59720 Federal Register / Vol. 68, No. 201 / Friday, October 17, 2003 / Rules and Regulations 

(b) Residual Market Mechanism 

Disclosure. A State residual market 

insurance entity or State workers’

compensation fund may provide the 

disclosures required by this subpart B to 

policyholders using normal business 

practices, including forms and methods 

of communication used to communicate 

similar policyholder information to 

policyholders. The disclosures may be 

made by the State residual market 

insurance entity or State workers’

compensation fund itself, the individual 

insurers that participate in the State 

residual market insurance entity or a 

State workers’ compensation fund, or its 

servicing carriers. The ultimate 

responsibility for ensuring that the 

disclosure requirements have been met 

rests with the insurer filing a claim 

under the Program. 

(c) Other requirements. Except as 

provided in this section, all other 

disclosure requirements set out in this 

subpart B apply to State residual 

insurance market entities and State 

workers’ compensation funds. 

(d) Prior safe harbor superseded. This 

section supersedes the disclosure safe 

harbor provisions found at paragraph 

C.4 of the Interim Guidance issued by 

Treasury in a notice published on 

December 18, 2002, and published at 67 

FR 78864 (December 26, 2002).

■ 3. Subpart D of part 50 is amended by 

adding §§ 50.30, 50.33, 50.35, and 50.36 

to read as follows:

§ 50.30 General participation 

requirements. 

(a) Insurers. As defined in § 50.5(f), all 

State residual market insurance entities 

and State workers’ compensation funds 

are insurers under the Program even if 

such entities do not receive direct 

earned premiums. 

(b) Mandatory Participation. State 

residual market insurance entities and 

State workers’ compensation funds that 

meet the requirements of § 50.5(f) are 

mandatory participants in the Program 

subject to the rules issued in this 

Subpart. 

(c) Identification. Treasury will 

release and maintain a list of State 

residual market insurance entities and 

State workers’ compensation funds at 

www.treasury.gov/trip. Procedures for 

providing comments and updates to that 

list will be posted with the list.

§ 50.33 Entities that do not share profits 

and losses with private sector insurers. 

(a) Treatment. A State residual market 

insurance entity or a State workers’

compensation fund that does not share 

profits and losses with a private sector 

insurer is deemed to be a separate 

insurer under the Program. 

(b) Premium calculation. A State 

residual market insurance entity or a 

State workers’ compensation fund that 

is deemed to be a separate insurer 

should follow the guidelines specified 

in § 50.5(d)(1) or 50.5(d)(2) for the 

purposes of calculating the appropriate 

measure of direct earned premium.

§ 50.35 Entities that share profits and 

losses with private sector insurers. 

(a) Treatment. A State residual market 

insurance entity or a State workers’

compensation fund that shares profits 

and losses with a private sector insurer 

is not deemed to be a separate insurer 

under the Program. 

(b) Premium and loss calculation. A 

State residual market insurance entity or 

a State workers’ compensation fund that 

is not deemed to be a separate insurer 

should continue to report, in accordance 

with normal business practices, to each 

participant insurer its share of premium 

income and insured losses, which shall 

then be included respectively in the 

participant insurer’s direct earned 

premium or insured loss calculations.

§ 50.36 Allocation of premium income 

associated with entities that do share 

profits and losses with private sector 

insurers. 

(a) Servicing Carriers. For purposes of 

this Subpart, a servicing carrier is an 

insurer that enters into an agreement to 

place and service insurance contracts 

for a State residual market insurance 

entity or a State workers’ compensation 

fund and to cede premiums associated 

with such insurance contracts to the 

State residual market insurance entity or 

State workers’ compensation fund. 

Premiums written by a servicing carrier 

on behalf of a State residual market 

insurance entity or State workers’

compensation fund that are ceded to 

such an entity or fund shall not be 

included as direct earned premium (as 

described in § 50.5(d)(1) or 50.5(d)(2)) of 

the servicing carrier. 

(b) Participant Insurers. For purposes 

of this Subpart, a participant insurer is 

an insurer that shares in the profits and 

losses of a State residual market 

insurance entity or a State workers’

compensation fund. Premium income 

that is distributed to or assumed by 

participant insurers in a State residual 

market insurance entity or State 

workers’ compensation fund (whether 

directly or as quota share insurers of 

risks written by servicing carriers), shall 

be included in direct earned premium 

(as described in § 50.5(d)(1) or 

50.5(d)(2)) of the participant insurer.

Dated: October 1, 2003. 

Wayne A. Abernathy, 

Assistant Secretary of the Treasury.

