the United States);

(ii) Not so licensed or admitted, but is an eligible surplus line

carrier listed on the Quarterly Listing of Alien Insurers of the

National Association of Insurance Commissioners;

(iii) Approved for the purpose of offering property and casualty

insurance by a Federal agency in connection with maritime, energy or

aviation activity; or

(iv) A State residual market insurance entity or State workers'

compensation fund.

Consistent with Interim Guidance II, the interim final rule

provides that an entity that falls within two categories will be

considered by Treasury to fall within the first category it meets under

section 102(6)(A)(i)-(v). Therefore, if an entity is a federally

approved insurer under section 102(6)(A)(iii) and is licensed or

admitted in any State, it will be treated under the Program as a State

licensed or admitted insurer under section 102(6)(A)(i).

In each of the categories of insurer in section 102(6)(A)(i)-(iv),

the insurer has a pre-existing State or NAIC regulatory framework, or

has a relationship with a Federal or State program. In developing this

interim final rule, Treasury considers such a nexus between an insurer

and a Federal or State program or regulatory authority to be extremely

important to the effective and efficient administration of the Program.

A pre-existing nexus between an insurer and a regulatory structure, for

example, assists Treasury in ensuring the financial integrity of

participating entities, in obtaining necessary data to implement and

evaluate the Program and in carrying out Treasury's surcharge and

recoupment, audit and enforcement responsibilities under the Act.

Treasury's emphasis on such a nexus is also in accord with the

temporary nature of the Program and other aspects of the Program's

statutory structure.

``State Licensed or Admitted''

Insurers under clause (i) of section 102(6)(A) include all entities

that are licensed or admitted by a State's insurance regulatory

authority. This group of insurers includes captive insurers, risk

retention groups, and farm and county mutuals, if such entities are

State licensed or admitted. The Program treats all State licensed or

approved insurers consistently in accord with the plain language of

section 102(6)(A)(i). This treatment also furthers other statutory

objectives such as ensuring that policyholders have widespread access

to the terrorism risk insurance benefits of Program, and spreading

potential costs of the Program associated with any federal loss-sharing

payments. (For example, see the cost spreading provisions in connection

with recoupment as required by section 103(e)(7) and in connection with

surcharges as required by section 103(e)(8) to be applied to all

commercial property and casualty policyholders).

Other Categories of Insurers

The NAIC has established criteria for approval of eligible surplus

line carriers for listing on the NAIC's Quarterly Listing of Alien

Insurers. Federally approved insurers under section 102(6)(A)(iii) are

addressed in detail below. Treasury intends to issue additional

regulations to apply the provisions of the Act to insurers in clause

(iv) of State residual market insurance entities and State workers'

compensation funds pursuant to section 103(d).

As described above, all State licensed or admitted captive insurers

are insurers within the Program under section 102(6)(A)(i). Treasury

may, in consultation with the NAIC or the appropriate State regulatory

authority, apply the provisions of the Act to ``other classes or types

of captive insurers and other self insurance arrangements'' pursuant to

section 103(f) of the Act, but only if such an application is

determined before the occurrence of an act of terrorism and all of the

provisions of the Act are applied comparably to such entities. Treasury

has engaged in consultations, but has not yet made a decision regarding

the participation in the Program of captives and other self insurance

arrangements that do not fall into other categories in clauses (i)-

(iv).

b. Must Receive Direct Earned Premiums As Required by Section

102(6)(B)

The second criteria an entity must meet to be an insurer for

purposes of the Program is prescribed by section 102(6)(B). In addition

to falling within a category in section 102(6)(A), to be an ``insurer''

under the Act, an entity must receive ``direct earned premiums'' (as

defined) on any type of commercial property and casualty insurance (as

defined). The key aspect of this requirement in the statutory

definition of insurer is the Act's specification of a direct measure of

premium income as opposed, for example, to a net measure of premium

income which accounts for reinsurance. Although the legislative history

and design of the Act envision reinsurance arrangements as an important

component of capacity within the insurance market, the Act excludes

reinsurance from the Program. (Section 103(g) of the Act provides that

the Act does not limit or prevent ``insurers'' from obtaining

reinsurance coverage for ``insurer deductibles'' or ``insured losses''

retained by insurers.) Therefore, consistent with the Act and

Treasury's Interim Guidance II, the interim final rule provides that,

if an entity does not receive direct earned premiums as required by

section 102(6)(B), and subject to statutory exceptions, then the entity

is not an ``insurer'' under the Act. In that regard, Section 102(6)(B)

excepts State residual market insurance entities from the direct earned

premium requirement.

c. Must Meet Additional Criteria Prescribed by Treasury Under

Section 102(6)(C).

In addition to the requirements of section 102(6)(A) and (B)

described above, section 102(6)(C) of the Act requires that an insurer

also meet ``any other criteria that the Secretary of the Treasury may

reasonably prescribe.'' The interim final rule does not prescribe

additional criteria under section 106(C). Published elsewhere in this

separate part of the Federal Register is a notice of proposed

rulemaking in which Treasury solicits public comment on whether the

Secretary should prescribe other criteria for certain insurers pursuant

to the authority provided by section 102(6)(C) and, if so, what

criteria Treasury should prescribe. In this regard, in the notice of

proposed rulemaking Treasury solicits comment on appropriate criteria

to prevent participation in the Program by newly formed insurance

companies deemed by Treasury to be established for the purpose of

evading the insurer deductible requirements of the Act and the Program.

As stated in the notice of proposed rulemaking, Treasury's objectives

are to encourage new sources of capital in the market for terrorism

[[Page 9807]]

risk insurance, and at the same time, ensure the integrity of the

Program and provide comparable treatment of Program participants.

Accordingly, the intent of any additional criteria, if proposed, is not

to discourage Program participation by newly formed commercial property

and casualty insurance companies in their normal course of business,

but to administer the Program effectively and fairly, including

preventing evasion of insurer deductible requirements by special

purpose entities formed to provide terrorism risk only coverage.

Also in the notice of proposed rulemaking published elsewhere in

this separate part of the Federal Register, Treasury solicits comment

on appropriate additional criteria, including financial standards, that

should be proposed for federally approved insurers under Treasury's

authority in section 102(6)(C). One reason for imposing additional

criteria on federally approved insurers is because there are no uniform

requirements or standards for federal approval under various federal

programs. Although some federal programs impose minimum financial

standards, others do not. Therefore, Treasury is considering whether

additional criteria for federally approved insurers should be proposed

to promote the financial integrity of the Program and to otherwise

effectively administer the Program. In addition, in the notice of

proposed rulemaking published elsewhere in this separate part of the

Federal Register, Treasury solicits comment on criteria that Treasury

should propose and prescribe under section 102(6)(C) to ensure that

payments under the Program do not benefit entities with connections to

terrorist organizations.

d. ``Federally Approved'' Insurer.

If an entity does not fall within section 102(6)(A)(i) or (ii), but

is approved or accepted by a Federal agency to offer property and

casualty insurance in connection with maritime, energy or aviation

activities; receives direct earned premiums for any type of commercial

property and casualty insurance as required by 102(6)(B), and, if

prescribed, meets any criteria established by Treasury under 102(6)(C),

then, such an entity is considered by Treasury to be a federally

approved ``insurer'' under section 102(6)(A)(iii).

