[Federal Register Volume 67, Number 238 (Wednesday, December 11, 2002)]
[Notices]
[Pages 76208-76209]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-31211]


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DEPARTMENT OF THE TREASURY


Departmental Offices; Study of the Impact of Threat of Terrorism 
on Availability of Group Life Insurance

AGENCY: Department of the Treasury, Departmental Offices.

ACTION: Notice; request for comments.

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SUMMARY: Recently enacted terrorism insurance legislation requires the 
Secretary of the Treasury (Treasury) to study, on an expedited basis, 
whether adequate and affordable catastrophe reinsurance for acts of 
terrorism is available to life insurers in the United States that issue 
group life insurance, and the extent to which the threat of terrorism 
is reducing the availability of group life insurance for consumers in 
the United States. To assist in this study, the Treasury is soliciting 
comments on the questions listed below.

DATES: Comments must be in writing and received by January 10, 2003.

ADDRESSES: Send comments by e-mail to [email protected]. 
Please include your name, affiliation, address, e-mail address, and 
telephone number. All submissions should be captioned ``Comments on 
Group Life Insurance Study''.

FOR FURTHER INFORMATION CONTACT: Lucy Huffman, Project Manager, Office 
of Microeconomic Analysis, 202-622-0198; John Worth, Acting Director, 
Office of Microeconomic Analysis, 202-622-2683; U.S. Treasury 
Department.

SUPPLEMENTARY INFORMATION: Section 103(h) of the Terrorism Risk 
Insurance Act of 2002 (Public Law No. 107-297)

[[Page 76209]]

(Act) requires the Treasury to study, on an expedited basis, whether 
adequate and affordable catastrophe reinsurance for acts of terrorism 
is available to life insurers in the United States that offer group 
life insurance, and the extent to which the threat of terrorism is 
reducing the availability of group life insurance coverage for 
consumers in the United States. To the extent that the Treasury 
determines that such coverage is not or will not be reasonably 
available to both such insurers and consumers, the Treasury is directed 
to apply, in consultation with the National Association of Insurance 
Commissioners, the provisions of the Act, as appropriate, to group life 
insurers; and provide such restrictions, limitations, or conditions 
with respect to any financial assistance provided that Treasury deems 
appropriate, based on this study.
    The purpose of the Act is to establish a temporary Federal program 
that provides for a transparent system of shared public and private 
compensation for insured losses resulting from acts of terrorism, in 
order to protect consumers by addressing market disruptions and ensure 
the continued widespread availability and affordability of property and 
casualty insurance for terrorism risk; and to allow for a transitional 
period for the private markets to stabilize, resume pricing of such 
insurance, and build capacity to absorb any future losses, while 
preserving state insurance regulation and consumer protections.
    Treasury is soliciting comment in response to the following 
questions, including empirical data in support of such comments where 
appropriate and available.

I. The Impact of Terrorism Risk on Group Life Insurers

    1.1 Who are the suppliers of the group life insurance in the U.S.; 
who are the buyers; and how are sellers and buyer brought together?
    1.2 What is the corporate status of group life insurers? Are they 
generally stand-alone companies, or affiliates of other corporations? 
If the latter, what are the major business interests of the other 
corporations?
    1.3 What characterizes group life insurance offerings? Please 
describe typical terms of coverage, offer and renewal procedures, and 
other relevant information.
    1.4 How is group life insurance regulated in the U.S.? Are there 
significant differences in group life regulation among the states and, 
if so, what are these differences?
    1.5 What are the risk exposures of customers and how are they 
concentrated--by locality, by type of employer, other? What is the 
annual premium structure for these different exposures?
    1.6 What amounts of loss exposure are typically reinsured? Please 
describe the structure of typical reinsurance contracts, including the 
period of coverage and typical renewal process.
    1.7 What was the amount of group life insurance losses in the 
terrorist attack of September 11, 2001; and how was it distributed--
losses to insurers versus losses to reinsurers? How was it distributed 
within each group?
    1.8 What was the availability and price of reinsurance in the 
period before and following September 11, 2001, for group life 
insurance? What is it today? Please be specific by type and amount of 
coverage available, deductible, sublimit, renewability, and other 
relevant characteristics.
    1.9 What is the current capacity of group life insurers in the U.S. 
to bear terrorism risk, individually and as affiliates of other 
companies, taking into consideration their reinsurance situation? 
Please provide empirical support for responses as available and 
appropriate.
    1.10 Are there other sources of protection for terrorism risks in 
group life insurance, e.g., through capital markets? To what extent are 
these sources used currently? What are the issues associated with 
expanded use of these sources?
    1.11 Please address and provide empirical support for whether group 
life insurers have reasonable access to adequate and affordable 
catastrophe reinsurance, and, if not, why inclusion in the Act would 
correct this situation. In so doing, please compare the magnitude and 
scope of the situation of group life insurers to the situation previous 
to the passage of the Act of those property and casualty insurers that 
are included in the Act.

II. The Impact of Terrorism Risk on Group Life Insurance Markets

    2.1 Please describe in detail, current group life insurance market 
conditions, including availability and pricing, by type and location of 
employers and other purchasers.
    2.2 What is the impact of terrorism risk on group life insurance 
availability for employees and other consumers? Please describe in as 
much detail as possible which employees and other consumers have been 
significantly affected, including availability and pricing, by type and 
location of employer or other purchaser of group life coverage.
    2.3 What is the cost and availability of alternative sources of 
life insurance coverage for those employees and other consumers 
affected by the reduced availability and affordability of group life 
insurance?
    2.4 Please explain and provide empirical support concerning the 
extent to which the threat of terrorism is reducing reasonable 
availability of group life insurance coverage for employees and other 
consumers in the U.S., and whether it would continue to be reduced if 
group life insurers continue to be excluded from the Program. Please 
compare the magnitude and scope of the impact on consumers of not 
including group life insurance to the impact on consumers previous to 
the passage of the Act of those property and casualty insurance lines 
covered under the Act. Please explain how inclusion would correct this 
situation.

III. The Potential for Inclusion in the Federal Program

    3.1 Treasury presumes that, if it would be appropriate to include 
group life insurance under the Act, Treasury would apply the current 
provisions of the Act to group life insurers. If this is not the case, 
please discuss and provide a detailed explanation of the changes that 
would need to be made to implement the Program for group life insurers. 
Please include discussion of any operational difficulties with applying 
the current provisions in the Act to group life insurers, any other 
characteristics of group life insurance that should be considered with 
respect to any financial assistance if group life insurers were 
included under the Act, and the benefits and costs, including 
administrative costs, of any proposed changes to the provisions for 
group life insurers.

    Dated: December 3, 2002.
Mark Warshawsky,
Deputy Assistant Secretary for Economic Policy, Microeconomic Analysis.
[FR Doc. 02-31211 Filed 12-10-02; 8:45 am]
BILLING CODE 4810-25-P