[Federal Register Volume 69, Number 87 (Wednesday, May 5, 2004)]
[Notices]
[Pages 25168-25169]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-10151]


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DEPARTMENT OF THE TREASURY


Departmental Offices; Treasury's Decision To Extend the Terrorism 
Risk Insurance Act's ``Make Available'' Requirement

AGENCY: Department of the Treasury, Departmental Offices.

ACTION: Notice; Request for Comments.

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SUMMARY: Title I of the Terrorism Risk Insurance Act of 2002 (Pub. L. 
107-297) requires that, from the date of enactment (November 26, 2002) 
through the last day of Program Year 2 (December 31, 2004), each 
insurer must make available, in all of its property and casualty 
insurance policies, coverage for insured losses under the Act. In this 
regard, the Act requires that such insurance coverage must not differ 
materially from the terms, amounts and other coverage limitations 
applicable to losses arising from events other than acts of terrorism. 
In addition, the Act requires the Secretary of the Treasury (Treasury) 
to determine, no later than September 1, 2004, whether to extend these 
statutory make available requirements through Program Year 3 (December 
31, 2005). To obtain additional information to assist Treasury in its 
determination, the Treasury solicits public comment on the questions 
listed below.

DATES: Comments must be in writing and received by June 4, 2004.

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 Make 
Available Determination.''

FOR FURTHER INFORMATION CONTACT: Mario Ugoletti, Acting Director, 
Office of Financial Institutions Policy, 202-622-0715; Roy Woodall, 
Senior Insurance Analyst, Office of Financial Institutions Policy, 202-
622-5171; U.S. Treasury Department (not toll-free numbers).

SUPPLEMENTARY INFORMATION: On November 26, 2002, President Bush signed 
into law the Terrorism Risk Insurance Act of 2002 (the Act). The Act 
was effective immediately. Title I of the Act established a temporary 
federal program of shared public and private compensation for insured 
commercial property and casualty insured losses resulting from an act 
of terrorism as defined by the Act. The Act authorized Treasury to 
administer and implement the three year Terrorism Risk Insurance 
Program which ends on December 31, 2005.
    Section 103(c)(1) of the Act requires each entity that meets the 
definition of an insurer under the Act to (A) make available, in all of 
its property and casualty insurance polices coverage for insured 
losses; and (B) make available property and casualty insurance coverage 
for insured losses that does not differ materially from the terms, 
amounts, and other coverage limitations applicable to losses arising 
from events other than acts of terrorism. These requirements apply from 
the date of enactment (November 26, 2002) through the last day of 
Program Year 2 (December 31, 2004).\1\
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    \1\ Following enactment of the Act, Treasury promptly issued 
interim guidance on the make available requirement and other 
provisions of the Act. See for example, 67 FR 76206 (December 11, 
2002). This interim guidance was superceded by Treasury's interim 
final rules and notice and comment rulemaking. Treasury's final 
regulations implementing the make available requirements of section 
103(c)(1) are located at 31 CFR 50.20-24. See also 68 FR 59720 
(October 17, 2003).
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    In addition, section 103(c)(2) of the Act requires Treasury to 
determine, no later than September 1, 2004, whether to extend the 
``make available'' requirements of section 103(c)(1) through Program 
Year 3 (December 31, 2005). (Regardless of whether the make available 
requirements are extended by Treasury through Program Year 3, we note 
that the overall Program and the Act's federal backstop for insured 
losses for acts of terrorism continue though December 31, 2005.) The 
Treasury determination on whether to extend the make available 
requirements through Program Year 3 is to be based on the factors 
referred to in section 108(d)(1) of the Act. The factors referred to in 
section 108(d)(1) are:
     The ``effectiveness of the Program;''
     The ``likely capacity of the property and casualty 
insurance industry to offer insurance for terrorism risk after 
termination of the Program'' and
     The ``availability and affordability of such insurance for 
various policyholders, including railroads, trucking, and public 
transit.''
    Pursuant to the Act, Treasury is now considering whether to extend 
the make available requirements in section 103(c)(1)(A) and (B) to 
Program Year 3. As noted above, section 103(c)(2) provides that 
Treasury base this determination ``on the factors referred to in 
section 108(d)(1)''. Section 108(d) of the Act requires Treasury to 
conduct a study and prepare a report to Congress by June 30, 2005 
relating to the termination of the Program; the factors described in 
section 108(d)(1) (and cross-referenced by section 103 of the Act) are 
keyed directly to the overall effectiveness of the Program and how the 
insurance industry might respond after the termination of the Program. 
To better enable Treasury to evaluate the overall effectiveness of the 
Act as required by section 108(d), Treasury is in the process of 
conducting a series of nationally representative surveys of insurers 
and policyholders.
    The section 103(c) determination of whether to extend the make 
available requirements, and its timing, differ from the purpose and 
timing of the study and report required by section 108(d), but the Act 
requires Treasury to base the make available determination on the 
factors referenced in section 108(d)(1).
    Treasury's data collection from the surveys we are conducting as 
part of our overall evaluation of the Program for purposes of the study 
under section 108(d) will only be partially complete by the time a 
decision on extending the make available requirement must be made. In 
addition, the make available requirement of section 103(c) comprises 
only one component of the overall Program. Thus, as Treasury considers 
whether to extend the make available requirement into Program Year 3, 
we are particularly interested in any specific way, or ways, in which 
the make available requirement has worked or affected the overall 
operation of the Program and whether this ties into the factors 
described in section 108(d)(1).
    To facilitate a determination by Treasury within the required time 
frame on whether to extend the make available requirement into Program 
Year 3, Treasury solicits general comments from the public as well as 
specific responses to the following questions, including submission of 
any relevant empirical data in support of such comments where 
appropriate and available.