As reflected in Interim Guidance II, this interim final rule

provides that the scope of insurance coverage (insured losses) under

the Program for federally approved insurers under section

102(6)(A)(iii) is only to the extent of federal approval of the

commercial property and casualty insurance coverage approved by the

Federal Agency in connection with maritime, energy or aviation

activity. Insured losses under other insurance coverage that may be

offered by a federally approved insurer under section 102(6)(A)(iii) is

not covered by the Program. This treatment of federally approved

insurers is in accord with the statutory language of the Act in section

102(6)(A)(iii) (``approved for the purpose of offering property and

casualty insurance by a Federal agency in connection with maritime,

energy or aviation activity''). This treatment is also in accord with

Treasury's consideration of a pre-existing nexus (for example, the

nexus of State-licensing or NAIC approval for listing on the Quarterly

Listing of Alien Insurers) as very important to the effective and

efficient administration of the Program. This nexus is considered by

Treasury to be an important aid in ensuring financial integrity of

participants in the Program, in obtaining data, and in connection with

recoupment, audit and enforcement responsibilities, among others. In

addition, this treatment is consistent with the temporary nature and

other statutory structure of the Program. Treasury recognizes that it

is possible to interpret section 102(6)(A)(iii) more broadly, but for

reasons stated above has determined that the narrower reading is not

only in accord with the statutory language but serves other important

purposes in the administration of the Program.

Examples of federally approved insurers under section

102(6)(A)(iii) are those insurers that do not fall within section

102(6)(A)(i) or (ii), and are approved or accepted by a Federal agency

under the following federal programs and statutes:

[sbull] Approval of Underwriters for Marine Hull Insurance

(Maritime Administration, U.S. Department of Transportation).

[sbull] Aircraft Accident Liability Insurance (U.S. Department of

Transportation).

[sbull] Oil Spill Financial Responsibility for Offshore Facilities

(Minerals Management Service, U.S. Department of the Interior).

[sbull] Oil Spill Financial Responsibility for Vessels (United

States Coast Guard, U.S. Department of Transportation).

[sbull] Longshoremen's and Harbor Workers' Compensation Act

(Employment Standards Administration, U.S. Department of Labor).

[sbull] Price Anderson Act (Nuclear Regulatory Commission, U.S.

Department of Energy).

The above list of Federal insurance programs contains an addition

to the list contained in Interim Guidance II through the express

inclusion of insurers approved or accepted under the Price Anderson

Act. This list is provided as a starting reference point and is not

exclusive. Any entity that is approved or accepted by a U.S. agency to

offer commercial property and casualty insurance in connection with

maritime, energy or aviation activities by a program that is not listed

above is particularly encouraged to advise the designated Treasury

contacts provided by this rule with the name of the program and the

name of the Federal agency that approved or accepted them.

Treasury is not prescribing additional criteria under section

102(6)(C) in the interim final rule for federally approved insurers,

but solicits comments elsewhere in this separate part of the Federal

Register on whether and what additional criteria should be prescribed

for federally approved insurer.

3. ``Affiliates''

The definition of ``insurer'' in section 102(6) includes ``any

affiliate thereof.'' Section 102(2) of the Act defines ``affiliate'' to

mean ``with respect to any insurer, any entity that controls, is

controlled by or is under common control with the insurer'' (emphasis

supplied). Any affiliate that does not meet the definition of insurer,

for example, it does not fall into any of the categories in section

102(6)(A) or does not receive direct earned premiums for commercial

property and casualty insurance as required by section 102(6)(B), is

not an ``insurer'' for purposes of the Program. Consistent with Interim

Guidance II, and the definition of ``control'' discussed below,

Treasury will treat the parent company, and all affiliates that meet

the requirements of ``insurer'' in section 102(6)(A), (B) and (C),

collectively as one ``insurer'' for purposes of calculating the direct

earned premiums on which the insurer deductible is based under the

Program. This consolidated treatment is also in accord with the

Conference Report to accompany the Act, which states, in the

explanation of section 102 of the Act, that ``the terms `affiliate' and

`control' are meant to ensure that affiliated insurers are treated as a

consolidated entity for calculating direct earned premiums.'' H.R.

Conf. Rep. No. 107-779 (2002).

For example, if an insurance company is licensed or admitted to

engage in the

[[Page 9808]]

business of providing primary or excess insurance in a State and

receives direct earned premiums as required in section 102(6)(B), and

three out of four of its affiliate insurance companies also are State

licensed and meet the requirements of section 102(6)(B) and (C), then

the parent company and the three affiliates that meet the definition of

``insurer'' are, collectively, one insurer for purposes of calculating

and consolidating direct earned premiums and calculating insurer

deductibles under the Program. The affiliate that does not fall within

one of the categories in section 102(6)(A) or fails to meet all the

requirements to be an ``insurer'' under section 102(6) is not included

in the Program.

As discussed previously in Interim Guidance II, if an entity is

``under common control with the insurer,'' and that entity meets the

requirements to be an ``insurer'' in section 102(6)(A)-(C), Treasury

will consider that entity collectively with the other insurer (its

affiliate) as one ``insurer'' for the Program purposes of consolidating

direct earned premiums and calculating the insurer deductible. For

example, assume that two insurance companies are licensed to engage in

the business of providing primary or excess insurance in any State

(either in one State or in separate States) and both receive direct

earned premiums as required by section 102(6)(B). Each company, would

meet the definition of ``insurer.'' Assume additionally that the common

parent of the two companies does not fall into any of the categories in

section 102(6)(A). Treasury will consider the two affiliated companies

to be, collectively, one insurer for purposes of calculating and

consolidating direct earned premiums and their insurer deductible under

the Program, but their parent company is not an insurer and not

included in the Program.

4. ``Control''

Related to the definition of insurer and affiliate is the

definition of ``control'' in section 102(3)(A)-(C) of the Act. The

definition and determination of ``control'' for purposes of the Program

is used by Treasury to calculate the insurer deductible on a

consolidated basis for an insurer ``including any affiliate

thereof''(see discussion of affiliate above). Under the Act, an entity

is in control of another entity if the statutory definition is met

under section 102(3)(A) or (B), or if Treasury makes a determination

under (C) that the entity directly or indirectly exercises a

controlling influence over the management or policies of the other

entity. Each category of control for purposes of the Program is

described below with examples.

a. ``Owns, Controls or has the Power to Vote'' 25 Percent of Voting

Securities.

Section 102(3)(A) provides that an entity has ``control'' over

another if the entity directly or indirectly or acting through 1 or

more other persons owns, controls or has power to vote, 25 percent or

more of any class of voting securities of the other entity. For

example, if Insurer X owns, or has the power to vote, 25 percent or

more of any class of voting securities of Insurer Y, then Insurer X is

in control of Insurer Y under section 102(3)(A). This control

relationship means, among other things, that Treasury will consolidate

the direct earned premiums of these two insurers under Insurer X for

purposes of calculating the insurer deductible and evaluating a claim

for federal payment.

Published elsewhere in this separate part of the Federal Register

is a notice of proposed rulemaking in which Treasury solicits comments

on whether the definition of control contained in the interim final

rule should be supplemented by proposing a rule to address situations

in which a corporate insurance structure may contain multiple insurers

that own, control or have the power to vote more than 25 percent of the

voting shares of another insurer. Based on available information, such

control arrangements exist but they do not appear to be common. In

particular, Treasury is considering consolidating direct earned

premiums for purposes of calculating the insurer deductible on a pro

rata basis among the multiple controlling owners. For example, if

Insurer Y owns 40 percent of the voting shares of Insurer Z and Insurer

X owns 30 percent of the voting shares of Insurer Z, then a pro rata

allocation of premium income and insured loss under the Program would

be, respectively, 57 percent and 43 percent.

b. Controls Election of Majority of Directors or Trustees.

