[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]


-----------------------------------------------------------------------

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.

-----------------------------------------------------------------------

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