[FR Doc. 03–26250 Filed 10–16–03; 8:45 am] 

BILLING CODE 4811–15–P

DEPARTMENT OF THE TREASURY

31 CFR Part 50 

RIN 1505–AA98 

Terrorism Risk Insurance Program; 

Disclosures and Mandatory Availability 

Requirements

AGENCY: Departmental Offices, Treasury.

ACTION: Final rule.

SUMMARY: The Department of the 

Treasury (Treasury) is issuing this final 

rule concerning disclosures and 

mandatory availability requirements as 

part of its implementation of Title I of 

the Terrorism Risk Insurance Act of 

2002 (Act). The final rule incorporates 

and clarifies conditions for federal 

payment, set forth in section 103(b) of 

the Act, that require insurers to make 

certain disclosures to policyholders. It 

also incorporates and clarifies the 

section 103(c) requirements that 

insurers ‘‘make available’’ in their 

commercial property and casualty 

policies terrorism risk insurance 

coverage for insured losses resulting 

from certified acts of terrorism under 

the Act. Treasury issued an interim final 

rule and proposed rule with request for 

comment. This final rule, which is the 

second in a series of regulations that 

Treasury is issuing to implement the 

Program, adopts the interim final rule 

with several modifications as discussed 

below.

DATES: This final rule is effective 

October 17, 2003.

FOR FURTHER INFORMATION CONTACT:

Mario Ugoletti, Deputy Director, Office 

of Financial Institutions Policy (202) 

622–2730, or Martha Ellett or Cynthia 

Reese, Attorney-Advisors, Office of the 

Assistant General Counsel (Banking & 

Finance), (202) 622–0480, or C. 

Christopher Ledoux, Senior Attorney, 

Terrorism Risk Insurance Program (202) 

622–6770 (not toll-free numbers).

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Terrorism Risk Insurance Act of 2002 

On November 26, 2002, President 

Bush signed into law the Terrorism Risk 

Insurance Act of 2002 (Pub. L. 107–297, 

116 Stat. 2322). The Act was effective 

immediately. The Act’s purposes are to 

address market disruptions, ensure the 

continued widespread availability and 

Federal Register / Vol. 68, No. 201 / Friday, October 17, 2003 / Rules and Regulations 59721

affordability of commercial property 

and casualty insurance for terrorism 

risk, and to allow for a transition period 

for the private markets to stabilize and 

build capacity while preserving State 

insurance regulation and consumer 

protections. 

Title I of the Act establishes a 

temporary federal program of shared 

public and private compensation for 

insured commercial property and 

casualty losses resulting from an act of 

terrorism which, as defined by the Act, 

is certified by the Secretary of the 

Treasury, in concurrence with the 

Secretary of State and the Attorney 

General. The Act authorizes Treasury to 

administer and implement the 

Terrorism Risk Insurance Program, 

including the issuance of regulations 

and procedures. The Program will end 

on December 31, 2005. 

Each entity that meets the Act’s 

definition of ‘‘insurer’’ (well over 2000 

firms) must participate in the Program. 

The amount of federal payment for an 

insured loss resulting from an act of 

terrorism is to be determined, based 

upon the insurance company 

deductibles and excess loss sharing with 

the Federal Government, as specified by 

the Act and the implementing 

regulations. An insurer’s deductible 

increases each year of the Program, 

thereby reducing the Federal 

Government’s involvement prior to 

expiration of the Program. An insurer’s 

deductible is calculated based on the 

value of ‘‘direct earned premiums’’

collected over certain statutory periods. 

Once an insurer has met its individual 

deductible, the federal payments cover 

90 percent of the insured losses above 

the deductible, subject to an industryaggregate limit of $100 billion. 

The Program provides a federal 

reinsurance backstop for three years. 

The Act gives Treasury authority to 

recoup federal payments made under 

the Program through policyholder 

surcharges, up to a maximum annual 

limit. The Act also prohibits duplicative 

federal payments for insured losses that 

have been covered under any other 

federal program. 

The mandatory availability or ‘‘make 

available’’ provisions in section 103(c) 

of the Act require that, for Program Year 

1 and Program Year 2 and, if so 

determined by Treasury, in Program 

Year 3, all entities that meet the Act’s 

definition of insurer must make 

available, in all of their property and 

casualty insurance policies, coverage for 

insured losses resulting from an act of 

terrorism. This coverage can not differ 

materially from the terms, amounts, and 

other coverage limitations applicable to 

losses arising from events other than 

acts of terrorism. 

As conditions for federal payment 

under the Program, clear and 

conspicuous disclosures must be 

provided by insurers to the 

policyholders of the premium charged 

for insured losses covered by the 

Program and the federal share of 

compensation for insured losses under 

the Program. In addition, the Act 

requires that insurers submit a claim to 

Treasury for federal payment as well as 

certain certifications. Treasury will 

engage in rulemaking to prescribe 

claims procedures for the Program at a 

later date.

