1505-0257 TRIP 2020 Renewal to OMB for 2021 Data Call_Final

Rev. 9/2020

Department of the Treasury

Terrorism Risk Insurance Program

Supporting Statement – Information Collection Requirement

OMB Control Number 1505-0257

Collection of Data from Property and Casualty Insurers for Reports Concerning the Terrorism Risk Insurance Program

1. Explain the circumstances that make the collection of information necessary.

This information collection is made necessary by the Terrorism Risk Insurance Act, as amended (Public Law 107-297, 116 Stat. 2322) (the Act).

The Act was signed into law on November 26, 2002. 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.

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 certified by the Secretary of the Treasury. The Act authorizes Treasury to administer and implement the Terrorism Risk Insurance Program (Program), including the issuance of regulations and procedures. The Program provides a federal backstop for insured losses from an act of terrorism. Although the Program was originally set to expire on December 31, 2005, it has now been extended and amended on four occasions; most recently, the Terrorism Risk Insurance Reauthorization Act of 2019 (2019 Reauthorization Act, P.L. 116-94) extended the Program through December 31, 2027.

Treasury has been required to conduct an annual data collection since passage of the Terrorism Risk Insurance Reauthorization Act of 2015 (2015 Reauthorization Act, P.L. 114-1). Section 111 of the 2015 Reauthorization Act provided that the Secretary of the Treasury, commencing in the calendar year beginning on January 1, 2016, shall require insurers participating in the Program to submit information regarding insurance coverage for terrorism losses in order to analyze the effectiveness of the Program. For the first year of data collection, Treasury sought emergency clearance and review for the 2016 data collection only, as the normal public review and comment processes would not have permitted the collection of data under then-proposed rules in time for Treasury to complete a Report to Congress by June 30, 2016. Approval of a collection form for use in CY 2016 only was provided under OMB No. 1505-0253. A revised collection form for use in CY 2017 was approved (after a public notice and comment period) under OMB No. 1505-0257. A revised application was submitted for the forms to be used in CY 2018, on account of certain proposed changes to the forms and the development of a consolidated collection approach with a similar data collection by state insurance regulators in association with the National Association of Insurance Commissioners (NAIC). Further changes were made to the forms for use in 2019, subject to notice and comment and approval by OMB. For purposes of 2020, Treasury did not seek to change the basic forms; however, a new reporting requirement in the 2019 Reauthorization Act led it to seek emergency approval from OMB for a new Places of Worship worksheet, applicable to all reporting insurers. The approval of that application resulted in new expiration for the reporting forms in general of September 30, 2020.

It is estimated that approximately 900 insurance groups or individual insurance entities that meet the Act’s definition of “insurers” will be required to provide some amount of information in response to the data collection, and the amount of information required will vary based upon the type and size of insurer involved.

2. Explain how, by whom, how frequently, and for what purpose the information will be used. If the information collected will be disseminated to the public or used to support information that will be disseminated to the public, then explain how the collection complies with all applicable Information Quality Guidelines.

This is an annual collection, continuing through the Program’s expiration in 2027 (unless reauthorized by Congress). The information will be used to support required reports by the Secretary addressing: (1) the effectiveness of the Program; and (2) the competitiveness of small insurers in the terrorism risk insurance marketplace. Reports addressing the effectiveness of the Program must be submitted in June 2022, June 2024, and June 2026. Studies concerning small insurer competitiveness must be submitted in June 2021, June 2023, June 2025, and June 2027.

The reports concerning the effectiveness of the Program will include: (i) an analysis of the overall effectiveness of the Program; (ii) an evaluation of the availability and affordability of terrorism risk insurance, including an analysis of such availability and affordability specifically for places of worship; (iii) an evaluation of any changes or trends in the data collected; (iv) an evaluation of whether any aspects of the Program have the effect of discouraging or impeding insurers from providing commercial property casualty insurance coverage or coverage for acts of terrorism; (v) an evaluation of the impact of the Program on workers’ compensation insurers; and (vi) an updated estimate of the total amount of terrorism insurance premium earned since January 1, 2003. Similar topics were also addressed in previous statutorily-mandated reports published in 2016 and 2018. Treasury also anticipates publishing a report in 2020 using the currently-approved forms.

