[Federal Register Volume 68, Number 59 (Thursday, March 27, 2003)]
[Notices]
[Pages 15039-15041]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-7304]


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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until superceded by regulations or by subsequent notice.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remains in effect until superceded by regulations or subsequent notice.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

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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