The Act also contains provisions 

designed to manage litigation arising 

from or relating to a certified act of 

terrorism. Section 107 of the Act creates 

an exclusive federal cause of action, 

provides for claims consolidation in 

federal court, and contains a prohibition 

on federal payments for punitive 

damages under the Program. The Act 

provides the United States with the 

right of subrogation with respect to any 

payment or claim paid by the United 

States under the Program. 

1. Three Year Program 

The duration of the Program is three 

years. The Act was signed into law on 

November 26, 2002 and section 108(a) 

of the Act provides that, ‘‘[t]he Program 

shall terminate on December 31, 2005.’’

Thereafter, the Act provides Treasury 

with certain continuing authority to take 

actions as necessary to ensure payment, 

recoupment, adjustments of 

compensation and reimbursement for 

insured losses arising out of any act of 

terrorism occurring during the period 

between November 26, 2002 and 

December 31, 2005. The duration of the 

Program and the Program’s termination 

date should not be confused with the 

make available requirements contained 

in section 103(c). As reflected in both 

the interim final and final rules, the 

make available requirements in section 

103(c) of the Act apply to all insurers, 

through the end of Program Year 2. 

However, the Secretary of the Treasury 

may determine, not later than 

September 1, 2004, to extend the make 

available requirements through Program 

Year 3, based on factors referenced in 

section 108(d)(1) of the Act. Regardless 

of whether the make available 

requirements of section 103 are 

extended, the Program and the Act’s 

federal backstop for insured losses for 

acts of terrorism continue through 

December 31, 2005. 

2. Program Implementation Goals 

In implementing the Program, 

Treasury is guided by several goals. 

First, Treasury strives to implement the 

Act in a transparent and effective 

manner that treats comparably those 

insurers required to participate in the 

Program and provides necessary 

information to policyholders. Second, in 

accord with the Act’s stated purposes, 

Treasury seeks to rely as much as 

possible on the State insurance 

regulatory structure. In that regard, 

Treasury has closely coordinated its 

implementation of all aspects of the 

Program with the National Association 

of Insurance Commissioners (NAIC). 

Third, to the extent possible within 

statutory constraints, Treasury seeks to 

allow insurers to participate in the 

Program in a manner consistent with 

procedures used in their normal course 

of business. Finally, given the 

temporary and transitional nature of the 

Program, Treasury is guided by the Act’s 

goal for insurers to develop their own 

capacity, resources, and mechanisms for 

terrorism insurance coverage when the 

Program expires on December 31, 2005. 

B. The Interim Final Rule 

The interim final rule was published 

in the Federal Register at 68 FR 19302 

(April 18, 2003). It added sections 50.10 

through 50.14 and 50.17 through 50.19 

to Subpart B, and sections 50.20, 50.21, 

50.23, and 50.24 to Subpart C of Part 50 

in Title 31, Code of Federal Regulations. 

Subpart A of Part 50, which addresses 

the scope and purpose of the Program, 

key definitions and certain general 

provisions, was finalized and published 

in the Federal Register at 68 FR 41250 

(July 11, 2003) and subsequently revised 

at 68 FR 48280 (August 13, 2003). 

Subpart B incorporates and clarifies 

certain conditions for federal payment 

contained in section 103(b) of the Act 

that require insurers to make certain 

clear and conspicuous disclosures to 

their policyholders with regard to 

terrorism risk insurance for insured 

losses under the Program. Subpart C 

incorporates and clarifies requirements 

in section 103(c) of the Act that insurers 

‘‘make available,’’ in all of their 

commercial property and casualty 

insurance policies, coverage for insured 

losses resulting from an act of terrorism 

as defined by section 102(1) of the Act. 

In this regard, section 103(c) requires 

insurers to make such terrorism risk 

coverage available at terms, amounts, 

and other coverage limitations that do 

not differ materially from those 

applicable to losses arising from events 

other than from acts of terrorism. 

59722 Federal Register / Vol. 68, No. 201 / Friday, October 17, 2003 / Rules and Regulations 

1These interim guidance notices were published 

in the Federal Register at 67 FR 76206 (Dec. 11, 

2002); 67 FR 78864 (Dec. 26, 2002) and at 68 FR 

4544 (Jan. 29, 2003). Treasury also issued a fourth 

interim guidance at 68 FR 15039 (Mar. 27, 2003), 

which has subsequently been superceded by a new 

provision in the final rule for Subpart A, published 

at 68 FR 41250 (July 11, 2003). The interim 

guidance and all regulations can also be located on 

Treasury’s Terrorism Risk Insurance Program Web 

site at http://www.treasury.gov/trip.