Pursuant to section 102(3)(B), an entity also is in control over

another entity for purposes of the Program if the entity controls in

any manner the election of a majority of the directors or trustees of

the other entity. For example, even if Insurer A does not own or have

the power to vote 25 percent or more of any class of voting securities

of Insurer B, if Insurer A controls in any manner the election of a

majority of the directors or trustees of Insurer B, then Insurer A

``controls'' Insurer B under the Act. This means that, for purposes of

the Program, Treasury will consolidate the direct earned premiums of

these two insurers under Insurer A in calculating the insurer

deductible and evaluating a claim for federal payment.

c. Control Determination by Treasury under Section 102(3)(C).

If no control relationship exists on the basis of either section

102(3)(A) or (B), Treasury has authority, under section 102(3)(C), to

determine, after notice and opportunity for hearing, that an insurer

directly or indirectly exercises a controlling influence over the

management or policies of another insurer. To provide further guidance

for purposes of a control determination under this subsection (C), the

interim final rule establishes several rebuttable presumptions. The

first rebuttal presumption under section 102(3)(C) is that an entity is

in control of another entity for purposes of the Program (including

consolidation of direct earned premiums in calculating the insurer

deductible) if a State has determined that a control relationship

exists between the two entities. If a State has made such a control

determination with regard to two insurers, and the affected insurers

wish to rebut the presumption established in this interim final rule,

then the insurers may request an informal hearing (e.g. exchange of

documents) in which they will be given an opportunity by Treasury to

present and support their position that no control relationship exists,

prior to a final determination by Treasury.

The second rebuttable presumption Treasury is establishing is that

an insurer exercises directly or indirectly a controlling influence

over the management or policies of another insurer under section

102(3)(C) if 25 percent or more of capital of a stock insurer,

policyholder surplus of a mutual insurer, or corporate capital of other

entities qualifying as insurers is provided by another insurer, even in

the absence of voting shares or of control of the election of a

majority of the directors or trustees of the other insurer. The third

rebuttable presumption is that an insurer exercises directly or

indirectly a controlling influence over the management or policies of a

syndicate insurer if, at any time during the Program Year, the insurer

supplies 25 percent or more of the underwriting capacity for that year

to the other insurer that is a syndicate consisting of a group

including incorporated and individual unincorporated underwriters.

If the affected insurers wish to rebut the presumptions described

above and established by this interim final rule, then such insurers

may request a hearing in which they will be given an opportunity to

rebut the presumption of control by presenting and supporting

[[Page 9809]]

their position through written submissions to Treasury and, in

Treasury's discretion, through informal oral presentation.

Published elsewhere in this separate part of the Federal Register

is a notice of proposed rulemaking in which Treasury solicits comment

on a pro rata allocation method for control determinations under

section 102(3)(C) of the Act, similar to the pro rata method under

consideration for controlling insurers under section 102(3)(A), in

situations in which multiple insurers each provide 25 percent or more

of the capital of a stock insurer, policyholder surplus of a mutual

insurer or corporate capital of other entities that meet the definition

of insurer under the Act and in the interim final rule. The pro rata

approach under consideration by Treasury would treat each insurer on a

standalone basis for Program purposes such as calculation of direct

earned premiums and the insurer deductible if no insurer provides 25

percent or more of the capital of a stock insurer, policyholder surplus

of a mutual insurer or corporate capital of other entities that meet

the definition of insurer under the Act and the Program.

At a later date, Treasury will be issuing claims procedures. In

accordance with the consolidated treatment of direct earned premiums

among insurer affiliates, Treasury anticipates that the controlling

insurer will be the insurer that will be required to file any claim

with Treasury for federal payment under the Program and that this

insurer will receive the federal payment that is to be distributed

within the consolidated insurer group in accordance with distribution

of risk within the consolidated insurer group. Elsewhere in this

separate part of the Federal Register, Treasury solicits comments on

various means to ensure the prompt distribution of the federal payment

as appropriate to ensure that the purposes of the Program are not

thwarted or evaded, and that the ultimate risk bearing entities are

treated in an equitable manner, within the Act's requirements.

C. What is the Scope of Insurance Coverage Under the Program?

(``Insured Loss'', ``Property and Casualty Insurance'', ``Direct Earned

Premium'' and Insurer Deductible'')

1. ``Insured Loss''

The definition of ``insured loss'' in the interim final rule

incorporates the statutory definition in section 102(5) supplemented by

the guidance concerning scope of the term ``insured loss'' that is

contained in Interim Guidance II and Interim Guidance III. Section

102(5) of the Act defines insured loss to mean any loss resulting from

a certified ``act of terrorism'' covered by primary or excess

``property and casualty insurance,'' that is issued by an ``insurer,''

if such loss:

[sbull] ``Occurs within the United States,'' or

[sbull] Occurs to an ``air carrier''; a U.S. flag vessel or a

vessel ``based principally in the United States on which United States

income tax is paid and whose insurance coverage is subject to

regulation in the United States, regardless of where the loss occurs,''

or

[sbull] Occurs ``at the premises of any United States mission.''

In general, if the property and casualty insurance coverage is

provided within the geographic and other statutory parameters of the

definition of ``insured loss'' in the Act as described above, and is

provided by an ``insurer'' as defined in section 102(6) of the Act

(whether or not the insurer is non-U.S. based or owned), then such

losses will be covered by the Program, subject to the conditions for

payment and other requirements of the Act. However, if insurance

coverage is provided by an entity that is not an ``insurer'' under the

Act, then, even if a loss occurs within the United States, or otherwise

meets the definitional parameters of ``insured loss,'' e.g. occurs to

an air carrier or vessel or mission as defined in the Act, the loss

would not be covered by the Program. In addition, if insurance is

provided by a U.S. insurer, but the loss does not fall within the

definition of ``insured loss,'' for example, it occurs on foreign soil

and not to a U.S. mission or covered air carrier or vessel, then the

loss would not be covered by the Program. Section 102(5)(A) provides

that ``insured losses'' means any loss resulting from a certified act

of terrorism and covered by primary or excess property and casualty

insurance issued by an insurer if such loss occurs within the United

States.

As described in Interim Guidance III, insured losses under section

102(5)(B) are only those losses that are incurred by covered air

carriers or vessels, if the insured loss occurs beyond the geographic

boundaries of the United States as described in Section 102(5)(A).

Losses that are incurred by covered air carriers or vessels would

include losses covered by insurance coverage provided to those entities

(for example, property insurance coverage and liability coverage). Not

included under section 102(5)(B) are losses that are not incurred by

covered air carriers or vessels, such as losses covered by third party

insurance contracts that are separate from the insurance coverage

provided to covered air carriers or vessels.

2. ``Property and Casualty Insurance''

Section 102(12) of the Act defines ``property and casualty

insurance'' to mean commercial lines of property and casualty

insurance. The statutory definition expressly includes ``excess

insurance, workers compensation insurance and surety insurance.'' In

addition, the Act specifically excludes (i) federal crop insurance

issued or reinsured under the Federal Crop Insurance Act or any other

type of crop or livestock insurance that is privately issued or

reinsured; (ii) private mortgage insurance as defined in the Homeowners

Protection Act of 1998 or title insurance; (iii) financial guaranty

insurance issued by monoline financial guaranty insurance corporations;

(iv) insurance for medical malpractice; (v) health or life insurance

including group life insurance; (vi) flood insurance provided under the

National Flood Insurance Act of 1968; and (vii) reinsurance or

retrocessional reinsurance.

Insurance is generally regulated by State law in the United States.

There is no uniform or consistent definition of ``commercial property

and casualty insurance'' among the States. In some States, a line of

insurance may be considered commercial and in other States the same

line of insurance is considered personal. However, as Program

administrator, Treasury must designate types or lines of commercial

property and casualty insurance on which direct earned premiums and

insurer deductibles are to be calculated and for which federal payments

will be made for ``insured losses'' under the Program. Direct earned

premiums received by insurers for commercial property and casualty

insurance under the Program are the basis for the Program's statutory

reinsurance structure, for other terms and for federal payments. In

developing a definition of property and casualty insurance for purposes

of administrating and implementing the Program, Treasury considered the

statutory definition, the Program structure, and effective

administration of the Program. In this regard, Treasury also consulted

with the NAIC and others regarding State law and premium reports filed

with the NAIC.

