[Federal Register Volume 84, Number 243 (Wednesday, December 18, 2019)]
[Notices]
[Pages 69462-69464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27279]


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DEPARTMENT OF THE TREASURY

RIN 1505-AC62


IMARA Calculation for Calendar Year 2020 Under the Terrorism Risk 
Insurance Program

AGENCY: Departmental Offices, Department of the Treasury.

ACTION: Notice.

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SUMMARY: The Department of the Treasury (Treasury) is issuing this 
notice to advise the public of the calculation of the Terrorism Risk 
Insurance Program's (TRIP or Program) insurance marketplace aggregate 
retention amount (IMARA) under the Terrorism Risk Insurance Act, as 
amended, for purposes of calendar year

[[Page 69463]]

2020. The IMARA has been determined by Treasury to be $40,878,630,900.

DATES: The IMARA for purposes of calendar year 2020 is effective from 
January 1, 2020, until December 31, 2020.

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 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\ The Secretary of the Treasury (Secretary) administers the 
Program. The Federal Insurance Office (FIO) assists the Secretary in 
administering the Program.\4\
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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.
    \4\ 31 U.S.C. 313(c)(1)(D).
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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).\5\
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    \5\ 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.\6\ 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 final rules issued by the Secretary.\7\ 
These final rules, which were issued by Treasury in 2016 and revised in 
2019, added Program regulation 31 CFR 50.4(m).\8\
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    \6\ In 2015, the IMARA was $29.5 billion; it increased to $31.5 
billion in 2016, $33.5 billion in 2017, $35.5 billion in 2018, and 
$37.5 billion in 2019. See TRIA, sec. 103(e)(6)(B).
    \7\ 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.
    \8\ See 81 FR 93756 (December 21, 2016), which added 31 CFR 
50.4(m) and other Program regulations, and 84 FR 62450 (November 15, 
2019), which implemented technical changes to 31 CFR 50.4(m).
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    Under 31 CFR 50.4(m)(2), the IMARA for calendar year 2020 is 
calculated by reference to the average annual industry aggregate 
deductibles over the prior three calendar years for purposes of the 
Program, based upon the direct earned premium (DEP) reported to 
Treasury by insurers in Treasury's annual data calls. For purposes of 
2020, Treasury will make the calculation based upon aggregate insurer 
deductibles for the previous three calendar years (2019, 2018, and 
2017). Insurer deductibles under the Program are based upon the DEP of 
individual insurers in the year prior to the year in question. As a 
result, deductibles used in the 2020 IMARA are based on DEP for 
calendar years 2018, 2017, and 2016, as reported to Treasury in 2019, 
2018, and 2017.
    In the June 2019 Study of Small Insurer Competitiveness in the 
Terrorism Risk Insurance Marketplace (2019 Small Insurer Study),\9\ 
Treasury identified DEP in the TRIP-eligible lines of insurance 
reported to Treasury in its 2017, 2018, and 2019 data calls as follows:
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    \9\ https://www.treasury.gov/initiatives/fio/reports-and-notices/Documents/2019_TRIP_SmallInsurer_Report.pdf.

                                                  Figure 1--TRIP-Eligible DEP by Insurer Category \10\
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                                                        2017 TRIP data call                2018 TRIP data call                2019 TRIP data call
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                                                 2016 DEP in TRIP-                  2017 DEP in TRIP-                  2018 DEP in TRIP-
                                                   eligible lines     % of total      eligible lines     % of total      eligible lines     % of total
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Alien Surplus Lines Ins........................     $7,421,060,583               4     $9,492,933,571               5     $7,618,548,358               4
Captive Insurers...............................      7,930,646,027               4      9,052,630,571               4      8,937,119,082               4
Non-Small Insurers.............................    168,238,219,882              83    163,891,791,592              80    166,188,192,378              81
Small Insurers.................................     20,085,947,637              10     21,806,195,201              11     22,516,178,612              11
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    Total......................................    203,675,874,129             100    204,243,550,936             100    205,260,038,430             100
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Source: 2017-2019 TRIP Data Calls.

    The reported premiums in Figure 1 are the operative figures for 
purposes of calculating the IMARA for calendar year 2020 in accordance 
with 31 CFR 50.4(m)(2). The average annual DEP figure for the combined 
period of 2016, 2017, and 2018 is $204,393,154,498 ($203,675,874,129 + 
$204,243,550,936 + $205,260,038,430 = $613,179,463,495/3 = 
$204,393,154,498). The annual average of the sum of insurer deductibles 
for all insurers for the prior

[[Page 69464]]

three years is 20 percent of $204,393,154,498, or $40,878,630,900.\11\ 
Accordingly, the IMARA for purposes of calendar year 2020 is 
$40,878,630,900.
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    \10\ Some figures may not add to 100 percent due to rounding. 
See 2019 Small Insurer Study at 16.
    \11\ See note 7 above.

Steven E. Seitz,
Director, Federal Insurance Office.
[FR Doc. 2019-27279 Filed 12-17-19; 8:45 am]
BILLING CODE 4810-25-P