The studies concerning small insurer competitiveness will address: (i) changes to the market share, premium volume, and policyholder surplus of small insurers relative to large insurers; (ii) how the property and casualty insurance market for terrorism risk differs between small and large insurers, and whether such a difference exists within other perils; (iii) the impact of the Program’s mandatory availability requirement on small insurers; (iv) the effect of increasing the trigger amount for the Program (i.e., the amount of loss that must be sustained industrywide before the Program will make payments, even if a particular insurer has satisfied its individual deductible) on small insurers; (v) the availability and cost of private reinsurance for small insurers; and (vi) the impact that state workers’ compensation laws have on small insurers and workers’ compensation carriers in the terrorism risk insurance marketplace. Similar topics were also addressed in previous statutorily-mandated reports published in 2017 and 2019.

The data collected will not be disseminated to the public by Treasury; however, it will be used in an aggregated format in connection with reports that Treasury will produce that will be disseminated publicly. Treasury will follow its Information Quality Guidelines in connection with any reports produced that rely upon the data collected pursuant to this collection. To ensure the integrity of the data that is collected, Treasury’s insurance statistical aggregator will monitor the information as collected to identify anomalies and will otherwise validate the data once collected, pursuant to standard insurance data aggregation techniques, to confirm that the information correctly represents the experience of the reporting insurers. Data collected on an industry-wide basis in the insurance industry is validated for state regulatory purposes in the same fashion.

3. Describe whether, and to what extent, the collection of information involves the use of automated, electronic, mechanical, or other technological techniques or other forms of information technology.

It is planned that all responses be submitted electronically, and that the responding insurers will largely generate responses electronically by querying their data management systems for the requested data. The intention is to follow, as appropriate, best insurance and reinsurance industry practices. Exceptions may be required where an insurer lacks the capability to make an electronic submission or where certain data elements are more easily collected through a questionnaire, which would also be set up for response though an electronic, web-based process.

4. Describe efforts to identify duplication.

Treasury has not identified any entity or collection of entities that currently hold all of the non-public data Treasury seeks to collect. Treasury has determined, however, that the National Council on Compensation Insurance (NCCI), the California Workers’ Compensation Insurance Rating Bureau (California WCIRB), and the New York Compensation Insurance Rating Board (NYCIRB) are willing to provide certain workers’ compensation insurance data elements, and that this can be linked to information that will otherwise be reported directly by participating insurers. This approach was first taken during the CY 2017 data collection, did not pose any data integrity problems, and otherwise reduced burdens upon reporting insurers. Accordingly, Treasury again will instruct reporting insurers that they need not report those elements of the reporting forms that will be reported instead by NCCI, the California WCIRB, and/or the NYCIRB on their behalf.

5. If the collection of information involves small businesses or other small entities, describe the methods used to minimize burden.

Treasury has taken two principal steps to minimize the burden of the production of data upon insurers characterized as “small insurers.” First, insurers whose Program-eligible premiums in prior year were below $10 million are excused entirely from reporting and need not provide any information. Second, a separate form has been generated for entities that are not excused from reporting, but whose Program-eligible lines premiums and policyholder surplus beginning in CY 2021 are both below $1 billion. This form is significantly more streamlined and captures significantly less data than the form that larger insurers are required to complete. Even these small insurers, however, typically utilize electronic systems to collect their business data, such that no particular burden is placed upon “small” insurers operating in this industry.

6. Describe the consequences to the Federal program or policy activities if the collection is not conducted or is conducted less frequently.

The data is being requested pursuant to a statutory mandate to collect information beginning in 2016 and continuing through at least 2027. The collected data will be used to support statutorily-required reports concerning the effectiveness of the Program, which are due June 2022, June 2024, and June 2026, and statutorily-required studies concerning the participation of small insurers in the Program, which are due June 2021, June 2023, June 2025, and June 2027.

7. Explain any special circumstances that require the collection to be conducted in a manner inconsistent with OMB guidelines.

There are no special circumstances that require the collection to be conducted in a manner inconsistent with OMB guidelines. Moreover, the proposed data collection elements sought in the Program data collection templates have been selected to be consistent with the manner in which insurers presently collect data, such that the collection should be consistent with insurance industry and state insurance regulatory practice.

