[Federal Register Volume 84, Number 249 (Monday, December 30, 2019)]
[Notices]
[Pages 72138-72139]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-28193]
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DEPARTMENT OF THE TREASURY
Fiscal Service
[FISCAL-2019-0002]
RIN 1530-AA20
Surety Companies Doing Business With the United States; Request
for Information
AGENCY: Bureau of the Fiscal Service, Treasury.
ACTION: Notice of request for information; request for comment.
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SUMMARY: The U.S. Department of the Treasury, Bureau of the Fiscal
Service (Fiscal Service) administers the corporate federal surety bond
program (``the program''), under which Fiscal Service processes and
evaluates applications from companies seeking to underwrite or reinsure
federal surety bonds. Fiscal Service is considering modernizing and
improving the program. To support this effort, Fiscal Service requests
information from stakeholders on these topics, including views
regarding the application process for certificates of authority, the
data that Fiscal Service should consider, and the analytical methods it
should use when evaluating an applicant's financial condition.
DATES: Submit written comments on or before February 13, 2020.
ADDRESSES: You may submit comments, identified by docket FISCAL-2019-
0002, using the following methods:
Federal eRulemaking Portal: (http://www.regulations.gov).
Follow the instructions on the website for submitting comments.
Email: [email protected]. Include docket
FISCAL-2019-0002 in the subject line of the message.
Mail: Surety Bond Branch, Bureau of the Fiscal Service,
3201 Pennsy Drive, Building E, Landover, MD 20785.
Instructions: All submissions received must refer to Fiscal Service
and docket number FISCAL-2019-0002. In general, comments received will
be published on www.regulations.gov without change, including any
business or personal information provided. Do not disclose any
information in your comment or supporting materials that you consider
confidential or inappropriate for public disclosure. Comments will not
be edited to remove any identifying or contact information.
FOR FURTHER INFORMATION CONTACT: Melvin Saunders, at (202) 874-5283 or
[email protected]; or Dwayne Boothe, at (304) 480-
5244 or [email protected].
SUPPLEMENTARY INFORMATION: Congress authorized the Secretary of the
Treasury (the Secretary) in 31 U.S.C. 9304-9305 to certify a surety
company to do business with the United States if the Secretary
determines that the company meets certain conditions and is able to
carry out its contracts. The Secretary has delegated authority to
Fiscal Service to administer the program.
Fiscal Service evaluates the financial condition of companies
applying to be certified as a surety or as a reinsurer of federal
surety bonds. Fiscal Service issues a ``certificate of authority'' to
approved companies. Under the program, Fiscal Service also evaluates
companies applying for recognition as admitted reinsurers for excess
risk that does not run to the United States. Fiscal Service has
published its requirements for companies applying to underwrite or
reinsure federal surety bonds and for companies applying to be
recognized as admitted reinsurers at 31 CFR part 223, and in annual
letters posted to its website at fiscal.treasury.gov/surety-bonds.
Fiscal Service publishes lists of companies receiving certificates of
authority to underwrite or reinsure federal surety bonds, and of those
companies recognized as admitted reinsurers, on its website annually.
Once a company is certified to underwrite or reinsure federal surety
bonds, it must submit quarterly financial reports to Fiscal Service
demonstrating that the company remains in good financial standing.
Fiscal Service is exploring ways to modernize and improve how it
evaluates the financial condition of companies seeking to underwrite
and reinsure federal surety bonds or to act as admitted reinsurers, as
well as its requirements for the application or renewal of certificates
of authority. A number of changes in the regulation of the insurance
industry that have an indirect effect on the program and companies
applying for certification (or to be recognized as an admitted
[[Page 72139]]
reinsurer) have taken place in the years since Fiscal Service last
significantly updated the program's regulatory requirements and its
financial analysis methodology. For instance, the passage of the
Nonadmitted and Reinsurance Reform Act of 2010 and the adoption by U.S.
states of the 2011 amendments to the National Association of Insurance
Commissioners' Credit for Reinsurance Model Law and Model Regulation
have impacted the form and extent of surety companies' reliance on
reinsurers not domiciled in the United States. In 2010, Congress
created the Federal Insurance Office (``FIO'') in the Department of the
Treasury to, among other things, monitor and report on the regulation
of the insurance industry. Additionally, pursuant to the authorities
set forth in the Federal Insurance Office Act of 2010, the Department
of the Treasury, led by the FIO, and the Office of the United States
Trade Representative have negotiated a covered agreement with the
European Union, providing for (among other things) the elimination of
collateral requirements, under specified conditions, for reinsurers
from EU member states assuming business from U.S. ceding insurers.
While these and other developments are not the sole impetus for Fiscal
Service's consideration of modernizing and improving program
requirements, the questions below should be viewed in light of these
changes that have occurred in the regulation of the insurance industry.
Throughout this process, Fiscal Service will consult and coordinate
with FIO.
You are invited to answer the following questions and provide
general comments on any other aspect of the program's regulations and
requirements. Please include in your comments how any recommended
actions would protect the financial interests of the United States and
otherwise improve the program.
Request for Comment: While Fiscal Service is particularly
interested in responses to the following questions, commenters may
supply other information pertaining to Fiscal Service's requirements
not explicitly referenced below.
1. Should Fiscal Service consider changing the approach or
methodology it uses to value the assets and liabilities of a company
applying to be certified as an insurer or reinsurer, or to be
recognized as an admitted reinsurer? In particular, please consider
commenting on the following items: (a) Admissible versus non-admissible
assets; (b) capital requirements; (c) underwriting limitation; and (d)
comparison to requirements imposed by relevant regulatory authorities.
2. What different methodologies, if any, should Fiscal Service
consider using when evaluating applications from companies that are
part of an insurance group's pooling agreement? Please provide your
views on whether Fiscal Service should analyze such applicants'
financial condition at the group level rather than, or in conjunction
with, analysis at the individual company level. Please address the
benefits and risks to the federal government of performing the
financial analysis at the group level.
3. Should Fiscal Service consider changing the approach or
methodology it uses to determine the credit allowed for reinsurance
and, if so, what changes should it consider? Please address both
reinsurance of federal surety bonds and of non-federal risks, and
provide the rationale for any proposed changes.
4. Should Fiscal Service consider changing any aspects of the
approach or methodology it uses to determine recognition of a company
as an admitted reinsurer? In your response, please address Fiscal
Service's treatment of both domestic and alien reinsurers, and discuss
the benefits and risks to the federal government of any proposed
changes.
5. Should Fiscal Service consider changing the permissible methods,
as described in the program's regulations and annual letters published
on its website, for limiting risk in excess of a surety company's
underwriting limitation? In your response, please address permissible
methods for limiting risk in excess of the underwriting limitation
relative to both federal surety bonds and to non-federal risks.
6. Should Fiscal Service consider changing the schedule and the
documentation required for issuing and renewing certificates of
authority and, if so, what changes should it consider? As an example,
but not a limitation on the scope of the foregoing question, should
Fiscal Service consider issuing certificates of authority that are
valid for more than one year based on a company's financial condition?
Please address the benefits and risks to the federal government of
implementing such proposed changes, including issuing certificates of
authority that are valid for more than one year.
7. Please recommend any other revisions to the program regulations
as addressed in 31 CFR part 223 or the annual letters published on
Fiscal Service's website that are consistent with protecting the
federal government, and provide the rationale for those revisions.
Timothy E. Gribben,
Commissioner, Bureau of the Fiscal Service.
[FR Doc. 2019-28193 Filed 12-27-19; 8:45 am]
BILLING CODE 4810-AS-P