[Federal Register Volume 84, Number 221 (Friday, November 15, 2019)]
[Rules and Regulations]
[Pages 62450-62452]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24801]


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DEPARTMENT OF THE TREASURY

31 CFR Part 50

RIN 1505-AC62


IMARA Calculation Under the Terrorism Risk Insurance Program

AGENCY: Departmental Offices, Department of the Treasury.

ACTION: Final rule.

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SUMMARY: The Department of the Treasury (Treasury) is issuing this 
final rule to implement technical changes to program regulations that 
address the calculation and notification to the public of the Terrorism 
Risk Insurance Program's (Program) insurance marketplace aggregate 
retention amount (IMARA) under the Terrorism Risk Insurance Act (Act), 
as amended. The changes were published in proposed form for public 
comment on September 6, 2019.

DATES: This rule is effective December 16, 2019.

FOR FURTHER INFORMATION CONTACT: Richard Ifft, Senior Insurance 
Regulatory Policy Analyst, Federal Insurance Office, 202-622-2922 or 
Lindsey Baldwin, Senior Policy Analyst, Federal Insurance Office, 202-
622-3220.

SUPPLEMENTARY INFORMATION:

I. Background

    The Terrorism Risk Insurance Act of 2002 (as amended, the Act or 
TRIA) \1\ was enacted on November 26, 2002, following the attacks of 
September 11, 2001, to address disruptions in the

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market for terrorism risk insurance, to help ensure the continued 
availability and affordability of commercial property and casualty 
insurance for terrorism risk, and to allow for the private markets to 
stabilize and build insurance capacity to absorb any future losses for 
terrorism events.\2\ TRIA requires insurers to ``make available'' 
terrorism risk insurance for commercial property and casualty losses 
resulting from certified acts of terrorism (insured losses), and 
provides for shared public and private compensation for such insured 
losses. The Program has been reauthorized three times, most recently by 
the Terrorism Risk Insurance Program Reauthorization Act of 2015 (2015 
Reauthorization Act).\3\
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    \1\ Public Law 107-297, 116 Stat. 2322, codified at 15 U.S.C. 
6701 note. Because the provisions of TRIA (as amended) appear in a 
note instead of particular sections of the U.S. Code, the provisions 
of TRIA are identified by the sections of the law.
    \2\ TRIA, sec. 101(b).
    \3\ See Terrorism Risk Insurance Extension Act of 2005, Public 
Law 109-144, 119 Stat. 2660; Terrorism Risk Insurance Program 
Reauthorization Act of 2007, Public Law 110-160, 121 Stat. 1839; 
Terrorism Risk Insurance Program Reauthorization Act of 2015, Public 
Law 114-1, 129 Stat. 3.
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    The Secretary of the Treasury (Secretary) administers the Program. 
The Federal Insurance Office (FIO) assists the Secretary in 
administering the Program.\4\ To assist insurers, policyholders, and 
other interested parties in complying with the applicable requirements 
of the Act, Treasury has issued regulations implementing the Program. 
In some instances, Treasury has also issued interim guidance to be 
relied upon by insurers until superseded by any regulations.\5\ Most 
recently, Treasury issued regulations implementing the changes to the 
Program required under the 2015 Reauthorization Act.\6\
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    \4\ 31 U.S.C. 313(c)(1)(D).
    \5\ Treasury summarized the history of prior rulemakings in 
connection with the Program in a 2016 proposed rulemaking proposing 
rule changes to implement the 2015 Reauthorization Act. See 81 FR 
18950 (April 1, 2016) (2016 NPRM).
    \6\ See 81 FR 88592 (December 7, 2016) (Certification Interim 
Final Rule); 81 FR 93756 (December 21, 2016) (Program Final Rules 
Except Certification).
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    The Act established an industry marketplace aggregate retention 
amount (IMARA) as a threshold figure to determine whether any Treasury 
payments under the Program are subject to mandatory recoupment. Under 
the Act, if total annual payments by participating insurers are below 
the IMARA, Treasury must recoup all amounts expended by it up to the 
IMARA threshold (mandatory recoupment). If total annual payments by 
participating insurers are above the IMARA, Treasury has the discretion 
to recoup all expended amounts above the IMARA threshold (discretionary 
recoupment).\7\
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    \7\ See TRIA, sec. 103(e)(7); see also 31 CFR part 50 subpart J 
(Recoupment and Surcharge Procedures).
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    The 2015 Reauthorization Act provided for a schedule of defined 
IMARA values from calendar year 2015 through calendar year 2019. The 
2015 Reauthorization Act also provided that for calendar year 2020 and 
future years the IMARA ``shall be revised to be the amount equal to the 
annual average of the sum of insurer deductibles for all insurers 
participating in the Program for the prior 3 calendar years,'' as such 
sum is determined pursuant to a rule issued by the Secretary.\8\ The 
rule change adopted in this notice solely addresses the manner in which 
Treasury calculates the IMARA and the timing of public notification of 
the IMARA calculation.
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    \8\ TRIA, sec. 103(e)(6)(B)(ii) and (e)(6)(C). An insurer's 
deductible under the Program for any particular year is 20 percent 
of its direct earned premium subject to the Program during the 
preceding year. TRIA, sec. 102(7). For example, an insurer's 
calendar year 2019 Program deductible is 20 percent of its calendar 
year 2018 direct earned premium.
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II. The Proposed Rule

