[Federal Register Volume 68, Number 19 (Wednesday, January 29, 2003)]
[Notices]
[Pages 4544-4545]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-2116]



[[Page 4544]]

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DEPARTMENT OF THE TREASURY

Departmental Offices


Interim Guidance Concerning Certain Conditions for Federal 
Payment, Non-U.S. Insurers, and Scope of Insurance Coverage in the 
Terrorism Risk Insurance Act of 2002

AGENCY: Departmental Offices, Treasury.

ACTION: Notice.

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SUMMARY: This notice provides additional interim guidance concerning 
certain conditions for Federal payment in title I of the Terrorism Risk 
Insurance Act of 2002 as implemented in Department of Treasury's 
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until superceded by regulations or by subsequent notice.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 and GSE 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 additional interim 
guidance to assist insurers in ascertaining how they may comply with 
certain immediately applicable provisions of title I of the Terrorism 
Risk Insurance Act of 2002 (Pub. L. 107-297) (the Act) prior to the 
issuance of regulations by the Department of the Treasury (Treasury). 
This notice provides interim guidance concerning the timing and 
certification of disclosures that Treasury expects to require from an 
insurer that is making a claim for federal payment under the Terrorism 
Risk Insurance Program. In addition, this interim guidance addresses 
the ``separate line item'' disclosure requirement in section 
103(b)(2)(C), non-U.S. insurer participation in the Program, and the 
scope of ``insured loss.'' The interim guidance contained in this 
notice, along with interim guidance issued previously by Treasury, may 
be relied upon by insurers in complying with these statutory 
requirements prior to the issuance of regulations on these issues. 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interim guidance remains in effect until superceded by regulations or 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 became effective immediately. It 
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. The 
Terrorism Risk Insurance Program is administered and implemented by 
Treasury and will sunset on December 31, 2005.

II. Interim Guidance

    Treasury will be issuing regulations to administer and implement 
certain elements of the Terrorism Risk Insurance Program (Program). To 
assist insurers in complying with certain statutory requirements prior 
to the issuance of regulations, Treasury has previously issued interim 
guidance, located at 67 FR 76206 (December 11, 2002) and at 67 FR 78864 
(December 26, 2002) (also located on Treasury's Terrorism Risk 
Insurance Program Web site at http://www.treasury.gov/trip). This 
notice contains additional interim guidance concerning disclosures as 
conditions for Federal payment in section 103(b)(2) of the Act, non-
U.S. insurer participation in the Program, and the scope of ``insured 
loss.''

How May an Insurer Comply With the Section 103(b)(2) Requirements for 
Disclosure ``at the Time of Offer, Purchase and Renewal of the 
Policy?''

    As conditions for Federal payment under the Program, section 
103(b)(2) requires that an insurer provide clear and conspicuous 
disclosure to the policyholder, for existing policies and for new 
policies, of the premium charged for insured losses covered by the 
Program and the Federal share of compensation for insured losses under 
the Program. For policies issued after the date of enactment (November 
26, 2002), sections 103(b)(2)(B) and (C) require these disclosures to 
be made to the policyholder ``at the time of offer, purchase and 
renewal of the policy.'' For purposes of interim guidance, Treasury 
deems an insurer to be in compliance with these disclosure requirements 
``at the time of offer, purchase and renewal'' if the insurer makes the 
required clear and conspicuous disclosures to the policyholder or 
applicant no later than at the time that the insurer first formally 
offers to provide insurance coverage or renew a policy for a current 
policyholder, and makes clear and conspicuous reference back to that 
disclosure as well as the final terms of terrorism insurance coverage 
at the time the transaction is completed. The required disclosures can 
be communicated by the use of channels, methods and forms of 
communication normally used to communicate similar policyholder 
information. This interim guidance is provided as a safe harbor to 
assist insurers in complying with conditions for Federal payment prior 
to the issuance of regulations. It is not the exclusive means by which 
an insurer may comply with the section 103(b)(2) (B) and (C) 
requirements.

How May an Insurer Comply With the ``Separate Line Item'' Requirement 
for Policies Issued More Than 90 days After Date of Enactment?