This final rule (and the preceding 

interim final rule) reflect earlier interim 

guidance, issued by Treasury in notices 

that were published soon after the Act’s 

enactment date, and were designed to 

assist insurers, policyholders and other 

interested parties in complying with 

immediately applicable and timesensitive requirements.1 In finalizing 

the interim final rule, Treasury carefully 

considered the comments submitted and 

consulted with the NAIC.

II. Summary of Comments and Final 

Rule 

Treasury received 12 comments on 

the interim final rule. Comments were 

submitted by individual insurance 

companies and their legal counsel, by 

insurance and mortgage banker industry 

trade associations, by a coalition of 

trade and professional associations and 

by the American Academy of Actuaries. 

After review and careful consideration 

of these comments, as well as additional 

research and consultation with the 

NAIC, Treasury is now promulgating a 

final rule concerning the Act’s 

disclosure and make available 

requirements. The final rule makes few 

changes to the interim final rule. 

Clarifications were made in several 

areas based on comments received. 

These clarifications are discussed in the 

summary of comments below. 

A. Disclosures 

1. General Disclosure Requirements 

(Section 50.10) 

Section 103(b) of the Act requires 

insurers to make certain disclosures to 

policyholders as a condition for federal 

payment under the Act. The general 

disclosure requirements of section 50.10 

of the interim final rule incorporate the 

Act’s requirements. This section of the 

final rule is unchanged from the interim 

final rule. Section 50.10 states, in part, 

that an insurer must provide clear and 

conspicuous disclosure to the 

policyholder of: (1) The premium 

charged for insured losses covered by 

the Program; and (2) the federal share of 

compensation for insured losses under 

the Program. As discussed below, the 

disclosure provisions are a condition for 

federal payment under the Act and a 

mechanism through which Congress 

sought to enhance competition and 

comparison shopping in the purchase of 

terrorism risk insurance and to increase 

awareness of the federal contribution to 

the Program. 

One commenter, a mortgage banking 

trade association, urged Treasury to 

revise the interim final rule to 

specifically require insurers to notify 

lenders, securitizers, and servicers of 

commercial mortgages (collectively 

referred to in this preamble as mortgage 

finance providers) of the terrorism 

coverage options offered under the Act. 

The commenter also requested that the 

interim final rule be changed to require 

insurers to provide notice to these 

mortgage finance providers of their 

borrowers’ acceptance or rejection of the 

terrorism risk insurance coverage made 

available by the insurer. In support of 

these suggested revisions, the 

commenter stated that mortgage finance 

providers are having difficulty 

determining ‘‘whether most of the 

properties in their portfolios carry 

adequate terrorism risk insurance as 

required by loan documents.’’ The 

commenter also asserts that the absence 

of these suggested extensions to the 

current regulatory disclosure 

requirements produces inefficiencies in 

the commercial real estate and capital 

markets, including information gaps 

that may have an adverse effect on 

economic growth and on the condition 

of key financial institutions. 

In a careful evaluation of whether the 

suggested revisions to the interim final 

rule were appropriate, Treasury first 

reviewed the scope of the disclosure 

provisions of section 103(b) of the Act 

and then considered the legislative 

history concerning those disclosure 

requirements. Treasury also considered 

whether there were alternative ways in 

which these mortgage finance providers 

may obtain the insurance coverage 

information they seek from their 

borrowers. Treasury consulted with the 

NAIC concerning definitions in various 

state laws and typical industry business 

practices and standards. For the reasons 

discussed below, Treasury is not 

extending the disclosure requirement in 

the interim final rule as suggested by the 

commenter. 

Section 103(b) requires that clear and 

conspicuous disclosure of certain 

information be provided by insurers to 

‘‘policyholders.’’ The Conference Report 

to the Act states that Congress required 

the disclosures in section 103(b) in 

order, ‘‘to enhance the competitiveness 

of the marketplace by better enabling 

consumers to comparison shop for 

terrorism insurance coverage, and to 

make policyholders better aware that 

the Federal government will be sharing 

the costs of such coverage with insurers 

thereby reducing the insurers’

exposure.’’ H.R. Conf. Rep. No. 107–779, 

at 24 (2002). Neither the language in 

section 103(b) of the Act, nor the 

congressional intent of these disclosures 

as explained in the Conference Report, 

requires that these disclosures be made 

to mortgage finance providers or other 

entities that are not policyholders. 

Similarly, there is no third party 

notification requirement in the Act 

concerning whether a policyholder has, 

or has not, elected to purchase terrorism 

risk insurance coverage. The stated 

legislative intent of the disclosures is to 

enhance comparison shopping and 

Program awareness by policyholders.

