Terrorism Risk Insurance Program; Certification

SUMMARY: The Department of the Treasury (Treasury) is issuing this interim final rule as part of its implementation of changes to the Terrorism Risk Insurance Program (Program) required by the Terrorism Risk Insurance Program Reauthorization Act of 2015 (2015 Reauthorization Act). This interim final rule only addresses the process for certification of an act of terrorism, as published in proposed form on April 1, 2016, for public comment. Some clarifying changes have been made in this interim final rule in response to comments, and certain wording changes have also been made which are not intended to change the meaning of the rule as originally proposed.

The proposed rule includes a more general revision to and renumbering of the Program rules which will be issued in full at a later date. Accordingly, for now, the new subpart is renumbered to avoid duplication with the existing rule numbers. Upon issuance of the final rules for the Program, the final rules will reflect the numbering sequence in the notice of proposed rulemaking published on April 1, 2016.

EFFECTIVE DATE: Effective date: January 6, 2017. Written comments on this interim final rule must be received on or before January 6, 2017.

ADDRESSES: 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 "Terrorism Risk Insurance Program Certification Comments." Please include your name, group affiliation, address, email address and telephone number(s) 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 (not a toll free number) or Kevin Meehan, Senior Insurance Regulatory Policy Analyst, Federal Insurance Office, 202-622-7009 (not a toll free number).

SUPPLEMENTARY INFORMATION:

I. Background

The Terrorism Risk Insurance Act of 2002 (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. 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 Secretary of the Treasury (Secretary) administers the Program, including the issuance of regulations and procedures. Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Federal Insurance Office assists the Secretary in administering the Program. /2/

FOOTNOTE 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 United States Code, the provisions of TRIA are identified by the sections of the law. END FOOTNOTE

FOOTNOTE 2 31 U.S.C. 313(c)(1)(D). END FOOTNOTE

The Program has been reauthorized three times. /3/ Most recently, on January 12, 2015, the President signed into law the Terrorism Risk Insurance Program Reauthorization Act of 2015 (2015 Reauthorization Act), /4/ reauthorizing the Program until December 31, 2020. The 2015 Reauthorization Act changed various operational matters respecting the Program. Among other changes, the 2015 Reauthorization Act mandates that Treasury issue final rules governing the certification process, /5/ following the submission of a mandated report on improving the process. /6/

FOOTNOTE 3 Terrorism Risk Insurance Extension Act of 2005, Public Law 109-444, 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. END FOOTNOTE

FOOTNOTE 4 Public Law 114-1, 129 Stat. 3. END FOOTNOTE

FOOTNOTE 5 TRIA, section 102(1)(D). END FOOTNOTE

FOOTNOTE 6 2015 Reauthorization Act, section 107. See U.S. Department of the Treasury, The Process for Certifying an "Act of Terrorism" under the Terrorism Risk Insurance Act of 2002 (October 2015) (Certification Report), available at http://www.treasury.gov/initiatives/fio/reports-and-notices/Documents/2015%20Report%20on%20the%20Certification%20Process%20under%20the%20Terrorism%20-%20Production%20Version.pdf. END FOOTNOTE

II. Previous Rulemaking

To date, rules establishing general provisions implementing the Program, including key definitions, and requirements for policy disclosures and mandatory availability, are found in subparts A, B, and C of 31 CFR part 50. /7/ Treasury's rules applying provisions of the Act to state residual market insurance entities and state workers' compensation funds are set forth in subpart D of 31 CFR part 50. /8/ Rules concerning claims procedures governing payment of the Federal share of compensation for insured losses are currently found at subpart F of 31 CFR part 50. /9/ Subpart G of 31 CFR part 50 currently contains rules on audit and recordkeeping requirements for insurers, /10/ while subpart H of 31 CFR part 50 currently addresses recoupment and surcharge procedures. /11/ Finally, subpart I of 31 CFR part 50 currently contains rules implementing the litigation management provisions of TRIA, /12/ and subpart J of 31 CFR part 50 currently addresses rules concerning the cap on annual liability established under TRIA. /13/ To assist insurers, policyholders, and other interested parties in complying with immediately applicable requirements of the Act, Treasury has also at times issued interim guidance to be relied upon by insurers until superseded by regulations.