    Section 103(b)(2)(C) requires that an insurer make the required 
clear and conspicuous disclosures on a ``separate line item'' in the 
policy for any policy issued more than 90 days after the date of 
enactment of the Act (November 26, 2002). In previous interim guidance, 
published at 67 FR 76206 (December 11, 2002), Treasury indicated that 
additional interim guidance, as appropriate, as well as regulations 
would be issued on the ``separate line item'' requirement. For purposes 
of interim guidance, Treasury deems an insurer to be in compliance with 
the separate line item requirement of section 103(b)(2)(C) if it makes 
the required ``clear and conspicuous'' disclosure: (i) On the 
declarations page of the policy; (ii) elsewhere within the policy 
itself; or (iii) in any rider or endorsement that is made a part of the 
policy, as long as the disclosure is clear and conspicuous and 
otherwise meets the requirements of section 103(b)(2) and previous 
interim guidance. This interim guidance is provided as a safe harbor to 
assist insurers in complying with conditions for Federal payment prior 
to the issuance of regulations; however, it is not the exclusive means 
by which an insurer may comply with the section 103(b)(2)(C) ``separate 
line item'' requirement.

How May an Insurer Certify Its Compliance With Required Disclosures as 
a Condition for Payment in Section 103(b) of the Act?

    Section 103(b) of the Act sets forth conditions for Federal 
payments for an insured loss that is covered by an insurer, including 
provision of clear and conspicuous disclosure to the policyholder of 
the premium charged for insured losses covered by the Program and the 
Federal share of compensation for insured losses under the Program. The 
Act also requires as a condition for payment that an insurer process a 
claim for an insured loss and submit a claim to Treasury for payment of 
the Federal share of compensation for the insured loss, along with 
certain written certifications, including certification of the 
insurer's compliance

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with the provisions of section 103(b) of the Act. In previous interim 
guidance, Treasury has addressed the statutory terms ``insurer'' and 
``insured losses'' under the Program, 67 FR 78864 (December 26, 2002), 
and Treasury intends to issue regulations establishing claims 
procedures for Federal payments under the Program. With regard to an 
insurer's certification of its compliance with the disclosure 
requirements in section 103(b)(2), Treasury expects to propose 
regulations that will require an insurer to certify that it complied 
with the required disclosure(s) to the policyholder on the underlying 
claim or claims submitted by the insurer for Federal payment under the 
Program.

How Do the Nullification Requirement of Section 105 and Other 
Provisions of the Act Apply to Non-U.S. Insurers?

    For the purposes of this interim guidance, Treasury views the 
nullification requirement of section 105 and other provisions of the 
Act as they apply to non-U.S. insurers in the context of such insurers' 
required participation under the Act. The provisions of the Act apply 
to entities that meet the definition of ``insurer'' under section 
102(6) of the Act and with the respect to an ``insured loss'' covered 
by the Program. Included among the other requirements of the Act are: 
The ``make available'' requirements of section 103(c); the disclosure 
requirements as a condition for Federal payment contained in section 
103(b)(2); and the policy surcharge (recoupment) provisions of section 
103(e)(8). For non-U.S. insurers that are required to participate in 
the Program, participation requirements for existing policies that 
provide coverage for ``insured losses'' include the ``make available'' 
and other requirements in the Act, such as those listed above, even in 
the absence of nullification under section 105. The disclosure 
standards referenced in this and other interim guidance also would 
apply.

For the Purpose of Determining the Scope of ``Insured Loss,'' How Is 
Section 102(5)(B) Interpreted as It Relates to U.S. Air Carriers and 
U.S. Flag Vessels?

    Section 102(5)(B) defines an ``insured loss'' to include losses 
that occur ``to an air carrier (as defined in section 40102 of title 
49, United States Code), to a United States flag vessel (or 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.'' Section 40102 
defines an ``air carrier'' generally as a United States citizen 
(individual, partnership, or corporation) that provides foreign or 
interstate ``air transportation.''
    For the purposes of interim guidance, Treasury is providing further 
clarification that insured losses under section 102(5)(B) are only 
those losses that are incurred by the air carrier or the United States 
flag vessel. Insured losses under section 102(5)(B) would not include 
losses incurred by third parties that are associated with losses 
incurred by a United States air carrier or a United States flag vessel, 
unless the cause of the loss originated within the United States.

    Dated: January 22, 2003.
Wayne A. Abernathy,
Assistant Secretary of the Treasury.
[FR Doc. 03-2116 Filed 1-28-03; 8:45 am]
BILLING CODE 4810-25-P