For purposes of the Program, 

policyholder refers to the ‘‘person’’ to 

whom the insurer issues a commercial 

property and casualty insurance policy 

and who has apparent authority to 

negotiate, determine or modify the 

terms of the insurance contract. In this 

regard, the Act and Treasury’s 

regulations require insurers to disclose 

information about the premium and the 

federal share of compensation to 

policyholders at the time of offer, 

purchase, and renewal. 

In its comment, the association also 

expressed a concern that, ‘‘under notice 

provisions to the mortgagee contained 

in existing insurance policies, a partial 

cancellation of coverage for terrorism (as 

opposed to a cancellation of the entire 

policy) may be deemed by the insurers 

as an endorsement of the policy that 

does not require the insurer to send 

notice to the mortgage lender.’’ Thus, 

the commenter is concerned that 

mortgage finance providers may not be 

notified if there is a subsequent change 

in the policy with regard to terrorism 

risk insurance. However, the commenter 

also acknowledges that the failure of 

mortgage finance providers to obtain 

such notice appears to be due to the 

drafting of notice provisions in policies. 

Treasury considered whether there 

were other, perhaps more appropriate 

ways, in which mortgage finance 

providers could obtain the information 

they seek from their borrowers instead 

of through the expansion of the 

statutory disclosure requirements under 

this temporary Program. Treasury 

understands that mortgage finance 

providers generally may obtain the 

information about the status of a 

borrower’s coverage for terrorism risks 

(whether the losses are those covered by 

the Program or broader in scope) 

through their underwriting 

requirements and/or by contract. For 

example, loan documents generally 

require that borrowers provide 

appropriate insurance coverage 

Federal Register / Vol. 68, No. 201 / Friday, October 17, 2003 / Rules and Regulations 59723

information to their mortgage finance 

providers, including information on 

terrorism risk insurance coverage. In its 

comment, the association acknowledged 

this, but stated that these requirements 

are frequently ignored by borrowers and 

costly to enforce. In Treasury’s view, the 

issue appears to be one of contract 

negotiation, monitoring and 

enforcement by the parties rather than 

of regulation under the Program. 

In this regard, we also understand that 

ACORD, an independent, nonprofit 

insurance group comprised of insurance 

company, reinsurance company and 

financial service institution affiliated 

members that assists in the cooperative 

development and implementation of 

insurance (and related financial 

services) standards, has agreed to work 

with mortgage finance providers to 

revise standard insurance certificates. 

The goal of this market driven effort is 

to better facilitate access by the 

mortgage finance providers to the 

insurance coverage information 

concerning terrorism risk insurance and 

other types of insurance coverage. 

Based on our review of section 103(b) 

and of the legislative intent of the 

disclosure requirements as described in 

the Conference Report, and our 

understanding of industry practice and 

ongoing initiatives, as indicated by the 

commenter and in consultations with 

NAIC, Treasury is not expanding the 

reach of the disclosure to policyholder 

requirements set forth in the interim 

final rule. 

2. Clear and Conspicuous Disclosure 

(Section 50.12) 

As stated above, section 50.10 reflects 

the requirement in section 103(b) of the 

Act that the insurer must provide ‘‘clear 

and conspicuous disclosure’’ to the 

policyholder of the premium charged 

and the federal share of payments for 

insured losses under the Program. 

Section 50.12 of the interim final rule 

addresses the meaning of ‘‘clear and 

conspicuous’’ disclosure for purposes of 

the Program. Except as noted below 

with respect to section 50.12(d), this 

final rule adopts interim section 50.12 

without change. 

Section 50.12(a) of the interim final 

rule provides that whether a disclosure 

is clear and conspicuous depends on the 

totality of the facts and circumstances. 

Consistent with the Program 

implementation goals, the interim final 

rule does not specify an exclusive form 

or means of satisfying the statutory 

disclosure requirements, nor does it 

prescribe precise language, typeface, or 

font for the disclosures. In interim 

guidance issued by Treasury soon after 

enactment of the Act, Treasury deemed 

certain NAIC model forms to be an 

acceptable, nonexclusive way in which 

an insurer could satisfy the disclosure 

requirement. (These model forms are 

available at the Program’s Web site: 

http://www.treasury.gov/trip). Treasury 

stated that insurers could modify the 

NAIC model forms to meet individual 

circumstances, or use other forms, as 

long as the modifications met the 

statutory standards. This interim 

guidance was incorporated into the 

interim final rule and is now in the final 

rule, which also provides a safe harbor 

(see section 50.17). Insurers may 

continue to use certain NAIC model 

forms if appropriate or they may 

develop other disclosure forms that 

meet the requirements of the Act and 

the regulations. Treasury received one 

comment on section 50.12(a) of the 

interim final rule, which was supportive 

of Treasury’s approach. Section 50.12(a) 

of the interim final rule is adopted 

without change. 