The interim final rule defines the scope of commercial property and

casualty insurance for purposes of the Program to include commercial

property and casualty insurance, including those lines of insurance

expressly included in section 102(12) of the Act and excluding

[[Page 9810]]

those lines of insurance expressly excluded by the same statutory

definition. Treasury's interim final rule incorporates the suggested

guidance in Interim Guidance I that commercial lines within the

following lines of insurance coverage that are reported on the NAIC

Annual Statement of the Exhibit of Premiums and Losses--commonly known

as Statutory Page 14 are included in the Program: Line 1--Fire; Line

2.1--Allied Lines; Line 3--Farmowners Multiple Peril; Line 5.1--

Commercial Multiple Peril (non-liability portion); Line 5.2--Commercial

Multiple Peril (liability portion); Line 8--Ocean Marine; Line 9--

Inland Marine; Line 16--Workers' Compensation; Line 17--Other

Liability; Line 18--Products Liability; Line 19.3--Commercial Auto No-

Fault (personal injury protection); Line 19.4--Other Commercial Auto

Liability; Line 21.2--Commercial Auto Physical Damage; Line 22--

Aircraft (all perils); Line 24--Surety; Line 26--Burglary and Theft;

and Line 27--Boiler and Machinery.

The interim final rule also clarifies that premium information on

such lines of Statutory Page 14 should only be included in calculating

an insurer's direct earned premium and insurer deductible to the extent

that coverage is provided for commercial property and casualty

exposures. In other words, personal insurance that is reported on the

specified covered lines of Statutory Page 14 should be excluded from an

insurer's calculation of its direct earned premium and insurer

deductible. In making that determination for purposes of the Program,

insurers may consider insurance coverage primarily designed to cover

personal, family or household purposes to be personal insurance and,

therefore, not covered by the Program. Personal insurance policies that

include incidental coverage for commercial purposes would be considered

to be primarily personal policies. For purposes of the Program, as

reflected in this interim final rule, Treasury considers incidental

commercial coverage to exist where less than 25 percent of total

premium is attributable to commercial coverage.

In contrast, commercial property and casualty insurance generally

is designed to cover the commercial interests of business, civic, not-

for-profit or governmental entities, or other similar individuals,

organizations, or professional practices. In cases where an insurance

policy covers both commercial and personal exposures, and is not

primarily a personal policy, insurers should allocate the proportion of

risk between commercial and personal components in determining what

portion of the policy falls under the Program. In suggesting this

allocation, Treasury is not establishing a new reporting requirement at

this time, but is suggesting a method by which insurers may calculate

their deductibles and for Treasury to verify any claims under the

Program.

Insurers that do not report premiums to the NAIC on Statutory Page

14 may use the guidance provided above as an analogy or reference point

in determining whether and what lines of their commercial property and

casualty insurance are included in the Program and in calculating their

direct earned premium and insurer deductible. In this regard, as

discussed earlier, the insurance coverage of federally approved

insurers within the Program covers only those lines for which the

insurer has received federal approval.

3. ``Direct Earned Premium''

Section 102(4) of the Act defines direct earned premium as a

``direct earned premium for property and casualty insurance issued by

any insurer for insurance against'' insured losses as defined in

section 102(5). As discussed below, the term ``insurer deductible'' is

based on direct earned premiums received by insurers during specified

time periods. Interim Guidance I and II, provided guidance to

concerning the term ``direct earned premium'' in relation to the terms

``insurer deductible'', ``insured loss'' and ``property and casualty

insurance''. The interim final rule reflects this previous guidance but

contains further clarifications and supplementary guidance. For

insurers that report premiums to the NAIC on Statutory Page 14,

``direct earned premium'' is the information reported on column 2 for

the lines of commercial property and casualty insurance referenced

above, with the specified adjustments to remove personal insurance

coverage. This interpretation of direct earned premium information is

consistent with scope of ``insured loss'' as defined in the Act and

will be used by Treasury to calculate the insurer deductible for these

insurers.

Other insurers that are required to participate in the Program but

that do not report on Statutory Page 14 may use the discussion above

with reference to Statutory Page 14 as an analogy in developing a

comparable means by which they may calculate their direct earned

premiums. Treasury will use similar premium information (compiled by

these entities or their State regulators) to calculate an insurer's

deductible. For county or town mutual insurers that do not report to

the NAIC, for purposes of calculating direct earned premium, data that

is reported to their State regulator or maintained by the insurer

should be adjusted to: (1) Reflect an appropriate breakdown between

commercial and personal risks as outlined above; and (2) if necessary,

re-stated to reflect the accrual method of determining direct earned

premium versus direct premium. In addition, such entities should also

consider other types of payments that compensate an insurer for the

risk of loss (for example, assessments, contributions, or other similar

concepts) as being equivalent to premium income for purposes of the

Program.

Eligible surplus line carrier insurers may determine the scope of

insurance coverage and their insurer deductible under the Program for

policies that are in-force as of the date of enactment or that are

entered into prior to January 1, 2003, with reference to the geographic

scope in the definition of ``insured loss,'' and with reference to the

covered commercial property and casualty lines of insurance described

above. For policies issued by eligible surplus line carriers after

January 1, 2003, as stated in Interim Guidance II, the premium for

insurance coverage within the geographic scope of ``insured loss'' must

be priced separately by eligible surplus line carrier insurers.

In calculating the appropriate measure of direct earned premium to

determine the deductible for Program Year 1, eligible surplus line

carriers may use and rely on the same allocation methodologies

contained within the NAIC's ``Allocation of Surplus Lines and

Independently Procured Insurance Premium Tax on Multi-State Risks Model

Regulation'' for allocating premium between coverage within the

geographic scope of ``insured loss'' and all other coverage to estimate

the appropriate percentage of premium income for such policies that

applies to such risks.

Similarly, consistent with the scope of insurance coverage under

the Program and other limitations that apply to federally approved

insurers, such insurers should a use methodology similar to that used

by eligible surplus line carriers in calculating the appropriate

measure of their direct earned premium.

4. ``Insurer Deductible''

The Act defines an ``Insurer Deductible'' in Section 102(7) for the

various ``Program Years'' and other periods covered by the Program. For

example, Section 102(7)(B) defines the insurer deductible for Program

Year 1 (January 1, 2003 through December 31, 2003) as ``the value of an

insurer's direct

[[Page 9811]]

earned premiums over the calendar year immediately preceding Program

Year 1 multiplied by 7 percent''. A State licensed or admitted insurer

may estimate its insurer deductible by multiplying the applicable

percentage (listed in the Act for each of the Program Years) by the

direct earned premium information for commercial lines of property and

casualty insurance reported on Statutory Page 14 with the appropriate

adjustments as described above. Other entities should follow a similar

methodology based the definitions of ``insured loss,'' ``property and

casualty insurance,'' and ``direct earned premium.''

Section 102(7)(E) provides Treasury with authority to determine the

appropriate methodology for measuring the direct earned premium if an

insurer has not had a full year of operations during the calendar year

immediately preceding the Program Year.

Because new companies have only had limited business operations, it

is likely that their premium income will be somewhat volatile. Such

volatility could persist throughout the life of the three-year Program.

