[Federal Register Volume 85, Number 218 (Tuesday, November 10, 2020)]
[Proposed Rules]
[Pages 71588-71593]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24522]


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DEPARTMENT OF THE TREASURY

31 CFR Part 50


Terrorism Risk Insurance Program; Updated Regulations in Light of 
the Terrorism Risk Insurance Program Reauthorization Act of 2019, and 
for Other Purposes

AGENCY: Departmental Offices, Department of the Treasury.

ACTION: Notice of proposed rulemaking and request for comments.

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SUMMARY: The Department of the Treasury (Treasury) is issuing proposed 
rules to implement technical changes to the Terrorism Risk Insurance 
Program (TRIP or Program) required by the Terrorism Risk Insurance 
Program Reauthorization Act of 2019 (2019 Reauthorization Act), and to 
update links to the Program's website, where additional information 
relating to the administration of the Program is located for public 
reference. In addition, Treasury is proposing rules to: Clarify the 
manner in which Treasury will calculate ``property and casualty 
insurance losses'' for purposes of considering certification of an act 
of terrorism, and ``insured losses'' when administering the financial 
sharing mechanisms under the Program, including the Program Trigger and 
Program Cap; and incorporate into the Program rules prior guidance 
provided by Treasury in connection with stand-alone cyber insurance 
under the Program. Treasury also seeks further public comment 
concerning the certification process under the Program, and the 
participation of captive insurers in the Program, to facilitate further 
analysis and study by the Federal Insurance Office (FIO) of the Program 
and potential future rulemakings in these areas.

DATES: Comments must be in writing and received by January 11, 2021. 
Early submissions are encouraged.

ADDRESSES: Please submit comments electronically through the Federal 
eRulemaking Portal: http://www.regulations.gov, or by mail (if hard 
copy, preferably an original and two copies) to the Federal Insurance 
Office, Attention: Richard Ifft, Room 1410 MT, Department of the 
Treasury, 1500 Pennsylvania Avenue NW, Washington, DC 20220. Because 
postal mail may be subject to processing delay, it is recommended that 
comments be submitted electronically. All comments should be captioned 
with ``2019 TRIA Reauthorization Proposed Rules Comments.'' Please 
include your name, organizational affiliation, address, email address 
and telephone number in your comment. Where appropriate, a comment 
should include a short Executive Summary (no more than five single-
spaced pages).
    In general, comments received will be posted on http://www.regulations.gov without change, including any business or personal 
information provided. Comments received, including attachments and 
other supporting materials, will be part of the public record and 
subject to public disclosure. Do not enclose any information in your 
comment or supporting materials that you consider confidential or 
inappropriate for public disclosure.

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

SUPPLEMENTARY INFORMATION:

I. Background

    The Terrorism Risk Insurance Act (TRIA) \1\ was enacted following 
the attacks on 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 help private markets stabilize and build 
insurance capacity to absorb any future losses for terrorism events. 
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. Under TRIA, the Secretary 
of the Treasury administers the Program, with the assistance of FIO.
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    \1\ 15 U.S.C. 6701 note.
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    The Program was originally scheduled to terminate on December 31, 
2005, but it was extended several times between 2005 and 2015.\2\ Most 
recently, on December 20, 2019, President Trump signed into law the 
2019 Reauthorization Act.\3\ Section 502 of that Act extends the 
Program's termination date to December 31, 2027. The risk-sharing 
mechanisms for calendar year 2020 remain constant for the entire 
reauthorization period, and are not modified by the 2019 
Reauthorization Act.\4\
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    \2\ 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.
    \3\ Public Law 116-94, 133 Stat. 2534, Title V.
    \4\ TRIA, sec. 103(e)(1)(B)(vi).
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    Treasury is issuing this notice of proposed rulemaking to align 
certain dates in the Program regulations with the 2019 Reauthorization 
Act. Treasury is also taking this opportunity to update links to the 
Program website in the regulations.
    Treasury is also proposing several changes in response to a recent 
report by the Government Accountability Office (GAO) addressing certain 
sources of risk and uncertainty related to the Program.\5\ In the 
report, GAO indicated that, based upon its engagement with stakeholders 
during the preparation of the report, some uncertainty may exist about 
how Treasury would factor in policyholder retention amounts in 
calculating ``property and casualty insurance losses'' versus ``insured 
losses'' to determine the Program certification threshold, Program 
Trigger, and Program Cap.\6\ GAO recommended that Treasury provide 
further clarification to ``prevent uncertainty in the insurance market 
and potential litigation following a terrorist event that could delay 
insurance payments and economic recovery.'' \7\ Treasury agrees that 
the reduction of uncertainty is an important goal. Accordingly, 
Treasury proposes certain rule changes designed to clarify how Treasury 
will apply these defined terms to effectuate the intent and goals of 
the Program.
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    \5\ GAO, Terrorism Risk Insurance: Program Changes Have Reduced 
Federal Fiscal Exposure (GAO-20-348) (April 2020), https://www.gao.gov/assets/710/706243.pdf.
    \6\ Id. at 18-19.
    \7\ Id. at 19.
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    Treasury is also proposing certain changes based on previous 
Treasury guidance regarding cyber coverage. In December 2016, Treasury 
issued interim guidance confirming that certain stand-alone cyber 
coverage written in a TRIP-eligible line of insurance was within the 
scope of the Program, such that insurers were obligated to adhere to 
the ``make available'' and disclosure requirements under TRIA for such 
coverage.\8\