Section 50.12(b) of the interim final 

rule provides that, in describing the 

premium charged for insured losses 

covered by the Program, an insurer may 

refer to it as a portion or percentage of 

an annual premium, if consistent with 

normal business practice; but, may not 

describe this premium in a manner that 

would be misleading in the context of 

the Program, such as by characterizing 

it as a ‘‘surcharge.’’ It is inappropriate 

and misleading to use the term 

‘‘surcharge’’ in the disclosures because 

surcharge is a term used in section 

103(e)(8) of the Act in connection with 

the statutorily required recoupment. 

Treasury received two comments on 

this provision. One commenter, an 

association of insurance brokers and 

agents, strongly supported Treasury’s 

position. This commenter believed the 

use of the term ‘‘surcharge’’ in 

disclosing the premium, ‘‘threatened 

both to undermine the ability of 

consumers to properly evaluate their 

coverage needs and to call into question 

the legitimacy of the Program.’’ An 

insurance industry association 

commented that the group had ‘‘no 

objection’’ to this section in the interim 

final rule. Section 50.12(b) of the 

interim final rule is adopted without 

change. 

Section 50.12(c) of the interim final 

rule allows insurers to make the 

required disclosures using normal 

business practices, including forms and 

methods of communication used to 

communicate similar policyholder 

information to policyholders. The 

comments generally supported this 

approach, which is adopted without 

change.

Section 50.12(d) of the interim final 

rule provides further guidance on the 

use of an agent to provide the required 

disclosures to policyholders. The 

interim final rule refers to an insurance 

broker or other intermediary acting as 

agent for the insurer, if the insurer 

normally communicates with a 

policyholder in this fashion. An 

insurance industry association 

commenter suggested that, in view of 

the diverse treatment of the legal status 

of insurance brokers under the laws of 

the various States, unnecessary 

confusion may result from the use of 

terms such as ‘‘agent’’ and ‘‘broker’’

with varying implications in different 

jurisdictions. The commenter suggested 

that the final rule instead use the term 

‘‘producer.’’ Treasury agrees with this 

suggestion, but emphasizes that if the 

insurer elects to make the required 

disclosure through a producer or other 

intermediary, regardless of on whose 

behalf the producer or other 

intermediary is acting, the insurer 

remains responsible for ensuring that 

the disclosures are provided by the 

producer or other intermediary to 

policyholders in accordance with the 

Act. Accordingly, Treasury is modifying 

section 50.12(d) consistent with this 

comment. 

Section 50.12(e) of the interim final 

rule provides generally that an insurer 

may demonstrate that it has satisfied the 

requirement to provide clear and 

conspicuous disclosure through use of 

appropriate systems and normal 

business practices that demonstrate a 

practice of compliance. Although no 

comments explicitly addressed this 

provision, the comments generally 

supported the overall approach in 

section 50.12. Section 50.12(e) is 

adopted without change. 

Section 50.12(f) of the interim final 

rule provides that an insurer must 

certify that it has complied with the 

requirement to provide disclosure to the 

policyholder on all policies that form 

the basis for the underlying claim(s) 

submitted by the insurer for federal 

payment under the Program. One 

commenter believed the language of 

section 50.12(f) itself was clear, but 

stated that the corresponding discussion 

in the preamble to the interim final rule 

was not as clear and requested further 

clarification in the final rule. 

This final rule adopts section 50.12(f) 

of the interim final rule without change. 

Section 50.12(f) requires that, on all 

policies that form the basis for any 

claim that the insurer submits for 

federal payment for insured losses 

under the Program, an insurer must 

certify that it has complied with 

requirements to make disclosures to 

59724 Federal Register / Vol. 68, No. 201 / Friday, October 17, 2003 / Rules and Regulations 

those policyholders covered by the 

policies. These insured losses are used 

in determining whether an insurer has 

met its insurer deductible under the 

Program. If an insurer chooses not to 

provide disclosures on a block of 

policies covered by the Program, the 

insurer will not receive federal payment 

for any claims it may submit to Treasury 

for insured losses covered by such 

policies because the required 

disclosures—a condition for federal 

payment—were not made. The insurer 

could submit a claim for federal 

payment under the Program on another 

block of policies, as long as the insurer 

made the required disclosures to those 

policyholders, and otherwise met all 

other conditions for payment of those 

insured losses. Treasury will initiate a 

future rulemaking concerning claims 

and certification procedures for 

purposes of the Program. 

The following example provides 

further clarification of section 50.12(f). 