I. Effectiveness of the Make Available Requirement in the Context of 
the Overall Program

    1.1 Has the make available requirement contributed to the overall 
effectiveness of the Program over the first two years of the Program? 
In

[[Page 25169]]

particular, has the make available requirement been effective in making 
terrorism insurance coverage available and more affordable to the 
insurance marketplace in general, to large corporate policyholders, and 
to small business policyholders? (We specifically seek information on 
terrorism coverage for railroads, trucking and public transit in 
response to this question.)
    1.2 How would the effectiveness of the Program be affected during 
Program Year 3 (where the federal backstop for terrorism insurance is 
still maintained under the Act) if the make available requirement is 
not extended? Would policyholders still be able to obtain terrorism 
risk insurance (under what terms and conditions) and would the 
affordability be impacted if the requirement is not extended? Compare 
your response to the preceding questions to what you believe would be 
the effectiveness of the Program if the make available requirement is 
extended into 2005.
    1.3 Has Treasury's implementation of the make available requirement 
contributed to the effectiveness of the Program? In particular, has the 
make available requirement resulted in businesses being provided with 
useful information and the enhanced ability to compare prices for 
terrorism risk insurance across a number of providers? Given the 
experience with the make available requirement since enactment and 
policyholders' decisions on whether to purchase coverage provided by 
the Act, are there other approaches to implementing the make available 
requirement that are worth considering?
    1.4 How would a decision on extending or not extending the make 
available requirement affect policyholders' understanding of their 
options regarding the availability of terrorism risk insurance coverage 
in Program Year 3 (e.g., that the federal backstop for terrorism risk 
insurance is still in force)? Would one course of action be better 
understood by policyholders than other options?

II. The Relationship Between the Make Available Requirement and the 
Likely Capacity of Property and Casualty Insurers To Offer Coverage for 
Terrorism Risk After Termination of the Program

    2.1 What is the relationship between the make available requirement 
and an insurer's capacity to offer terrorism risk insurance coverage? 
How has the make available requirement affected or interacted with the 
available capacity of property and casualty insurers to provide 
terrorism risk insurance coverage during the course of the Program to 
date? Has the make available requirement led to any build-up in 
capacity?
    2.2. How would a Treasury decision to extend or not to extend the 
make available requirement affect or interact with the capacity of 
property and casualty insurers (including the availability of 
reinsurance) in terms of offering terrorism risk insurance coverage in 
Program Year 3? In addition, would there be any effect on insurers' 
decision to offer terrorism risk insurance coverage beyond 2005 that 
could be associated with a decision to extend or not to extend the make 
available requirement during Program Year 3?

III. Operational Issues

    3.1 What would be the regulatory impact at the state level (e.g. on 
filings with the state regulator of policy forms or exclusions) if the 
make available requirement were extended through Program Year 3 (2005)? 
Similarly, what would be the regulatory impact at the state level if 
the make available requirement were not extended through Program Year 
3?
    3.2 Are there other operational issues that Treasury should 
consider as part of determining whether or not to extend the make 
available requirement through Program Year 3?

    Dated: April 28, 2004.
Wayne A. Abernathy,
Assistant Secretary for Financial Institutions.
[FR Doc. 04-10151 Filed 5-4-04; 8:45 am]
BILLING CODE 4811-15-P