[[Page 71589]]

Treasury is proposing certain definitional changes to incorporate the 
cyber coverage guidance in the Program regulations.
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    \8\ Guidance Concerning Stand-Alone Cyber Liability Insurance 
Policies Under the Terrorism Risk Insurance Program, 81 FR 95312 
(Dec. 27, 2016) (Cyber Guidance), https://www.federalregister.gov/documents/2016/12/27/2016-31244/guidance-concerning-stand-alone-cyber-liability-insurance-policies-under-the-terrorism-risk.
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    While Treasury seeks comments from interested parties and the 
public on all aspects of the proposed rules, it particularly seeks 
comments on issues related to the certification process and the 
participation of captive insurers in the Program. Comments received 
will inform additional analyses concerning the Program and potential 
future rulemakings. Treasury has determined to further review these 
topics partly in response to a May 2020 report \9\ issued by the 
Advisory Committee on Risk-Sharing Mechanisms (ACRSM), which was 
established under the 2015 Reauthorization Act to provide advice, 
recommendations, and encouragement to Treasury for the creation and 
development of non-governmental, private market risk-sharing mechanisms 
to protect against losses arising from acts of terrorism.\10\ The ACRSM 
Report identifies a number of Program areas for further action and 
study by Treasury, including Treasury's existing rules governing the 
certification process as well as the participation within TRIP of 
captive insurers and other alternative carrier mechanisms.\11\
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    \9\ Advisory Committee on Risk-Sharing Mechanisms, Initial 
Report of the Committee (May 11, 2020) (ACRSM Report), https://home.treasury.gov/system/files/311/5-20-ACRSM-Report-Final.pdf.
    \10\ Terrorism Risk Insurance Program Reauthorization Act of 
2015, Public Law 114-1, 129 Stat. 3, Sec.  110.
    \11\ In addition, GAO issued a separate report in April 2020 in 
which it recommended that Treasury consider further changes to the 
rules governing the certification process. See GAO, Terrorism Risk 
Insurance: Market is Stable but Treasury Could Strengthen 
Communications about Its Processes (GAO-20-364) (April 2020), 
https://www.gao.gov/assets/710/706252.pdf.
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    The changes are explained below in the context of the proposed 
rules.

II. Program Regulations

    Rules establishing general provisions implementing the Program, 
including key definitions, and requirements for policy disclosures and 
mandatory availability, can be found in Subparts A, B, and C of 31 CFR 
part 50. Treasury's rules applying provisions of the Act to state 
residual market insurance entities and state workers' compensation 
funds are located at Subpart D of 31 CFR part 50. Rules addressing 
Treasury's data collection authorities are found at Subpart F of 31 CFR 
part 50. Subpart G of 31 CFR part 50 contains the Program's 
certification regulations. Rules setting forth procedures for filing 
claims for payment of the Federal share of compensation for insured 
losses are found at Subpart H of 31 CFR part 50. Subpart I of 31 CFR 
part 50 contains rules on audit and recordkeeping requirements for 
insurers, while Subpart J of 31 CFR part 50 addresses recoupment and 
surcharge procedures. Finally, Subpart K of 31 CFR part 50 contains 
rules implementing the litigation management provisions of TRIA, and 
Subpart L of 31 CFR part 50 addresses rules concerning the cap on 
annual liability under TRIA.\12\
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    \12\ To assist insurers, policyholders, and other interested 
parties in complying with immediately applicable requirements of 
TRIA, Treasury has also issued interim guidance to be relied upon by 
insurers until superseded by regulations.
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III. The Proposed Rules