Thus, to treat these newly formed insurers in a manner that is

consistent with other insurers under the Program and to prevent newly

formed insurers from having the unfair advantage of lower relative

deductibles, this interim final rule specifies that the deductible

measure for new companies formed after the date of enactment (November

26) will be based on contemporaneous data for direct earned premium

that corresponds to the current Program Year. If a newly formed insurer

does not have a full year of operations within a particular Program

year, this interim final rule provides that an insurer's direct earned

premium for Program year will be annualized to determine an insurer's

deductible.

III. Procedural Requirements

The Act established a Program to provide for loss sharing payments

by the Federal Government for insured losses resulting from certified

acts of terrorism. The Act became effective immediately upon the date

of enactment (November 26, 2002). Preemptions of terrorism risk

exclusions in policies, mandatory participation provisions, disclosure

and other requirements and conditions for federal payment contained in

the Act applied immediately to those entities that come within the

Act's definition of ``insurer.'' In the near term, Treasury will be

issuing additional regulations to implement the Program. This interim

final regulation provides critical information concerning the

definitions of Program terms that lays the groundwork for Treasury's

implementation of the Program. No one can predict if, or when, an act

of terrorism may occur. There is an urgent need for Treasury, as

Program administrator, to lay the groundwork for Program implementation

through interim final regulations to provide clarity and certainty

concerning which entities are required to participate in the Program;

the scope and conditions of Program coverage; and other implementation

issues that immediately affect insurers, their policyholders, State

regulators and other interested parties. This includes the need to

supplement, or modify as necessary, previously issued interim guidance.

Accordingly, pursuant to 5 U.S.C. 553(b)(B), Treasury has

determined that it would be contrary to the public interest to delay

the publication of this rule in final form during the pendency of an

opportunity for public comment. For the same reasons, pursuant to 5

U.S.C. 553(d)(3), Treasury has determined that there is good cause for

the interim final rule to become effective immediately upon

publication. While this regulation is effective immediately upon

publication, Treasury is seeking public comment on the regulation and

will consider all comments in developing a final rule.

This interim final rule is a significant regulatory action and has

been reviewed by the Office of Management and Budget under the terms of

Executive Order 12866.

Because no notice of proposed rulemaking is required, the

provisions of the Regulatory Flexibility Act (5 U.S.C. chapter 6) do

not apply. However, the Act and the Program are intended to provide

benefits to the U.S. economy and all businesses, including small

businesses, by providing a federal reinsurance backstop to commercial

property and casualty policyholders and spreading the risk of insured

loss resulting from an act of terrorism.

List of Subjects in 31 CFR Part 50

Terrorism risk insurance.

Authority and Issuance

For the reasons set forth above, 31 CFR Subtitle A is amended by

adding Part 50 to read as follows:

PART 50--TERRORISM RISK INSURANCE PROGRAM

Subpart A--General Provisions

Sec.

50.1 Authority, purpose and scope.

50.4 Mandatory participation in Program.

50.5 Definitions.

50.6 Rules of construction for dates.

50.7 Special rules for Interim Guidance safe harbors.

Subpart B--Disclosures as Conditions for Federal Payment [Reserved]

Subpart C--Mandatory Availability [Reserved]

Subpart D--State Residual Market Insurance Entities; Workers'

Compensation Funds [Reserved]

Subpart E--Self-Insurance Arrangements; Captives [Reserved]

Subpart F--Claims Procedures [Reserved]

Subpart G--Audit, Investigative and Civil Money Penalty Procedures

[Reserved]

Subpart H--Recoupment and Surcharge Procedures [Reserved]

Authority: 5 U.S.C. 301; 31 U.S.C. 321; Title I, Pub. L. 107-

297, 116 Stat. 2322 (15 U.S.C 6701 note).

Subpart A--General Provisions

Sec. 50.1 Authority, purpose and scope.

(a) Authority. This Part is issued pursuant to authority in Title I

of the Terrorism Risk Insurance Act of 2002, Pub. L. 107-297, 116 Stat.

2322.

(b) Purpose. This Part contains rules prescribed by the Department

of the Treasury to implement and administer the Terrorism Risk

Insurance Program.

(c) Scope. This Part applies to insurers subject to the Act and

their policyholders.

Sec. 50.4 Mandatory participation in Program.

Any entity that meets the definition of an insurer under the Act is

required to participate in the Program.

Sec. 50.5 Definitions.

For purposes of this Part:

(a) Act means the Terrorism Risk Insurance Act of 2002.

(b) Act of terrorism. (1) In general. The term act of terrorism

means any act that is certified by the Secretary, in concurrence with

the Secretary of State and the Attorney General of the United States:

(i) To be an act of terrorism;

(ii) To be a violent act or an act that is dangerous to human life,

property, or infrastructure;

(iii) To have resulted in damage within the United States, or

outside of the United States in the case of:

(A) An air carrier (as defined in 49 U.S.C. 40102) or a United

States flag vessel (or a vessel based principally in the United States,

on which United States income tax is paid and whose insurance coverage

is subject to regulation in the United States); or

(B) The premises of a United States mission; and

(iv) To have been committed by an individual or individuals acting

on

[[Page 9812]]

behalf of any foreign person or foreign interest, as part of an effort

to coerce the civilian population of the United States or to influence

the policy or affect the conduct of the United States Government by

coercion.

(2) Limitations. The Secretary is not authorized to certify an act

as an act of terrorism if:

(i) The act is committed as part of the course of a war declared by

the Congress (except with respect to any coverage for workers'

compensation); or

(ii) property and casualty losses resulting from the act, in the

aggregate, do not exceed $5,000,000.

(3) Judicial review precluded. The Secretary's certification of an

act of terrorism, or determination not to certify an act as an act of

terrorism, is final and is not subject to judicial review.

(c)(1) Affiliate means, with respect to an insurer, any entity that

controls, is controlled by, or is under common control with the

insurer. An affiliate must itself meet the definition of insurer to

participate in the Program.

(2) For purposes of paragraph (c)(1) of this section, an insurer

has control over another insurer for purposes of the Program if:

(i) An insurer directly or indirectly or acting through one or more

other persons owns, controls, or has power to vote 25 percent or more

of any class of voting securities of the other insurer;

(ii) An insurer controls in any manner the election of a majority

of the directors or trustees of the other insurer; or

(iii) The Secretary determines, after notice and opportunity for

hearing, that an insurer directly or indirectly exercises a controlling

influence over the management or policies of the other insurer, even if

there is no control as defined in paragraph (c)(2)(i) or (c)(2)(ii) of

this section.

(3) For purposes of a determination of controlling influence under

paragraph (c)(2)(iii) of this section, the following rebuttable

presumptions will apply:

(i) If a State has determined that an insurer controls another

insurer, there is a rebuttable presumption that the insurer that is

determined by the State to control another insurer exercises a

controlling influence over the management or policies of the other

insurer for purposes of paragraph (c)(2)(iii) of this section; and

(ii) If an insurer provides 25 percent or more of another insurer's

capital (in the case of a stock insurer), policyholder surplus (in the

case of a mutual insurer), or corporate capital (in the case of other

entities that qualify as insurers), there is a rebuttable presumption

that the insurer providing such capital, policyholder surplus, or

corporate capital exercises a controlling influence over the management

or policies of the receiving insurer for purposes of paragraph

(c)(2)(iii) of this section.

(iii) If an insurer, at anytime during a Program Year, supplies 25

percent or more of the underwriting capacity for that year to an

insurer that is a syndicate consisting of a group including

incorporated and individual unincorporated underwriters, there is a

rebuttable presumption that the insurer exercises a controlling

influence over the syndicate for purposes of paragraph (c)(2)(iii) of

this section.

(4) An insurer deemed to be in a control relationship pursuant to

paragraph (c)(2)(iii) of this section as a result of the rebuttable

presumption in paragraph (c)(3)(i), (ii) or (iii) of this section may

request a hearing in which the insurer will be given an opportunity to

rebut the presumption of control by presenting and supporting its

position through written submissions to Treasury and, in Treasury's

discretion, through informal oral presentations.