FOOTNOTE 7 See 68 FR 9804 (Feb. 28, 2003) (Program definitions (Interim Final Rule)); 68 FR 19302 (April 18, 2003) (disclosure and mandatory availability requirements (Interim Final Rule)); 68 FR 41250 (July 11, 2003) (Program definitions (Final Rule)); 68 FR 48280 (Aug. 13, 2003) ("direct earned premium" definition (Final Rule)). END FOOTNOTE

FOOTNOTE 8 See 68 FR 19309 (Apr. 18, 2003) (residual market entities and state compensation funds (Notice of Proposed Rulemaking)); 68 FR 59715 (Oct. 17, 2003) (residual market entities and state compensation funds (Final Rule)). END FOOTNOTE

FOOTNOTE 9 See 68 FR 67100 (Dec. 1, 2003) (claims procedures (Notice of Proposed Rulemaking)); 69 FR 39296 (June 29, 2004) (claims procedures (Final Rule)); 70 FR 2830 (Jan. 18, 2005 (timing of affiliation for purposes of claims payments (Notice of Proposed Rulemaking)); 70 FR 34348 (June 14, 2005) (timing of affiliation for purposes of claims payments (Final Rule)). END FOOTNOTE

FOOTNOTE 10 See 68 FR 67100 (Dec. 1, 2003) (audit and investigative procedures (Notice of Proposed Rulemaking)); 69 FR 39296 (audit and investigative procedures (Final Rule)). END FOOTNOTE

FOOTNOTE 11 See 73 FR 53798 (Sept. 17, 2008) (recoupment and surcharge procedures (Notice of Proposed Rulemaking)); 74 FR 66051 (Dec. 14, 2009) (recoupment and surcharge procedures (Final Rule)). END FOOTNOTE

FOOTNOTE 12 See 69 FR 25341 (May 6, 2004) (Federal cause of action and settlement approval provisions (Notice of Proposed Rulemaking)); 69 FR 44932 (July 28, 2004) (Federal cause of action and settlement approval provisions (Final Rule)). END FOOTNOTE

FOOTNOTE 13 See 73 FR 56767 (Sept. 30, 2008) (cap on annual liability (Notice of Proposed Rulemaking)); 74 FR 66061 (Dec. 14, 2009) (cap on annual liability (Final Rule)). END FOOTNOTE

No rules concerning the certification process have previously been proposed or issued by Treasury. /14/

FOOTNOTE 14 Although, and as noted below, Treasury has previously responded to comments provided in response to proposed rules concerning applicable definitional provisions for the Program that Treasury "establish a time frame within which the Secretary would be required to make a determination or certification that an `act of terrorism' had occurred. . . ." See 68 FR 41250, 41252 (July 11, 2003). END FOOTNOTE

III. The Proposed Rule

The proposed rule on which this interim final rule is based was published in the Federal Register at 81 FR 18950 on April 1, 2016. The proposed rule included Subpart G--Certification to 31 CFR part 50, which comprises regulations addressing the certification process, as required under the 2015 Reauthorization Act. Proposed subpart G, which is new, is part of a general proposal published on April 1, 2016 to strike existing 31 CFR part 50 in its entirety and to replace it with revised Program rules that incorporate new financial and operational provisions for the Program added in the 2015 Reauthorization Act. The proposal also reorders the existing rules to incorporate the new subparts, and makes other changes to further clarify existing rules and to eliminate redundancies.

--This is a summary of a Federal Register article originally published on the page number listed below--

Interim final rule with request for comment.

CFR Part: "31 CFR Part 50"

RIN Number: "RIN 1505-AC53"

Citation: "81 FR 88592"

Federal Register Page Number: "88592"

"Rules and Regulations"