    This proposed rulemaking would revise 31 CFR part 50 to incorporate 
new dates pursuant to the 2019 Reauthorization Act. The proposed rules 
also provide an updated link to the Program's website. Finally, the 
proposed rules identify certain changes designed to clarify how 
Treasury will apply certain defined terms to effectuate the intent and 
goals of the Program and incorporate Treasury's prior guidance 
concerning stand-alone cyber coverage.

B. Description of the Proposed Rules

    The changes to the existing rules at 31 CFR part 50 as provided for 
in these proposed rules, on a section-by-section basis, are as follows:
Subpart A--General Provisions
Section 50.1--Authority, purpose, and scope.
    The proposed change adds the 2019 Reauthorization Act to the 
statutory authority for the Program.
Section 50.4--Definitions
    The proposed change to Section 50.4(b)(2)(ii) adds a sentence to 
the end of the subsection to clarify that, for purposes of calculating 
the threshold that must be reached before the Secretary may certify an 
act of terrorism, ``property and casualty insurance losses'' include 
amounts that are ultimately payable by the policyholder, as long as 
they arise under an insurance policy subject to the Program. ``Property 
and casualty insurance losses'' is thus broader than insured loss, as 
it is not limited to amounts ``covered'' under the policy. It includes 
all losses arising from claims associated with TRIP-eligible lines 
policies, whether or not the policyholder obtained terrorism risk 
coverage under that policy, or if the losses in question ultimately 
will be paid by the policyholder.
    The $5 million certification threshold in TRIA is based upon 
``property and casualty insurance losses,'' a term that is not defined 
under the statute. By contrast, TRIA defines the term insured loss, 
which governs the calculation of the Program Trigger and the Program 
Cap, as ``any loss resulting from an act of terrorism . . . that is 
covered by primary or excess property and casualty insurance issued by 
an insurer[.]'' \13\ The term property and casualty insurance is also 
defined under TRIA, and refers to all insurance subject to the 
Program.\14\ Treasury also commonly refers to property and casualty 
insurance as the ``TRIP-eligible lines of insurance.''
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    \13\ TRIA, sec. 102(5).
    \14\ TRIA, sec. 102(11).
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    In practice, the certification analysis needed to accurately assess 
the size of an event involves calculating all losses associated with 
property and casualty insurance policies, regardless of whether the 
policyholder obtained terrorism risk coverage within the policy. The 
calculated amount would also include, for example, policy deductibles 
or fronting arrangements, even though the financial loss associated 
with these components will ultimately fall on the policyholder.\15\ 
Accordingly, Treasury proposes to add language to Section 
50.4(b)(2)(ii) to clarify that, for purposes of the certification 
analysis, ``property and casualty insurance losses'' include any losses 
associated with a property and casualty insurance policy, even if those 
losses are ultimately payable by the policyholder.
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    \15\ Treasury also addressed the potential parameters of the 
``property and casualty insurance losses'' language in its 2015 
report, The Process for Certifying an ``Act of Terrorism'' Under the 
Terrorism Risk Insurance Act of 2002 (Certification Report), at 6 
(https://www.treasury.gov/resource-center/fin-mkts/Documents/TRIP_Certification_Report.pdf).
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    The proposed change to the definition of insured loss in Section 
50.4(n) would add subsection (3)(iv) to clarify that insured loss does 
not include amounts that are paid by the policyholder under property 
and casualty insurance policies.
    An insured loss under TRIA governs payments under the Program, 
including application of the Program Trigger and Program Cap. As noted 
above, it is defined as ``any loss resulting from an act of terrorism . 
. . that is covered by primary or excess property and casualty 
insurance issued by an insurer[.]'' \16\ Insured losses ``covered'' 
means insured losses paid by insurers under insurance