A surety insurer may satisfy the Act’s 

make available requirement by 

providing terrorism risk insurance 

coverage under the Program to a block 

of notary public bond policyholders at 

no cost. The surety insurer may decide 

not to provide disclosure notices to 

those policyholders because it considers 

the expense of making the disclosures as 

being greater than the benefit of 

receiving the federal payments under 

the Program. Therefore, the insurer 

would be liable for any insured losses 

on the notary public bonds, but would 

not be eligible to receive any federal 

payment under the Program backstop on 

such losses because a condition for 

federal payment (making the requisite 

disclosures to policyholders) was not 

met. However, if the insurer provides 

the required disclosures to 

policyholders insured under a separate 

block of construction bond policies, the 

failure to make disclosures to the notary 

public bond policyholders would not 

prevent the insurer from certifying that 

it provided the required disclosure to 

policyholders insured under the 

construction bond policies for which 

the insurer was seeking federal payment 

for insured losses under the Program. 

The insured losses under the 

construction bond policies ‘‘form the 

basis’’ for a claim submitted for federal 

payment; the insured losses under the 

notary public bonds do not. Regardless 

of whether disclosures are provided, 

direct earned premiums on the notary 

public bonds would be included in the 

calculation of the insurer deductible for 

purposes of the Program and such 

notary public bond policyholders would 

be subject to any subsequent 

recoupment. The insurer’s calculation of 

insured losses under the Program for 

purposes of meeting its insurer 

deductible would include only those 

losses on the construction bonds. 

Section 50.12(f) relates to other 

aspects of the Program in the following 

ways. First, regardless of whether an 

insurer intends to submit a claim for 

federal payment, all insurers must 

comply with the make available 

requirements of section 103(c) of the Act 

and in the regulations. Second, in 

calculating its direct earned premium 

and insurer deductible under the 

Program, an insurer must include 

premium income from all policies for 

commercial property and casualty 

insurance for losses occurring at certain 

locations (see section 50.5(d)), whether 

or not the insurer made the required 

disclosures. Third, an insurer may 

submit a claim for federal payment only 

for those ‘‘insured losses’’ on policies on 

which the insurer made required 

disclosures to policyholders. Finally, all 

commercial property and casualty 

insurance policies are subject to the 

Act’s surcharge provisions, regardless of 

whether the insurer made the 

disclosures. Accordingly, if an insurer 

fails to provide the disclosure notices to 

its policyholders, the insurer will not 

have met conditions for federal payment 

and will not be eligible for federal 

payment for insured losses under those 

policies. The insurer, however, will 

continue to be subject to the make 

available requirements, and the insurer 

and its policyholders will continue to be 

subject to the surcharge provisions 

under the Act and the Program. 

3. Separate Line Item (Section 50.14)

Section 50.14 of the interim final rule 

incorporates interim guidance 

previously issued by Treasury that 

deems an insurer to be in compliance 

with the requirement of providing 

disclosure on a ‘‘separate line item in 

the policy’’ under section 50.10(d), and 

in compliance with section 103(b)(2)(C) 

of the Act, if the insurer makes the 

disclosure: (1) on the declarations page 

of the policy; (2) elsewhere within the 

policy itself; or (3) in any rider or 

endorsement that is made a part of the 

policy. In addition to the clear and 

conspicuous requirement, the Act 

requires that the separate line item 

disclosure be ‘‘in the policy.’’

Rather than require insurers to rewrite 

all of their policies, Treasury has 

determined that the disclosure is 

sufficient if made on the declarations 

page or within any rider or endorsement 

that is made a part of the policy. One 

commenter suggested revising the 

interim final rule to clarify that other 

documents could be used. This 

commenter contended this would make 

it clear that compliance is not 

dependent on the name or title of the 

document, but rather on the fact that 

such disclosure document is made part 

of the policy. Treasury agrees and is 

amending section 50.14(c) accordingly. 

B. Mandatory Availability 

1. General Mandatory Availability 

Requirements (Sections 50.20 and 

50.21) 

Sections 103(c)(1)(A) and (B) of the 

Act require an insurer (as defined by the 

Act and the implementing regulations) 

to make available, in all of its property 

and casualty insurance policies, 

coverage for insured losses; and to make 

available property and casualty 

insurance coverage for insured losses 

that does not differ materially from the 

terms, amounts, and other coverage 

limitations applicable to losses arising 

from events other that acts of terrorism. 

The make available requirements apply 

during the period beginning on the first 

day of the Transition Period and ending 

on the last day of Program Year 2 unless 

the make available requirements are 

extended by the Secretary through 

Program Year 3. The duration and 

possible extension of the make available 

requirements in section 103(c) should 

not be confused with the established 

three-year duration of the Program as 

provided by section 108 of the Act. 

