Departmental Offices, Department of the Treasury.
The Department of the Treasury (Treasury) is issuing this final rule to implement technical changes to program regulations that address the calculation and notification to the public of the Terrorism Risk Insurance Program's (Program) insurance marketplace aggregate retention amount (IMARA) under the Terrorism Risk Insurance Act (Act), as amended. The changes were published in proposed form for public comment on September 6, 2019.
This rule is effective December 16, 2019.
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FOR FURTHER INFORMATION CONTACT:
Richard Ifft, Senior Insurance Regulatory Policy Analyst, Federal Insurance Office, 202-622-2922 or Lindsey Baldwin, Senior Policy Analyst, Federal Insurance Office, 202-622-3220.
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The Terrorism Risk Insurance Act of 2002 (as amended, the Act or TRIA) 
was enacted on November 26, 2002, following the attacks of September 11, 2001, to address disruptions in the Start Printed Page 62451market 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 Program has been reauthorized three times, most recently by the Terrorism Risk Insurance Program Reauthorization Act of 2015 (2015 Reauthorization Act).
The Secretary of the Treasury (Secretary) administers the Program. The Federal Insurance Office (FIO) assists the Secretary in administering the Program.
To assist insurers, policyholders, and other interested parties in complying with the applicable requirements of the Act, Treasury has issued regulations implementing the Program. In some instances, Treasury has also issued interim guidance to be relied upon by insurers until superseded by any regulations.
Most recently, Treasury issued regulations implementing the changes to the Program required under the 2015 Reauthorization Act.
The Act established an industry marketplace aggregate retention amount (IMARA) as a threshold figure to determine whether any Treasury payments under the Program are subject to mandatory recoupment. Under the Act, if total annual payments by participating insurers are below the IMARA, Treasury must recoup all amounts expended by it up to the IMARA threshold (mandatory recoupment). If total annual payments by participating insurers are above the IMARA, Treasury has the discretion to recoup all expended amounts above the IMARA threshold (discretionary recoupment).
The 2015 Reauthorization Act provided for a schedule of defined IMARA values from calendar year 2015 through calendar year 2019. The 2015 Reauthorization Act also provided that for calendar year 2020 and future years the IMARA “shall be revised to be the amount equal to the annual average of the sum of insurer deductibles for all insurers participating in the Program for the prior 3 calendar years,” as such sum is determined pursuant to a rule issued by the Secretary.
The rule change adopted in this notice solely addresses the manner in which Treasury calculates the IMARA and the timing of public notification of the IMARA calculation.
II. The Proposed Rule
The proposed rule on which this final rule is based was published in the Federal Register at 84 FR 46907 on September 6, 2019. The proposed rule would make a technical correction to 31 CFR 50.4(m)(2)(i), originally implemented in 2016, to clarify that the IMARA calculation is based upon direct earned premium reported to Treasury by insurers in Treasury's annual data call “in” the three calendar years prior to the calendar year in question, instead of “for” the three calendar years prior to the calendar year in question. For example, this would result in a proper calculation of the 2020 IMARA by referring to the insurer deductibles for the previous three years (2019, 2018, and 2017), which are based on reported data for calendar years 2018, 2017, and 2016.
In addition, the proposed rule accelerates the notification date of the IMARA calculation by Treasury, from no later than April 30 of the year in question to no later than December 31 of the prior calendar year. That acceleration will improve administrative efficiency and provide greater certainty to insurers and policyholders.
III. Summary of Comments and Final Rule
Treasury received one comment regarding the proposed changes concerning the IMARA calculation and the date of notification of the IMARA calculation to the public. This comment was in favor of both of the proposed changes.
Accordingly, Treasury is issuing this final rule based upon the proposed rule without change.
IV. Procedural Requirements
Executive Order 12866, “Regulatory Planning and Review.” This 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 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 rule will not have a significant economic impact on a substantial number of small entities. The rule provides for a technical change in the manner in which Treasury will calculate a figure relevant to operation of the Program and to better conform it to Congressional requirements. The only other rule change is to provide for earlier notice to insurers of the IMARA calculation than the existing rule. It has no effect on the collection of the data (including data collected from small entities) under the Program rules.
Paperwork Reduction Act. The rule does not involve the collection of information and thus has not been submitted to OMB for review under the requirements of the Paperwork Reduction Act, 44 U.S.C. 3507(d). The Start Printed Page 62452rule only involves the calculation and public notification of the IMARA in connection with the Program based on data collected by Treasury under rules which have already been subject to OMB review and approval under Control No. 1505-0257.
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Authority and Issuance
For the reasons stated in the preamble, 31 CFR part 50 is amended as follows:
PART 50—TERRORISM RISK INSURANCE PROGRAM
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1. The authority citation for part 50 continues to read as follows: End Amendment Part
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2. Amend § 50.4 by revising paragraphs (m)(2) introductory text, (m)(2)(i), and (m)(3) to read as follows: End Amendment Part
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(2) For calendar years beginning with 2020 and any calendar year thereafter as may be necessary, such amount is the lesser of the aggregate amount, for all insurers, of insured losses once there has been a Program Trigger Event during the calendar year and the annual average of the sum of insurer deductibles for all insurers for the prior 3 years, to be calculated by taking:
(i) The total amount of direct earned premium reported by insurers to Treasury pursuant to § 50.51 in the three calendar years prior to the calendar year in question, and then dividing that figure by three; and
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(3) For calendar year 2020 and each subsequent calendar year, Treasury shall publish in the Federal Register the insurance marketplace aggregate retention amount no later than December 31 of the prior calendar year.
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Dated: November 7, 2019.
Assistant Secretary for Financial Institutions.
[FR Doc. 2019-24801 Filed 11-14-19; 8:45 am]
BILLING CODE 4810-25-P