[[Page 71590]]

policies within the scope of the Program. This reading is consistent 
with TRIA's intent, which is to provide a backstop for the losses of 
insurance companies. There is no mechanism under TRIA for policyholders 
to recover ``insured losses'' from Treasury.\17\ If the insured loss of 
an insurer included the obligations of its policyholders, it could 
permit an insurer to achieve a double recovery of its losses.\18\
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    \16\ TRIA, sec. 102(5).
    \17\ See, e.g., TRIA, sec. 103(e)(1)(A) (``The Federal share of 
compensation under the Program to be paid by the Secretary for 
insured losses of an insurer '') (Emphasis added.).
    \18\ Id., sec. 103(e)(1)(C) (prohibiting duplicative 
compensation where the Federal Government has through another 
program already provided compensation for the insured losses in 
question).
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    Although the insured loss definition under TRIA does not expressly 
exclude a deductible under a policy for which the policyholder will be 
responsible, such a deductible would not be ``covered'' by the insurer 
unless the policyholder failed to pay it.\19\ TRIA bases the Federal 
share payment upon ``all payments made for insured losses'' by the 
insurer.\20\ Therefore, for purposes of the Program Trigger and Program 
Cap, TRIA contemplates an insured loss definition that is limited to 
the actual losses sustained by the participating insurers. Accordingly, 
Treasury proposes to add a new subsection (3)(iv) to Section 50.4(n) to 
clarify that insured loss does not include amounts paid by 
policyholders as part of their retained obligations under TRIP-eligible 
lines policies subject to the Program.
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    \19\ Insurance practices may make the insurer responsible for 
payment of a policy deductible to a third party, with the 
policyholder subject to the insurer's claim for reimbursement of the 
deductible amount. By contrast, the policyholder must satisfy a 
self-insured retention obligation before any obligation on the part 
of the insurer is triggered under the policy. Thus, this issue would 
be limited to policyholder deductibles and not self-insured 
retentions, which could not be considered ``property and casualty 
insurance issued by an insurer.'' If an insurer paid a deductible 
that was not reimbursed by the policyholder (because of financial 
responsibility issues), Treasury could view such a payment as being 
within the definition of ``insured loss'' under ``property and 
casualty insurance issued by an insurer.''
    \20\ TRIA, sec. 103(b)(5)(B)(ii).
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    The proposed change to Section 50.4(w) would incorporate into the 
Program rules the guidance provided by Treasury in December 2016. That 
guidance stated that stand-alone cyber liability insurance is subject 
to the Program, unless it is otherwise identified for state reporting 
purposes as a type of insurance that is not property and casualty 
insurance under the Program. In the guidance, Treasury also noted the 
uncertainty presented in some circumstances as to whether cyber 
liability insurance is within the scope of the Program, since it is 
often written as professional liability insurance, which is a type of 
insurance expressly excluded from TRIP.\21\ Treasury observed, however, 
that the National Association of Insurance Commissioners (NAIC) had 
recently identified, for state purposes, an insurance product called 
``Cyber Liability'' within the general scope of the Other Liability 
line of insurance, which is generally subject to the Program.\22\
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    \21\ TRIA, sec. 102(11); see Cyber Guidance, 81 FR 95312-13.
    \22\ Cyber Guidance, 81 FR 95313; see NAIC, Uniform Property & 
Casualty Product Coding Matrix (effective Jan. 1, 2020), 10, https://www.naic.org/documents/industry_pcm_p_c_2020.pdf.
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    Given that this is a type of insurance \23\ within a line of 
insurance subject to the Program, and is not otherwise excluded in any 
fashion, Treasury confirmed in its guidance that such stand-alone cyber 
liability insurance is subject to the Program, and instructed 
participating insurers (to the extent they were not doing so already) 
to conform to the ``make available'' and disclosure requirements of 
TRIA with respect to such policies. Since the TRIA compliance periods 
identified in the guidance have now passed, there is no need to further 
modify the Program Rules to address the timing of when TRIA 
requirements for such insurance must be met.
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    \23\ In one place in the Cyber Guidance, stand-alone cyber 
liability insurance was identified as, for reporting purposes, a 
sub-line of insurance within Other Liability, which is not the case, 
and the proposed rule does not incorporate such language.
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Section 50.6--Special Rules for Interim Guidance Safe Harbors
    The proposed change to Section 50.6(b) updates the reference to the 
Program's website to the current address and deletes specific reference 
to now-obsolete prior Interim Guidance.
Subpart B--Disclosures as Conditions for Federal Payment
Section 50.16--Use of Model Forms
    The proposed change to Section 50.16 updates the reference to the 
Program's website to the current address.
Subpart C--Mandatory Availability
Section 50.20--General Mandatory Availability Requirements
    The proposed change provides that participating insurers must now 
comply with the ``make available'' requirement through December 31, 
2027, as distinguished from December 31, 2020, given the Program 
extension provided for under the 2019 Reauthorization Act.
Subpart D--State Residual Market Insurance Entities; Workers' 
Compensation Funds
Section 50.30--General Participation Requirements
    The proposed change to Section 50.30 updates the reference to the 
Program's website to the current address.
Subpart E--Self-Insurance Arrangements; Captives [Reserved]
    Treasury continues to reserve Subpart E for future additional rules 
addressing the participation of self-insurance arrangements and captive 
insurers in TRIP. Treasury poses a number of questions below concerning 
the participation of captive insurers in the Program, as to which it 
seeks comments from the public.
Subpart F--Data Collection
    There are no proposed changes to Subpart F.
Subpart G--Certification
    There are no proposed changes to Subpart G. Treasury poses a number 
of questions below concerning Treasury's certification process under 
its existing rules, as to which it seeks comments from the public.
Subpart H--Claims Procedures
Section 50.74--Payment of Federal Share of Compensation
    The proposed change to Section 50.74 updates the reference to the 
Program's website to the current address.
Subpart I--Audit and Investigative Procedures
Section 50.83--Adjustment of Civil Monetary Penalty Amount
    The proposed change to Section 50.83 updates the reference to the 
Program's website to the current address.
Subpart J--Recoupment and Surcharge Procedures
Section 50.90--Mandatory and Discretionary Recoupment
    The proposed change to Section 50.90 identifies the new dates by 
which Treasury must collect mandatory recoupment amounts under the 2019 
Reauthorization Act.
Subpart K--Federal Cause of Action; Approval of Settlements
Section 50.103--Procedure for Requesting Approval of Proposed 
Settlements
    The proposed change to Section 50.103 updates the reference to the 
Program's website to the current address.