(d) Direct earned premium means the direct earned premium(s)

received by an insurer for commercial property and casualty insurance

issued by the insurer against insured losses under the Program.

(1) State licensed or admitted insurers. For a State licensed or

admitted insurer that reports to the NAIC, direct earned premium is the

premium information for commercial property and casualty insurance

coverage reported by the insurer on column 2 of the NAIC Exhibit of

Premiums and Losses of the Annual Statement (commonly known as

Statutory Page 14). (See definition of property and casualty

insurance).

(i) Premium information as reported to the NAIC is included in the

calculation of direct earned premiums for purposes of the Program only

for commercial property and casualty coverage issued by the insurer.

(ii) Premiums for personal property and casualty insurance coverage

(coverage primarily designed to cover personal, family or household

risk exposures) are excluded in the calculation of direct earned

premiums for purposes of the Program.

(iii) Personal property and casualty insurance coverage that

includes incidental coverage for commercial purposes is primarily

personal coverage, and therefore premiums are excluded from the

calculation of direct earned premium. For purposes of the Program,

commercial coverage is incidental if less than 25 percent of the total

direct earned premium is attributable to commercial coverage.

(iv) If a property and casualty insurance policy covers both

commercial and personal risk exposures and is not primarily a personal

insurance policy, insurers may allocate the premiums in accordance with

the proportion of risk between commercial and personal components in

order to ascertain direct earned premium.

(2) Insurers that do not report to NAIC. An insurer that does not

report to the NAIC, but that is licensed or admitted by any State (such

as certain farm or county mutual insurers), should use the guidance

provided in paragraph (d)(1) of this section to assist in ascertaining

its direct earned premium.

(i) Direct earned premium may be ascertained by adjusting data

maintained by such insurer or reported by such insurer to its State

regulator to reflect a breakdown of premiums for commercial and

personal property and casualty exposure risk as described in paragraph

(d)(1) of this section and, if necessary, re-stated to reflect the

accrual method of determining direct earned premium versus direct

premium.

(ii) Such an insurer should consider other types of payments that

compensate the insurer for risk of loss (contributions, assessments,

etc.) as part of its direct earned premium.

(3) Certain eligible surplus line carrier insurers. An eligible

surplus line carrier insurer listed on the NAIC Quarterly Listing of

Alien Insurers must ascertain its direct earned premium as follows:

(i) For policies that were in-force as of November 26, 2002, or

entered into prior to January 1, 2003, direct earned premiums are to be

determined with reference to the definitions of insured loss and

property and casualty insurance by allocating the appropriate portion

of premium income that falls within the definition of insured loss. The

same allocation methodologies contained within the NAIC's ``Allocation

of Surplus Lines and Independently Procured Insurance Premium Tax on

Multi-State Risks Model Regulation'' for allocating premium between

coverage within the definition of insured loss and all other coverage

to ascertain the appropriate percentage of premium income to be

included in direct earned premium may be used; and

(ii) For policies issued after January 1, 2003, premium for insured

losses covered by property and casualty insurance under the Program

must be priced separately by such eligible surplus line carrier

insurers.

(4) Federally approved insurers. A federally approved insurer under

section 102(6)(A)(iii) of the Act should use a methodology similar to

that

[[Page 9813]]

specified for eligible surplus line carrier insurers in paragraph

(d)(3) of this section to calculate its direct earned premium. Such

calculation should be adjusted to reflect the limitations on scope of

insurance coverage under the Program (i.e. to the extent of federal

approval of commercial property and casualty insurance in connection

with maritime, energy or aviation activities).

(e) Insured loss. (1) The term insured loss means any loss

resulting from an act of terrorism (including an act of war, in the

case of workers' compensation) that is covered by primary or excess

property and casualty insurance issued by an insurer if the loss:

(i) Occurs within the United States;

(ii) Occurs to an air carrier (as defined in 49 U.S.C. 40102), to a

United States flag vessel (or a vessel based principally in the United

States, on which United States income tax is paid and whose insurance

coverage is subject to regulation in the United States), regardless of

where the loss occurs; or

(iii) Occurs at the premises of any United States mission.

(2)(i) A loss that occurs to an air carrier (as defined in 49

U.S.C. 40102), to a United States flag vessel, or a vessel based

principally in the United States, on which United States income tax is

paid and whose insurance coverage is subject to regulation in the

United States, is not an insured loss under section 102(5)(B) of the

Act unless it is incurred by the air carrier or vessel outside the

United States.

(ii) An insured loss to an air carrier or vessel outside the United

States under section 102(5)(B) of the Act does not include losses

covered by third party insurance contracts that are separate from the

insurance coverage provided to the air carrier or vessel.

(f) Insurer means any entity, including any affiliate of the

entity, that meets the following requirements:

(1)(i) The entity must fall within at least one of the following

categories:

(A) It is licensed or admitted to engage in the business of

providing primary or excess insurance in any State (including, but not

limited to, State licensed captive insurance companies, State licensed

or admitted risk retention groups, and State licensed or admitted farm

and county mutuals);

(B) It is not licensed or admitted to engage in the business of

providing primary or excess insurance in any State, but is an eligible

surplus line carrier listed on the Quarterly Listing of Alien Insurers

of the NAIC, or any successor to the NAIC;

(C) It is approved or accepted for the purpose of offering property

and casualty insurance by a Federal agency in connection with maritime,

energy, or aviation activity, but only to the extent of such federal

approval of commercial property and casualty insurance coverage offered

by the insurer in connection with maritime, energy or aviation

activity;

(D) It is a State residual market insurance entity or State

workers' compensation fund; or

(E) As determined by the Secretary, it falls within any other class

or type of captive insurer or other self-insurance arrangement by a

municipality or other entity, to the extent provided in Treasury

regulations issued under section 103(f) of the Act.

(ii) If an entity falls within more than one category described in

paragraph (f)(1)(i) of this section, the entity is considered to fall

within the first category within which it falls for purposes of the

Program;

(2) The entity must receive direct earned premiums for any type of

commercial property and casualty insurance coverage, except in the case

of:

(i) State residual market insurance entities and State workers'

compensation funds, to the extent provided in Treasury regulations; and

(ii) Other classes or types of captive insurers and other self-

insurance arrangements by municipalities and other entities, if such

entities are included in the Program by Treasury under regulations in

this Part.

(3) The entity must meet any other criteria as prescribed by

Treasury.

(g) Insurer deductible means:

(1) For an insurer that was in existence on November 26, 2002 and

has had a full year of operations during the calendar year immediately

preceding the applicable Program Year:

(i) For the Transition Period (November 26, 2002 through December

31, 2002), the value of an insurer's direct earned premiums over

calendar 2001, multiplied by 1 percent;

(ii) For Program Year 1 (January 1, 2003 through December 31,

2003), the value of an insurer's direct earned premiums over calendar

year 2002, multiplied by 7 percent;

(iii) For Program Year 2 (January 1, 2004 through December 31,

2004), the value of an insurer's direct earned premiums over calendar

year 2003, multiplied by 10 percent;

(iv) For Program Year 3 (January 1, 2005 through December 31,

2005), the value of an insurer's direct earned premiums over calendar

year 2004, multiplied by 15 percent; and

(2) For an insurer that came into existence after November 26,

2002, the insurer deductible will be based on data for direct earned

premiums for the current Program Year. If the insurer has not had a

full year of operations during the applicable Program Year, the direct

earned premiums for the current Program Year will be annualized to

determine the insurer deductible.

(h) NAIC means the National Association of Insurance Commissioners.