8. Provide a copy of the PRA Federal Register notice that solicited public comments on the information collection prior to this submission. Summarize the public comments received in response to that notice and describe the actions taken by the agency in response to those comments. Describe the efforts to consult with persons outside the agency to obtain their views on the availability of data, frequency of collection, the clarity of instructions and recordkeeping, disclosure, or reporting format (if any), and on the data elements to be recorded, disclosed, or reported.

A copy of the Federal Register Notice (85 FR 41676, July 10, 2020) is attached. In that Notice, Treasury indicated its intention to use, beginning in CY 2021, the same forms approved for use in CY 2020, subject to only minor non-material changes in future periods. In that notice, Treasury expressly sought comments concerning the Places of Worship worksheet used for the first time in CY 2020 pursuant to emergency approval by OMB. In response to the Notice, Treasury received one comment, from Lloyd’s of London, which generally indicated its support for the Program and did not provide any comments concerning the substance of the forms (“We have no substantive concerns to report at this time with respect to either the annual data collection forms, or the forms related to post-event claims processing.”)

Treasury also engaged with state insurance regulators and the NAIC, which separately sought comments from participating insurers in connection with the proposed consolidated collection approach. State regulators are in agreement with the collection forms, and will also rely upon those reporting templates for the majority of the information that they collect from participating insurers. Treasury will continue to engage with state regulatory officials and NAIC staff to explore ways in which reporting burdens upon insurers participating in the terrorism risk insurance market can be further minimized.

The communications described above, as well as similar engagement conducted in connection with prior data collections, have provided Treasury with significant information concerning the types of data that are available from participating insurance companies, as well as the best ways to request the data in order for the data requests to be consistent with existing systems and for the questions to yield the actual information that is sought by Treasury. Consistent with this prior investigation and outreach, Treasury requests information on a nationwide, state-specific, or locality basis, which are the bases upon which insurers typically report information for state regulatory purposes and to satisfy rating agency inquiries.

9. Explain any decisions to provide payments or gifts to respondents, other than remuneration of contractors or grantees.

There will be no payments or gifts to respondents associated with the data collection templates. The NCCI, California WCIRB, and NYCIRB are reporting information on behalf of participating insurers, and will not be compensated by Treasury.

10. Describe any assurance of confidentiality provided to respondents and the basis for assurance in statute, regulation, or agency policy.

Given the sensitivity of the requested data, Treasury expects to provide assurances of confidentiality to respondents. The basis for such an assurance is Section 104(h)(5) of the Act. Section 104(h)(5)(A) states that the submission of any non-publicly available data and information to the Secretary and the sharing of any non-publicly available data with or by the Secretary among other federal agencies, the state insurance regulatory authorities or any other entities under this subsection shall not constitute a waiver of, or otherwise affect, any privilege arising under Federal or state law to which the data or information is otherwise subject. Furthermore, Section 104(h)(5)(D) states that Section 552 of title 5, United States Code, including any exceptions thereunder, shall apply to any data or information submitted to the Secretary by an insurer.

Under Section 104(h)(3) of the 2015 Act, the Secretary is also instructed “to the extent possible” to collect data through an insurance statistical aggregator, that shall keep any nonpublic information collected confidential and provide the information to Treasury in aggregate form that does not permit identification of submitting insurers. Treasury will employing this approach in connection with the collection of data through the data collection templates, which will be transmitted through a secure web-based portal through which participating insurers will report the requested data to the insurance statistical aggregator. The aggregator that will be employed for this process through CY 2022 (Insurance Services Office, Inc.) regularly performs this function in connection with reporting performed by insurers for state regulatory purposes and otherwise.

11. Provide additional justification for any questions of a sensitive nature, such as sexual behavior and attitudes, religious beliefs, and other matters that are commonly considered private.

No personally identifiable information (PII) is sought or provided.

12. Provide an estimate in hours of the burden of the collection of information.

Treasury estimates that approximately 100 larger insurers will respond to the most extensive of the reporting templates (for “non-small” insurers), 200 companies will submit the “small insurer” template, 550 Program participants will submit the “captive insurer” template, and 50 insurers will complete the “alien surplus lines insurer” template.

