Treasury Department Announces Additional Interim Guidance on Terrorism Insurance for Insurance Industry
|December 18, 2002|
The Treasury Department today announced additional interim guidance for the insurance industry in meeting certain requirements under the Terrorism Risk Insurance Act of 2002, which was signed into law by President Bush on November 26, 2002.
Today's interim guidance [pdf] is designed to assist insurers in determining whether they are covered by, and how they may comply with, certain immediately applicable provisions of the Terrorism Risk Insurance Act prior to the issuance of final regulations by the Treasury.
"We emphasize again that the terrorism risk insurance program is in force today, even as we refine the operational details," said Treasury Assistant Secretary Wayne Abernathy, who oversees the Terrorism Risk Insurance Program. "We hope that today's round of guidance will serve as an immediate, if temporary, roadmap for insurers as they continue to incorporate the new law's provisions into their business models. We will continue our close and productive working relationship with the National Association of Insurance Commissioners (NAIC) to develop and issue the most effective guidance possible."
Today's interim guidance, along with interim guidance issued by the Treasury on December 3, 2002, can be used by insurers in complying with the statutory requirements prior to the issuance of regulations, and remains in effect until superceded by regulations or subsequent notice. Both interim guidance notices and other information related to the Terrorism Risk Insurance Program can be found at www.treasury.gov/trip. Prior to issuance of final regulations, insurers and other interested parties will have an opportunity to submit comments on proposed regulations.
Today's notice provides interim guidance concerning the definition of insurer in general and also concerning specific categories of insurers under the Act. All entities that meet the definition of insurer under the Act are required to participate in the Program. This includes state-licensed or admitted insurers, eligible alien surplus line carriers, and insurers that are approved by federal agencies in connection with maritime, aviation, or energy activity.
This guidance builds upon the Treasury's previous interim guidance (that described the lines of commercial property and casualty insurance covered by the Program and how an insurer's "direct earned premium" would be measured).
In addition to providing further guidance concerning which entities are considered insurers under the Program, the notice provides guidance concerning the scope of insurance coverage, including geographic scope, under the Program, and how an insurer under the Program may calculate its deductible for purposes of the Program. For alien surplus line carriers and foreign insurers that are approved by a federal agency in connection with maritime, aviation or energy activity, this guidance describes procedures that should be followed so that this category of insurers is treated in a manner similar to domestic insurers and so that they may estimate the portion of their insurance coverage that covered by the Program.
To assist all categories of insurers under the Program, the guidance provides clarification regarding participation by affiliates and parent companies and how the Treasury intends to treat such entities for purposes of the Program. As described in this guidance, all affiliates that meet the definition of insurer and are under common control with an insurer should be considered as one insurer for purposes of the Program. The guidance also describes how newly-formed insurers (e.g. newly formed insurance companies that meet the definition of insurer but do not have the necessary data to calculate their deductibles) can calculate their deductibles.
This guidance also provides a list of state residual market entities and state workers' compensation funds that are required to participate in the Program. Although these entities are required to participate as insurers in the Program, some may be unable to determine their risk exposure at this time. The Treasury is waiving the disclosure and "make available" requirements for this limited group of entities and funds until regulations are issued for this group.
Finally, although the Treasury stated in its previous interim guidance that the NAIC's model disclosures were not the exclusive means by which insurers could comply with the Act, the Treasury has received numerous questions on that issue. Today's interim guidance provides additional disclosure guidance.
Source: Treasury Department