    The proposed rule on which this final rule is based was published 
in the Federal Register at 84 FR 46907 on September 6, 2019. The 
proposed rule would make a technical correction to 31 CFR 
50.4(m)(2)(i), originally implemented in 2016, to clarify that the 
IMARA calculation is based upon direct earned premium reported to 
Treasury by insurers in Treasury's annual data call ``in'' the three 
calendar years prior to the calendar year in question, instead of 
``for'' the three calendar years prior to the calendar year in 
question. For example, this would result in a proper calculation of the 
2020 IMARA by referring to the insurer deductibles for the previous 
three years (2019, 2018, and 2017), which are based on reported data 
for calendar years 2018, 2017, and 2016.\9\ In addition, the proposed 
rule accelerates the notification date of the IMARA calculation by 
Treasury, from no later than April 30 of the year in question to no 
later than December 31 of the prior calendar year. That acceleration 
will improve administrative efficiency and provide greater certainty to 
insurers and policyholders.
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    \9\ The Program rule amended by this final rule was originally 
proposed in the 2016 NPRM and finalized in the Program Final Rules 
Except Certification. As explained in the September 2019 notice of 
proposed rulemaking, although the preamble to the 2016 NPRM 
correctly explained the methodology for calculating the IMARA in 
2020 and beyond, as required by the 2015 Reauthorization Act, the 
language in the Program rule implemented by the Program Final Rules 
Except Certification is ambiguous as to how the IMARA should be 
calculated. Under Sec.  50.4(m)(2)(i) of the Program rules as 
implemented in 2016, the IMARA calculation is to be based on the 
``direct earned premium reported by insurers to Treasury . . . for 
the three calendar years prior to the calendar year in question'' 
(emphasis added.) This language could be interpreted to mean, for 
example, that the 2020 IMARA would be calculated using direct earned 
premiums in 2019, 2018, and 2017, rather than using the data 
reported in 2019, 2018, and 2017 for calendar years 2018, 2017, and 
2016, as intended. This unintended interpretation would be 
inconsistent with the methodology specified in the 2015 
Reauthorization Act and would result in an incorrect IMARA. See 
generally 84 FR 46907, 46907-08 (Sept. 6, 2019).
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III. Summary of Comments and Final Rule

    Treasury received one comment regarding the proposed changes 
concerning the IMARA calculation and the date of notification of the 
IMARA calculation to the public. This comment was in favor of both of 
the proposed changes.\10\ Accordingly, Treasury is issuing this final 
rule based upon the proposed rule without change.
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    \10\ See Comment from Underwriters at Lloyd's, London (Oct. 2, 
2019), available at https://www.regulations.gov/docket?D=TREAS-TRIP-2019-0014.
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IV. Procedural Requirements

    Executive Order 12866, ``Regulatory Planning and Review.'' This 
rule is not a significant regulatory action for purposes of Executive 
Order 12866, ``Regulatory Planning and Review,'' and thus has not been 
reviewed by the Office of Management and Budget (OMB).
    Regulatory Flexibility Act. Under the Regulatory Flexibility Act, 5 
U.S.C. 601 et seq., Treasury must consider whether this rule will have 
a ``significant economic impact on a substantial number of small 
entities.'' 5 U.S.C. 605(b). In this case, Treasury certifies that this 
rule will not have a significant economic impact on a substantial 
number of small entities. The rule provides for a technical change in 
the manner in which Treasury will calculate a figure relevant to 
operation of the Program and to better conform it to Congressional 
requirements. The only other rule change is to provide for earlier 
notice to insurers of the IMARA calculation than the existing rule. It 
has no effect on the collection of the data (including data collected 
from small entities) under the Program rules.
    Paperwork Reduction Act. The rule does not involve the collection 
of information and thus has not been submitted to OMB for review under 
the requirements of the Paperwork Reduction Act, 44 U.S.C. 3507(d). The

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rule only involves the calculation and public notification of the IMARA 
in connection with the Program based on data collected by Treasury 
under rules which have already been subject to OMB review and approval 
under Control No. 1505-0257.

List of Subjects in 31 CFR Part 50

    Insurance, Terrorism.

Authority and Issuance

    For the reasons stated in the preamble, 31 CFR part 50 is amended 
as follows:

PART 50--TERRORISM RISK INSURANCE PROGRAM

0
1. The authority citation for part 50 continues to read as follows:

    Authority: 5 U.S.C. 301; 31 U.S.C. 321; Title I, Pub. L. 107-
297, 116 Stat. 2322, as amended by Pub. L. 109-144, 119 Stat. 2660, 
Pub. L. 110-160, 121 Stat. 1839 and Pub. L. 114-1, 129 Stat. 3 (15 
U.S.C. 6701 note) Pub. L. 114-74, 129 Stat. 601, Title VII (28 
U.S.C. 2461 note).


0
2. Amend Sec.  50.4 by revising paragraphs (m)(2) introductory text, 
(m)(2)(i), and (m)(3) to read as follows:


Sec.  50.4  Definitions.

* * * * *
    (m) * * *
    (2) For calendar years beginning with 2020 and any calendar year 
thereafter as may be necessary, such amount is the lesser of the 
aggregate amount, for all insurers, of insured losses once there has 
been a Program Trigger Event during the calendar year and the annual 
average of the sum of insurer deductibles for all insurers for the 
prior 3 years, to be calculated by taking:
    (i) The total amount of direct earned premium reported by insurers 
to Treasury pursuant to Sec.  50.51 in the three calendar years prior 
to the calendar year in question, and then dividing that figure by 
three; and
* * * * *
    (3) For calendar year 2020 and each subsequent calendar year, 
Treasury shall publish in the Federal Register the insurance 
marketplace aggregate retention amount no later than December 31 of the 
prior calendar year.
* * * * *

    Dated: November 7, 2019.
Bimal Patel,
Assistant Secretary for Financial Institutions.
[FR Doc. 2019-24801 Filed 11-14-19; 8:45 am]
BILLING CODE 4810-25-P