(i) Person means any individual, business or nonprofit entity

(including those organized in the form of a partnership, limited

liability company, corporation, or association), trust or estate, or a

State or political subdivision of a State or other governmental unit.

(j) Program means the Terrorism Risk Insurance Program established

by the Act.

(k) Program Years means the Transition Period (November 26, 2002

through December 31, 2002), Program Year 1 (January 1, 2003 through

December 31, 2003), Program Year 2 (January 1, 2004 through December

31, 2004), and Program Year 3 (January 1, 2005 through December 31,

2005).

(l) Property and casualty insurance means commercial lines of

property and casualty insurance, including excess insurance, workers'

compensation insurance, and surety insurance. Property and casualty

insurance:

(1) Includes commercial lines within the following lines of

insurance from the NAIC's Exhibit of Premiums and Losses (commonly

known as Statutory Page 14): Line 1--Fire; Line 2.1--Allied Lines; Line

3--Farmowners Multiple Peril; Line 5.1--Commercial Multiple Peril (non-

liability portion); Line 5.2--Commercial Multiple Peril (liability

portion); Line 8--Ocean Marine; Line 9--Inland Marine; Line 16--

Workers' Compensation; Line 17--Other Liability; Line 18--Products

Liability; Line 19.3--Commercial Auto No-Fault (personal injury

protection); Line 19.4--Other Commercial Auto Liability; Line 21.2--

Commercial Auto Physical Damage; Line 22--Aircraft (all perils); Line

24--Surety; Line 26--Burglary and Theft; and Line 27--Boiler and

Machinery; and

(2) Does not include:

(i) Federal crop insurance issued or reinsured under the Federal

Crop Insurance Act (7 U.S.C. 1501 et seq.), or Multiple Peril Crop

insurance reported on Line 2.2 of the NAIC's Exhibit of Premiums and

Losses (commonly known as Statutory Page 14);

(ii) Private mortgage insurance (as defined in section 2 of the

Homeowners Protection Act of 1988 (12 U.S.C. 4901)) or title insurance;

[[Page 9814]]

(iii) Financial guaranty insurance issued by monoline financial

guaranty insurance corporations;

(iv) Insurance for medical malpractice;

(v) Health or life insurance, including group life insurance;

(vi) Flood insurance provided under the National Flood Insurance

Act of 1968 (42 U.S.C. 4001 et seq.); or

(vii) Reinsurance or retrocessional reinsurance.

(m) Secretary means the Secretary of the Treasury.

(n) State means any State of the United States, the District of

Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the

Northern Mariana Islands, American Samoa, Guam, each of the United

States Virgin Islands, and any territory or possession of the United

States.

(o) Treasury means the United States Department of the Treasury.

(p) United States means the several States, and includes the

territorial sea and the continental shelf of the United States, as

those terms are defined in the Violent Crime Control and Law

Enforcement Act of 1994 (18 U.S.C. 2280 and 2281).

Sec. 50.6 Rule of construction for dates.

Unless otherwise expressly provided in the regulation, any date in

these regulations is intended to be applied so that the day begins at

12:01 a.m. and ends at midnight on that date.

Sec. 50.7 Special rules for Interim Guidance safe harbors.

(a) An insurer will be deemed to be in compliance with the

requirements of the Act to the extent the insurer reasonably relied on

Interim Guidance prior to the effective date of applicable regulations.

(b) For purposes of this section, Interim Guidance means the

following documents, which are also available from the Department of

the Treasury at http://www.treasury.gov/trip:

(1) Interim Guidance I issued by Treasury on December 3, 2002, and

published at 67 FR 76206 (December 11, 2002);

(2) Interim Guidance II issued by Treasury on December 18, 2002,

and published at 67 FR 78864 (December 26, 2002); and

(3) Interim Guidance III issued by Treasury on January 22, 2003,

and published at 68 FR 4544 (January 29, 2003).

Subpart B--Disclosures as Conditions for Federal Payment [Reserved]

Subpart C--Mandatory Availability [Reserved]

Subpart D--State Residual Market Insurance Entities; Workers'

Compensation Funds [Reserved]

Subpart E--Self-Insurance Arrangements; Captives [Reserved]

Subpart F--Claims Procedures [Reserved]

Subpart G--Audit, Investigative and Civil Money Penalty Procedures

[Reserved]

Subpart H--Recoupment and Surcharge Procedures [Reserved]

Dated: February 25, 2003.

Wayne A. Abernathy,

Assistant Secretary of the Treasury.

[FR Doc. 03-4831 Filed 2-27-03; 8:45 am]

BILLING CODE 4810-25-P

[Federal Register: March 27, 2003 (Volume 68, Number 59)]

[Notices]

[Page 15039-15041]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr27mr03-92]

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DEPARTMENT OF THE TREASURY

Departmental Offices; Interim Guidance Providing Procedure for

Rebuttal of Presumption of Control of an Insurer for Purposes of the

Terrorism Risk Insurance Program

AGENCY: Departmental Offices, Treasury.

ACTION: Notice.

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SUMMARY: This notice provides interim guidance to insurers that wish to

rebut a presumption of control by the Department of Treasury as

administrator of the Terrorism Risk Insurance Program.

DATES: This notice is effective immediately and will remain in effect

until superceded by regulations or by subsequent notice.

FOR FURTHER INFORMATION CONTACT: Mario Ugoletti, Deputy Director,

Office of Financial Institutions Policy 202-622-2730; Martha Ellett,

Attorney-Advisor, Office of the Assistant General Counsel (Banking and

Finance) 202-622-0480.

SUPPLEMENTARY INFORMATION: This notice provides interim guidance to

assist insurers that wish to rebut a presumption of controlling

influence for purposes of the Terrorism Risk Insurance Program (the

Program) established by Title I of the Terrorism Risk Insurance Act of

2002 (Pub. L. 107-297) prior to the issuance by the Department of

Treasury (Treasury) of regulations incorporating a procedure for

rebuttal of a controlling influence presumption. This interim guidance

remains in effect until superceded by regulations or subsequent notice.

I. Background

On November 26, 2002, the President signed into law the Terrorism

Risk Insurance Act of 2002 (the Act). The Act became effective

immediately. It establishes a temporary federal program of shared

public and private compensation for insured commercial property and

casualty losses resulting

[[Page 15040]]

from an ``act of terrorism,'' as defined in the Act. The Program is

administered and implemented by Treasury and will sunset on December

31, 2005.

Section 102(3) of the Act sets forth the Act's definition of the

term ``control.'' Treasury issued an interim final rule containing

Program definitions, including the definition of an ``affiliate'' of an

``insurer.'' 68 FR 9803 (February 28, 2003). The definition of

``affiliate'' in the interim final rule incorporates the three

categories in the statutory definition of control: (a) If an insurer

directly or indirectly owns, controls or has the power to vote 25

percent or more of any class of voting securities of the other insurer;

(b) if an insurer controls in any manner the election of a majority of

the directors or trustees of the other insurer; or (c) even if there is

no control under (a) or (b), if the Secretary determines after notice

and opportunity for hearing that an insurer directly or indirectly

exercises a controlling influence over the management or policies of

the other insurer.

In the interim final rule at 31 CFR 50.5(c)(2), Treasury

established several rebuttable presumptions for purposes of a

determination of controlling influence, and, therefore, of control by

an insurer over another insurer for purposes of the Program. If an

insurer controls another insurer, then, for example, their direct

earned premiums are consolidated for purposes of calculating the

insurer deductible. The rebuttable presumptions of control in the

interim final rule apply unless (i) subsequently modified by Treasury

by regulation or order, or (ii) an affected insurer or insurers makes a

rebuttal submission to Treasury, as set forth below, and Treasury

determines that no control relationship exists for purposes of the

Program.

