[Federal Register Volume 68, Number 115 (Monday, June 16, 2003)]
[Notices]
[Pages 35775-35776]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-15074]


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DEPARTMENT OF THE TREASURY


Departmental Offices, Treasury: Study of the Potential Effects of 
Acts of Terrorism on the Availability of Other Lines of Insurance

SUMMARY: The terrorism insurance legislation enacted on November 26, 
2002, requires the Secretary of the Treasury (Treasury), after 
consultation with the National Association of Insurance Commissioners 
(NAIC), representatives of the insurance industry, and other experts in 
the insurance field, to conduct a study of the potential effects of 
acts of terrorism on the availability of life insurance and other lines 
of insurance coverage, including personal lines, and to submit a report 
to the Congress on the results of the study by August 26, 2003. To 
assist in the study, the Treasury is soliciting comments on the 
questions listed below.

DATES: Comments must be received by July 5, 2003.

ADDRESSES: Send comments by e-mail to [email protected], or 
by mail to Lucy Huffman, Office of Microeconomic Analysis, U.S. 
Treasury Department, 1500 Pennsylvania Avenue, Washington, DC 20220. 
Please include your name, affiliation, address, e-mail address (if 
applicable), and telephone number. All submissions should be captioned 
``Comments on Study of Other Lines''.

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

SUPPLEMENTARY INFORMATION: Section 103(i) of the Terrorism Risk 
Insurance Act of 2002 (Pub. L. 107-297) (Act) requires the Treasury, 
after consultation with the NAIC, representatives of the insurance 
industry, and other experts in the insurance field, to conduct a study 
of ``the potential effects of acts of terrorism on the availability of 
life insurance and other lines of insurance coverage, including 
personal lines''. The Treasury is directed to submit a report to the 
Congress on the results of the study not later than 9 months after the 
date of enactment of the Act.
    To assist in the study, Treasury is soliciting comment in response 
to the following questions, including empirical data in support of such 
comments where appropriate and available.

[[Page 35776]]

I. Exposure of Insurance Lines Not Covered Under Section 102(6) of the 
Act to Acts of Terrorism Defined in Section 102(1) of the Act

    1.1 What lines of insurance would not be likely to experience 
potentially significant reductions in availability as a result of the 
occurrence of future acts of terrorism or the risk of acts of 
terrorism?
    1.2 What lines of insurance would be likely to experience 
potentially significant reductions in availability as a result of the 
occurrence of future acts of terrorism or the risk of acts of 
terrorism?
    1.3 What are the attributes of those lines cited in 1.2 that could 
lead to potentially significant reductions in availability? For 
example, are there unavoidable concentrations of risk? Is there a 
particular exposure to certain types of acts of terrorism?
    1.4 What is the market structure of those lines of insurance cited 
in 1.2? In your answer, please describe, as quantitatively as you can, 
the degree of competition in the markets for those lines, the net 
premiums to surplus ratios for companies in those lines, and other 
measures of market structure that you believe are relevant; and compare 
them to the insurance industry average. What is the distribution of 
market share (highly concentrated among a few entities, broadly 
distributed, other)? What types of insurers hold the majority of the 
market share (local, regional, national, other)?
    1.5 What is the current capacity of insurers in those lines cited 
in 1.2 to bear the risk of acts of terrorism, individually and as 
affiliates of other companies with support from them?
    1.6 Compared to the condition of reinsurance and alternative 
markets before the attack of September 11, 2001, what is the 
availability and affordability of reinsurance or of alternatives 
sources of protection, for insurers offering coverage in lines cited in 
1.2? What is the degree to which those insurers can mitigate their 
exposure through other means? Are there additional loss control 
programs or mitigation measures that could be undertaken?
    1.7 What is the Federal and State regulatory structure applicable 
to those lines of insurance cited in 1.2? In particular please describe 
whether exclusions are allowed and for what risks.

II. Current Insurance Availability Conditions

    2.1 Please describe current insurance availability conditions in as 
much detail as possible for customers of the lines cited in 1.2. If 
there is reduced availability of a particular line of insurance for 
some customers, please indicate the line and describe the reduced 
availability as quantitatively as possible, including, to the extent 
you can, which customers have been significantly affected, by type and 
location. Please indicate whether such customers have access to 
alternative sources of insurance, including the cost and availability 
of these alternative sources, or whether the customers are not covered.
    2.2 What is the impact on community and regional economies and well 
being, and the national economy of such reduced availability and 
affordability for those customers?

III. Impact of Potential Future Acts of Terrorism

    In this section we solicit comment on the effect of potential 
future acts of terrorism--single events or aggregation of several 
events across locale or across a time period--that could cause 
significant and extended disruptions in availability of insurance lines 
cited in 1.2.
    3.1 In order to facilitate our analysis, please set out the 
consequences of potential future acts of terrorism for each line of 
insurance cited in 1.2 within the following broad dimensions:
    (1) The relative concentration of the insurance industry exposed to 
the loss (including the following categories: (a) Loss broadly 
distributed--share of loss is equivalent to market share; (b) 
concentration of loss among many small companies--share of loss is 
greater than market share for large number of small companies and less 
than market share among market leaders; (c) concentration of loss among 
market leaders--share of loss is greater than market share for large 
companies and less than market share among small companies; (d) other 
distributions deemed of interest); and
    (2) the size of the loss (including the following categories: net 
present value of losses of approximately the following sizes: $5 
billion, $15 billion, $30 billion, $60 billion or larger).
    Within each ``cell'' identified by a single concentration and loss 
category, please describe as specifically as possible:
    [sbull] Impact on financial capacity of insurers in the line (e.g., 
as reduction in share of large local, regional or national market), 
whether and how many insolvencies might be the result, the extent to 
which state guarantee funds might be affected, any systemic impact on 
the insurance industry; and the length of time over which the industry 
might be able to recover.
    [sbull] Scope of any significant reduction in availability of 
coverage in the line, including length of time over which coverage is 
reduced and numbers of customers or subsets of customers potentially 
affected.
    [sbull] Scope of impact on the economies and well being of the 
communities in which the reductions in availability take place, the 
associated regions, and the national economy. Please be specific as to 
how the impact is transmitted from the affected community to the 
regional and national economy.
    If you do not believe this format allows you to adequately answer 
the question, please alter as needed. Please note that descriptions of 
scenarios of individual events are not likely to be as helpful as broad 
aggregates.
    3.2 If not already identified in the matrix above, please describe 
the class of events with the ``worst'' impact for the line of insurance 
affected, indicating the concentration and the size of the event (or 
aggregate of events).
    3.3 Please describe, to the extent possible, the likelihood of the 
events included in the matrix above.
    3.4 Please indicate whether you believe that the severity and 
likelihood of these events as you have described them is accurately 
reflected in current insurance availability conditions. Please be as 
specific as possible, including citing instances from your answers to 
questions 2.1-2.4.

    Dated: June 6, 2003.
Mark Warshawsky,
Acting Assistant Secretary for Economic Policy.
[FR Doc. 03-15074 Filed 6-13-03; 8:45 am]
BILLING CODE 4810-25-P