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Subpart L--Cap on Annual Liability
    There are no proposed changes to Subpart L.

IV. Request for Comments Concerning Certification Process and Captive 
Insurers

    FIO periodically issues reports and proposes regulations to address 
and improve the efficiency and effectiveness of the administration of 
the Program.
    FIO has also received recommendations from the ACRSM on certain 
issues. In its May 2020 report, the ACRSM made a number of suggestions 
concerning the certification process under TRIA, including matters 
concerning the treatment of cyber incidents, a potential petitioning 
procedure for a certification process, and further adjustment of the 
existing timeframes in the Program rules associated with the 
certification process.\24\ Treasury invites the public to comment on 
the following issues:
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    \24\ ACRSM Report, 6, 27.
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Program's Treatment of Cyber Events Outside the United States

    TRIA is generally limited (subject to certain defined exceptions) 
to acts of terrorism that ``result[ ] in damage within the United 
States.'' 25 The ACRSM has asked that FIO evaluate whether 
``cyber incidents that occur outside the U.S. with damage outside the 
U.S., but with impacts both inside and outside the U.S.'' could be 
eligible for certification under the Program. We request comment on:
    (a) Whether cyber events outside the United States can inflict 
cyber-related losses within the United States that qualify as ``damage 
within the United States'' for purposes of TRIA;
    (b) To the extent such cyber events can be said to inflict losses 
that qualify as ``damage within the United States,'' whether such 
losses may also be subject to compensation under the terrorism risk 
insurance pools or arrangements of other jurisdictions; and
    (c) How Treasury could evaluate such losses representing ``damage 
within the United States'' from a certification standpoint, 
particularly if the causative cyber events in question take place 
outside the United States.