For larger insurers reporting more expansive information, Treasury anticipates approximately 82 hours to collect, process and report—through the generation of queries to existing data systems that collect the required information, plus the individual responses to identified questions. Additionally, Treasury anticipates approximately 28 hours for collection, processing and reporting data for each of the smaller insurers, 51 hours each for the captive insurers; and 51 hours each for the alien surplus lines insurers. The insurance statistical aggregator that Treasury is utilizing has advised that it believes this hour burden estimate to be reasonable.

Respondent Type	Number of Respondents	Hours per Response	Total Hour Burden	Total Labor Cost (at $50.50/hour)*
Large Insurers	100	82	8,200	$ 414,100
Small Insurers	200	28	5,600	$ 282,800
Captive Insurers	550	51	28,050	$ 1,416,525
Alien Surplus Line Insurer	50	51	2,550	$ 128, 775
TOTAL	900	-	44,400	$ 2,242,200

*Based on data from Bureau of Labor Statistics, for Insurance Carriers and Related Activities, https://www.bls.gov/iag/tgs/iag524.htm. The average wage rate for all insurance employees was $37.52 in March 2020, and the total benefit compensation in 2019’s 4^th Quarter was 34.6%, which is a benefit multiplier of 1.346. Therefore, a fully-loaded wage rate for insurance employees is $50.50 = ($37.52 x 1.346).

13. Provide an estimate of the total annual cost burden to the respondents or record-keepers resulting

from the collection (excluding the value of the burden hours in #12 above).

The assembly, consolidation, review and transmission of the information are expected to present nominal costs to the insurers that respond given the data elements Treasury seeks to collect, which should be readily available in company systems and documents. There could be some limited amount of “start up” costs (estimated at $1,000 per insurer) for consolidating information that might be produced by responding insurers. However, Treasury expects that most reporting insurers would have already expended these costs in connection with the prior data collections; there would, as a result, not be similar new costs for insurers because there are not changes associated with forms to be used beginning in CY 2021. Based on the anticipated number of new insurers over prior reporting estimates, we estimate the additional start costs that have likely been expended could be $175,000 = (175 new insurers x $1000).

Otherwise, the costs are expected to consist of time associated with the consolidation of accounting records (including querying of computer systems), and for the internal review and certification of submissions. No equipment purchases or capital investment should be needed; however, some insurers may elect to perform some amount of incidental systems development to facilitate their submissions.

The data Treasury seeks to collect is contained within statistical information that insurers otherwise develop in order to achieve compliance with state insurance regulatory requirements (particularly annual statutory reporting requirements) and insurance rating reviews. The information collection is also directly extractive of information required for or generated in the course of normal business activity.

14. Provide estimates of annualized cost to the Federal government.

The cost to the federal government of the data collection will be the costs of the insurance statistical aggregator that is used to collect and aggregate the data. Treasury estimates that this cost for collecting data for CY 2021-CY2022 will be between $430,000 and $450,000. Therefore, the average annual government cost is $440,000 = ($430,000+$450,000)/2 years. Although there is no contract in place for CY 2023, Treasury anticipates that a similar cost will be incurred in that year as well. This cost is generally consistent with the costs incurred in connection with prior data collections.

15. Explain the reasons for any program changes or adjustments to previously identified annual reporting and recordkeeping burden hours or cost burden.

There has been an upward adjustment to the per response burden estimates as provided in connection with the CY 2019 data collection to account for the incremental additional cost associated with the new Places of Worship worksheet. The number of anticipated responding insurers has been modified upward based upon the experience in the CY 2019 data collection in terms of the number of insurers actually required to respond. Treasury will continue to collect information concerning the burden associates with the data production, and will use such information in evaluating future collection requirements.

In addition, the utilization of a consolidated data collection approach with state insurance regulators reduces total burdens upon insurers required to report terrorism risk insurance data.

16. For collections whose results will be published, outline the plans for tabulation and publication.

There are no plans for publication of the information as collected, although as stated above the information will form the basis for reports to be issued by Treasury to Congress from June 2021 through June 2027.

17. If seeking approval to not display the expiration date for OMB approval of the information collection, explain the reasons why display would be inappropriate.

Treasury will display the expiration date of OMB approval for this collection.

18. Explain each exception to the certification of compliance with 5 CFR 1320.9 statement.

There are no exceptions to the certification statement.

Part B. Describe the use of statistical methods such as sampling or imputation.

This collection does not employ statistical methods.

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