II. Interim Guidance

Treasury will be issuing regulations containing a procedure for

rebutting presumptions of a controlling influence for purposes of the

Program. Treasury is issuing the following procedure as interim

guidance for an insurer (as that term is defined by section 102 (6) of

the Act and under Treasury's interim final regulations) to follow if

such insurer wishes to rebut a presumption of controlling influence

prior to the issuance of such regulations. This rebuttal procedure may

also be found on Treasury's Terrorism Risk Insurance Program Web site

at http://www.treasury.gov/trip.

Procedure for Rebutting Presumption of Control

(1) An insurer or insurers may make a written submission to

Treasury to rebut a presumption, established under 31 CFR 50.5(c)(2),

of a controlling influence by the insurer under the Program. Prior to

establishment of a Terrorism Risk Insurance Program Office within

Treasury, such rebuttal submissions shall be made to the Office of

Financial Institutions Policy, Terrorism Risk Insurance Program, Room

3160 Annex, Department of Treasury, 1500 Pennsylvania Ave, NW.,

Washington, DC 20220. The submission to rebut a controlling influence

presumption should be entitled ``Submission to Rebut Control

Presumption'' and should provide the full name and address of the

submitting insurer(s) rebutting control and the name, title, address

and telephone number of the designated contact person(s) for such

insurer(s).

(2) Following receipt of a rebuttal submission, Treasury will

review the submission and determine whether Treasury needs additional

written or orally presented information from the submitting insurer in

order to determine whether the presumption of controlling influence has

been rebutted. In its discretion, Treasury may schedule a date, time

and place for an oral presentation by the insurer(s).

(3) A rebuttal submission by an insurer or insurers under the

Program shall provide all relevant facts and circumstances concerning

the relationship(s) between or among the affected insurers; explain in

detail why no controlling influence exists and provide support for why

the rebuttable presumption should not apply in light of particular

facts and circumstances and the Act's language, structure and purpose.

(a) General Information for Rebuttal Submission. The types of

information that Treasury may consider in reviewing rebuttal

submissions include:

(i) The ownership structure of the insurer that is subject to the

presumption of control, such as an organization chart and whether its

stock or other capital is widely or closely held;

(ii) The degree to which the ownership or capacity providers of the

insurer share in the profits and losses of the insurer;

(iii) The management structure of the insurer, including a

description and copies of management contracts and any informal

management arrangements;

(iv) Information on financial support provided by the insurer

presumed in control to the insurer presumed to be controlled, including

the nature and amount of debt instruments held by one insurer in the

other and information on financial support provided by companies other

than the insurer presumed to be in control;

(v) Information on who makes management, investment or other

significant business decisions for the insurer presumed to be

controlled and how these are made and similar information; and

(vi) Any other information that may be relevant to the

determination of control.

(b) Information for Rebuttal of Specific Presumptions. In addition

to the general information described above in (a), the types of

information Treasury may review in connection with a rebuttal of a

specific presumption includes the following:

(i) In rebutting a presumption based on a State determination of

control, the insurer's submission must include a copy of the State's

determination of control, the name, title and telephone number of the

head of the appropriate State agency along with copies of relevant

State regulations or rulings and citations to relevant statutes;

(ii) In rebutting a presumption based on provision by one insurer

of 25 percent or more of capital, policyholder surplus or corporate

capital, the insurer's submission should include financial and

accounting statements for the most recent calendar year and copies of

relevant financial and control information provided to State

regulators; and

(iii) In rebutting a presumption based on the fact that an insurer

supplies 25 percent or more of the underwriting capacity for that year

to another insurer that is a syndicate consisting of a group including

incorporated and individual unincorporated underwriters, the insurer

submission shall include financial statements for the most recent

calendar year and copies of relevant financial and control information

provided to State regulators.

(c) Confidential Information. Any confidential business or trade

secret information submitted to Treasury in a rebuttal submission

should be clearly marked. (4) Treasury shall review and consider the

insurer submission and other relevant facts and circumstances,

including information provided by the insurer's State regulator. Unless

otherwise extended by Treasury, within 60 days after receipt of a

complete submission, including any oral presentation, Treasury shall

issue a final determination of whether a submitter has rebutted the

relevant regulatory

[[Page 15041]]

presumption of a controlling relationship for purposes of the Program.

The determination shall set forth Treasury's basis for its

determination.

III . Paperwork Reduction Act

The collection of information contained in this interim guidance

has been reviewed and approved by the Office of Management and Budget

(OMB) in accordance with the requirements of the Paperwork Reduction

Act (44 U.S.C. 3507(j)) under control number 1505--0190. An agency may

not conduct or sponsor, and a person is not required to respond to, a

collection of information unless it displays a valid control number

assigned by OMB.

This information is required in order for Treasury to determine

whether an insurer has rebutted the presumption of control. The

collection of information is mandatory with respect to an insurer

seeking to rebut the presumption of control. The estimated average

burden associated with the collection of information in this final rule

is 40 hours per respondent.

Comments concerning the accuracy of this burden estimate and

suggestions for reducing this burden should be directed to the Office

of Financial Institutions Policy, Terrorism Risk Insurance Program,

Room 3160 Annex, Department of Treasury, 1500 Pennsylvania Ave, NW.,

Washington, DC 20220 and to OMB, Attention: Desk Officer for the

Department of the Treasury, Office of Information and Regulatory

Affairs, Washington, DC, 20503.

Dated: March 21, 2003.

Wayne A. Abernathy,

Assistant Secretary of the Treasury.

[FR Doc. 03-7304 Filed 3-26-03; 8:45 am]

BILLING CODE 4810-25-P

[Federal Register: August 26, 2003 (Volume 68, Number 165)]

[Notices]

[Page 51326-51327]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr26au03-160]

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DEPARTMENT OF THE TREASURY

Submission for OMB Review; Comment Request

August 18, 2003.

The Department of Treasury has submitted the following public

information collection requirement(s) to OMB for review and clearance

under the Paperwork Reduction Act of 1995, Pub. L. 104-13. Copies of

the submission(s) may be obtained by calling the Treasury Bureau

Clearance Officer listed. Comments regarding this information

collection should be addressed to the OMB reviewer listed and to the

Treasury Department Clearance Officer, Department of the Treasury, Room

11000, 1750 Pennsylvania Avenue, NW., Washington, DC 20220.

Dates: Written comments should be received on or before September

25, 2003, to be assured of consideration.

Departmental Offices/Office of Financial Institutions Policy

OMB Number: 1505-0190.

Form Number: None.

Type of Review: Extension.

Title: Terrorism Risk Insurance Program Rebuttal of Controlling

Influence Submissions.

Description: 31 CFR 50.8 specifies a rebuttal procedure that

requires a written submission by a insurer that seeks to rebut a

regulatory presumption of ``controlling influence'' over another

insurer under the Terrorism Risk Insurance Program, to provide Treasury

with necessary information to make a determination.

Respondents: Business or other for-profit, Federal Government.

Estimated Number of Respondents: 10.

Estimated Burden Hours Per Respondent: 40 hours.

Frequency of Response: Other (one time).

Estimated Total Reporting Burden: 400 hours.

Clearance Officer: Lois K. Holland, (202) 622-1563, Departmental

Offices, Room 2110, 1425 New York Avenue, NW., Washington, DC 20220.

OMB Reviewer: Joseph F. Lackey, Jr., (202) 395-7316, Office of

Management and Budget, Room 10235, New

[[Page 51327]]

Executive Office Building, Washington, DC 20503.

Lois K. Holland,

Treasury PRA Clearance Officer.

[FR Doc. 03-21801 Filed 8-25-03; 8:45 am]

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