Certification Process

    The ACRSM recommended that Treasury establish a petitioning 
procedure under the Program rules that would permit third parties to 
request that Treasury commence a certification process under its rules. 
We request comment on:
    (a) How such a procedure could be established consistent with TRIA;
    (b) What types of parties should be permitted to make such a 
petition to Treasury; and
    (c) The information that a prospective petitioner should be 
required to submit to inform Treasury that the certification 
requirements of TRIA have been met, including but not limited to 
whether property and casualty insurance losses have met the $5 million 
certification threshold.
    The ACRSM also recommended that Treasury consider whether the 
existing time periods and notification requirements under the 
certification process should be modified. Treasury invites comment on 
this proposal, while noting that it has previously acknowledged the 
difficulty of using prescriptive time periods or requirements in 
connection with the certification process.26 We request 
comment on:
    (a) How different time periods or notification requirements under 
the certification process could affect the administration of the 
Program and the terrorism risk insurance market; and
    (b) How any modifications to the existing time periods or 
notification requirements would be consistent with the flexibility that 
Treasury has previously indicated it needs for certification under 
various circumstances.

Captive Insurers

    Prior Treasury studies concerning the effectiveness of the Program 
have noted, in connection with analysis of the results of modeled loss 
questions posed by Treasury, that captive insurers have been projected 
to receive benefits in connection with those hypothetical loss events 
that are proportionally larger than those received by other insurance 
industry segments.\27\ In addition, the ACRSM Report provides an 
example of how losses of a similar size could be reimbursed for such 
insurers as compared with conventional insurers that have a much larger 
direct earned premium base from which Program deductibles are 
calculated, and recommends that Treasury provide further transparency 
concerning the participation of captive insurers in the Program.\28\ We 
request comment on:
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    \27\ See Treasury, Report on the Effectiveness of the Terrorism 
Risk Insurance Program (June 2018), 47-53, https://home.treasury.gov/system/files/311/2018_TRIP_Effectiveness_Report.pdf; Treasury, Report on the 
Effectiveness of the Terrorism Risk Insurance Program (June 2020), 
49-55, https://home.treasury.gov/system/files/311/2020-TRIP-Effectiveness-Report.pdf. Based upon the information available to 
FIO, this is likely because although captive insurers may insure 
large exposures of their policyholders, they tend to have smaller 
deductibles under the Program because of the small amount of their 
overall TRIP-eligible lines premiums.
    \28\ ACRSM Report, 6, 19-20.
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    (1) With respect to captive insurers:
    (a) Whether, in light of the size and operation of captive insurers 
and the current structure of TRIP, captive insurers are likely to 
obtain larger payments under the Program in a large loss event as 
compared to traditional insurers that assume similar risk exposures;
    (b) Whether there are administrative rule changes that could be 
made to the Program rules and administration for captive insurers that 
would result in recovery percentages for captive insurers that may be 
more consistent with those indicated in modeled loss analyses for other 
industry segments;
    (c) Whether the Program should attribute some amount of captive 
parent revenues to captive insurers for TRIP deductible calculation 
purposes; and
    (d) Whether changes to the Program structure for captive insurers 
could prevent policyholders (who may be unable to obtain terrorism risk 
insurance in the conventional market for a reasonable price) from 
obtaining such insurance from captive insurers.
    (2) Whether FIO should make public financial information regarding 
participating captive insurers, taking into account whether this 
additional transparency would be beneficial to the terrorism risk 
insurance market and the administration of TRIP. We request comment on:
    (a) The information that should and should not be made available to 
the public;
    (b) The reasons for making (or not making) this type of information 
available to the public;
    (c) Whether the publication of information on an individual company 
basis is consistent with the provisions of TRIA stating that Treasury 
should only obtain information from participating insurers in an 
anonymized fashion, and otherwise providing for the confidentiality of 
the information submitted; \29\ and
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    \29\ TRIA, sec. 104(h)(3), (5).
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    (d) How making information publicly available concerning captive 
insurers could address, if at all, the issues presented by potentially 
disproportionate recoveries by captive insurers under TRIP, or 
otherwise assist FIO in the administration of the Program.
    (3) Any other issues regarding the participation of captive 
insurers in TRIP.

[[Page 71592]]

V. Procedural Requirements

    Executive Order 12866, ``Regulatory Planning and Review.'' This 
proposed 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, if 
promulgated, 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 proposed rule, if adopted, would not have a 
significant economic impact on a substantial number of small entities, 
because the changes it proposes are largely ministerial and are not 
expected to impact small entities more than the existing Program 
regulations.
    Paperwork Reduction Act. No collection of information is addressed 
in this proposed rule. Treasury continues to submit to OMB for review, 
under the requirements of the Paperwork Reduction Act, 44 U.S.C. 
3507(d), material changes to existing collection requirements.

List of Subjects in 31 CFR Part 50

    Insurance, Terrorism.

    For the reasons stated in the preamble, the Department of the 
Treasury proposes to amend 31 CFR part 50 as follows:

PART 50--TERRORISM RISK INSURANCE PROGRAM

0
1. The authority citation for part 50 is revised 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, Pub. L. 114-1, 129 Stat. 3, Pub. L. 
116-94, 133 Stat. 2534 (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.  50.1 by revising paragraph (a) as follows:


Sec.  50.1  Authority, purpose, and scope.

    (a) Authority. This part is issued pursuant to authority in Title I 
of the Terrorism Risk Insurance Act of 2002, Public Law 107-297, 116 
Stat. 2322, as amended by the Terrorism Risk Insurance Extension Act of 
2005, Public Law 109-144, 119 Stat. 2660, the Terrorism Risk Insurance 
Program Reauthorization Act of 2007, Public Law 110-160, 121 Stat. 
1839, the Terrorism Risk Insurance Program Reauthorization Act of 2015, 
Public Law 114-1, 129 Stat. 3, and the Terrorism Risk Insurance Program 
Reauthorization Act of 2019, Public Law 116-94, 133 Stat. 2534.
* * * * *
0
3. Amend Sec.  50.4 by revising paragraphs (b)(2)(ii), (n)(3), (w)(1) 
and (w)(2) as follows:


Sec.  50.4  Definitions.

* * * * *
    (b) * * *
    (2) * * *
    (ii) Property and casualty insurance losses resulting from the act, 
in the aggregate, do not exceed $5,000,000. For these purposes, 
property and casualty insurance losses include any amounts subject to 
payment under a property and casualty insurance policy, even if the 
policyholder declined to obtain terrorism risk insurance under the 
policy or is otherwise ultimately responsible for the payment.
* * * * *
    (n) * * *
    (3) * * *
    (iii) Payments by an insurer in excess of policy limits; or
    (iv) Amounts paid by a policyholder as required under the terms and 
conditions of property and casualty insurance issued by an insurer.
* * * * *
    (w) * * *
    (1) Means commercial lines within only the following lines of 
insurance from the NAIC's Exhibit of Premiums and Losses (commonly 
known as Statutory Page 14): Line 1--Fire; Line 2.1--Allied Lines; Line 
5.1--Commercial Multiple Peril (non-liability portion); Line 5.2--
Commercial Multiple Peril (liability portion); Line 8--Ocean Marine; 
Line 9--Inland Marine; Line 16--Workers' Compensation; Line 17--Other 
Liability; Line 18--Products Liability; Line 22--Aircraft (all perils); 
and Line 27--Boiler and Machinery; a stand-alone cyber liability policy 
falling within Line 17--Other Liability, is property and casualty 
insurance, so long as it is not otherwise identified for state 
reporting purposes as a policy that is not property and casualty 
insurance, such as professional liability insurance.
    (2) Property and casualty insurance does not include:
* * * * *
0
4. Amend Sec.  50.6 by revising paragraph (b) as follows:


Sec.  50.6  Special rules for Interim Guidance safe harbors.

* * * * *
    (b) For purposes of this section, any Interim Guidance will be 
posted by Treasury at https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-insurance-office/terrorism-risk-insurance-program.
0
5. Amend Sec.  50.16 by revising paragraph (c) as follows:


Sec.  50.16  Use of model forms.

* * * * *
    (c) Definitions. For purposes of this section, references to NAIC 
Model Disclosure Form No. 1 and NAIC Model Disclosure Form No. 2 refer 
to such forms as revised in March 2020, or as subsequently modified by 
the NAIC, provided that Treasury has stated that usage by insurers of 
any such subsequently modified forms is deemed to satisfy the 
disclosure requirements of the Act and that the insurer uses the most 
current forms, so approved by Treasury, that are available at the time 
of disclosure. These forms may be found on the Treasury website at 
https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-insurance-office/terrorism-risk-insurance-program.
0
6. Amend Sec.  50.20 by revising paragraphs (b) and (c) as follows:


Sec.  50.20  General mandatory availability requirements.

* * * * *
    (b) Compliance through 2027. Under section 108(a) of the Act, an 
insurer must comply with paragraphs (a)(1) and (2) of this section 
through calendar year 2027.
    (c) Beyond 2027. Notwithstanding paragraph (a)(2) of this section 
and Sec.  50.22(a), property and casualty insurance coverage for 
insured losses does not have to be made available beyond December 31, 
2027, even if the policy period of insurance coverage for losses from 
events other than acts of terrorism extends beyond that date.
0
7. Amend Sec.  50.30 by revising paragraph (c) as follows:


Sec.  50.30  General participation requirements.

* * * * *
    (c) Identification. Treasury maintains a list of state residual 
market insurance entities and state workers' compensation funds at 
https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-insurance-office/terrorism-risk-insurance-program. Procedures for providing comments and updates 
to that list are posted with the list.
0
8. Amend Sec.  50.74 by revising paragraph (b) as follows:


Sec.  50.74  Payment of Federal share of compensation.

* * * * *

[[Page 71593]]

    (b) Payment process. Payment of the Federal share of compensation 
for insured losses will be made to the insurer designated on the Notice 
of Deductible Erosion required by Sec.  50.72. An insurer that requests 
payment of the Federal share of compensation for insured losses must 
receive payment through electronic funds transfer. The insurer must 
establish either an account for reimbursement as described in paragraph 
(c) of this section (if the insurer only seeks reimbursement) or a 
segregated account as described in paragraph (d) of this section (if 
the insurer seeks advance payments or a combination of advance payments 
and reimbursement). Applicable procedures will be posted at https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-insurance-office/terrorism-risk-insurance-program or otherwise will be made publicly available.
* * * * *
0
9. Amend Sec.  50.83 by revising paragraph (b) as follows:


Sec.  50.83  Adjustment of civil monetary penalty amount.

* * * * *
    (b) Annual adjustment. The maximum penalty amount that may be 
assessed under this section will be adjusted in accordance with the 
Federal Civil Penalties Inflation Adjustment Act Improvements Act of 
2015, 28 U.S.C. 2461 note, by January 15 of each year and the updated 
amount will be posted in the Federal Register and on the Treasury 
website at https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-insurance-office/terrorism-risk-insurance-program.
0
10. Amend Sec.  50.90 by revising paragraph (c) as follows:


Sec.  50.90  Mandatory and discretionary recoupment.

* * * * *
    (c) If the Secretary imposes a Federal terrorism policy surcharge 
as provided in paragraph (a) of this section, then the required 
amounts, based upon the extent to which payments for the Federal share 
of compensation have been made by the collection deadlines in section 
103(e)(7)(E) of the Act, shall be collected in accordance with such 
deadlines:
    (1) For any act of terrorism that occurs on or before December 31, 
2022, the Secretary shall collect all required amounts by September 30, 
2024;
    (2) For any act of terrorism that occurs between January 1 and 
December 31, 2023, the Secretary shall collect 35 percent of any 
required amounts by September 30, 2024, and the remainder by September 
30, 2029; and
    (3) For any act of terrorism that occurs on or after January 1, 
2024, the Secretary shall collect all required amounts by September 30, 
2029.
0
11. Amend Sec.  50.103 by revising paragraph (a) as follows:


Sec.  50.103  Procedure for requesting approval of proposed 
settlements.

    (a) Submission of notice. Insurers must request advance approval of 
a proposed settlement by submitting a notice of the proposed settlement 
and other required information in writing to the Terrorism Risk 
Insurance Program Office or its designated representative. The address 
where notices are to be submitted will be available at https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-insurance-office/terrorism-risk-insurance-program following any certification of an act of 
terrorism pursuant to section 102(1) of the Act.
* * * * *

    Dated: October 30, 2020.
Jonathan Greenstein,
Deputy Assistant Secretary for Financial Institutions Policy.
[FR Doc. 2020-24522 Filed 11-9-20; 8:45 am]
BILLING CODE P