2. Policies in Existence on November 

26, 2002

Section 50.21(a) of the interim final 

rule states, in part, that the make 

available requirement of the Act applies 

to insurance policies in existence on 

November 26, 2002 (the date of 

enactment of the Act). One commenter 

suggested this provision may not be 

technically correct. The commenter 

reasoned that the make available 

requirement applies at the time of initial 

offer of coverage and that for policies in 

existence on November 26, 2002, the 

initial offer of coverage had already 

occurred, and, further, that only section 

105 (voiding of terrorism exclusions) is 

applicable for policies in existence at 

the time of enactment. 

It is Treasury’s view that the make 

available requirement applies to policies 

in existence on November 26, 2002. 

Section 103(c)(1)(A) of the Act mandates 

that beginning on the first day of the 

Transition Period (defined in section 

102(11) as of the date of enactment), an 

insurer shall make available coverage 

for insured losses in all of its property 

and casualty insurance policies. Section 

105 of the Act, in effect, made coverage 

Federal Register / Vol. 68, No. 201 / Friday, October 17, 2003 / Rules and Regulations 59725

available upon enactment of the Act by 

voiding any exclusions within 

insurance policies that were in 

existence on November 26, 2002. 

Because the make available requirement 

and the process in section 105 of the Act 

for voiding terrorism risk insurance 

exclusions and offering coverage are 

generally consistent for commercial 

property and casualty policies in effect 

on November 26, 2002, Treasury has 

decided that no additional clarification 

is needed. See below for a discussion of 

the ‘‘initial offer of coverage’’ provision 

in the rule. 

3. Initial Offer of Coverage 

Section 50.21(a) of the interim final 

rule provides that the make available 

requirement also applies to new policies 

issued and renewals of existing policies 

during the period beginning on 

November 26, 2002 and ending on 

December 31, 2004 (the last day of 

Program Year 2) and, if the requirement 

is extended by the Secretary, to new 

policies issued and renewals of existing 

policies in Program Year 3 (calendar 

year 2005). The last line of 50.21(a) 

states that the ‘‘requirement applies at 

the time an insurer makes the initial 

offer of coverage.’’

One commenter, an insurance trade 

association, proposed revising the 

interim final rule by adding language to 

the end of section 50.21 stating that the 

make available requirement applies at 

the time an insurer makes the initial 

offer of coverage ‘‘and at no other time.’’

The commenter suggested this revision 

because of a concern that a policyholder 

may try to purchase terrorism risk 

insurance coverage during a policy 

period (for example, upon a heightened 

state of terror alert) despite having 

rejected an initial offer of coverage by an 

insurer. 

In context, Treasury believes the 

requirement in section 50.21(a) is clear. 

It is Treasury’s view that by offering the 

coverage at the time of initial offer, the 

insurer has satisfied the make available 

requirement. However, the commenter’s 

suggested change would limit the make 

available requirement more narrowly 

than intended by Treasury. This is 

because the initial offer of coverage is 

not the only time when the make 

available requirement applies. Treasury 

did not intend section 50.21 of the 

interim final rule to be read to mean 

that, as long as an insurer makes 

coverage available through an initial 

offer, the insurer has no further 

obligation to make coverage available to 

the policyholder during the Program’s 

duration (e.g., at initial offer of renewal 

or in a new policy.) An insurer must 

make the coverage available, not only at 

the time of initial offer, but also upon 

offer of policy renewal. 

It is Treasury’s view that an insurer 

need not make coverage available to a 

policyholder who did not accept an 

initial offer of coverage and later 

demands the coverage be added to the 

same policy during the policy period 

(i.e., through endorsement). In such a 

situation, the policyholder is not left 

without options; a policyholder can 

cancel its policy and solicit a new offer 

or proposal for insurance. Treasury is 

modifying section 50.21(a) to clarify the 

make available requirement applies at 

the time an insurer makes the initial 

offer of coverage as well as at the time 

an insurer makes an initial offer of 

renewal of an existing policy. 

This insurance association commenter 

also suggested that Treasury consider 

changing the rule to eliminate the 

requirement that an insurer make 

available coverage through an initial 

offer. Instead, the commenter proposed 

that an insurer only be required to 

simply disclose that coverage is 

available for purchase and to invite 

policyholders to contact the insurer for 

an offer or quote, if desired. The 

commenter suggested that insurers 

could still make a formal offer of 

coverage if consistent with their normal 

business practice, but an offer would 

not be required. Treasury is not 

adopting this suggestion, which is 

inconsistent with the purposes of the 

statutory provisions. 

4. Umbrella-Type Policies 

An insurance industry trade 

association commenter raised several 

questions about the applicability of the 

make available requirement for insured 

losses through commercial property and 

casualty umbrella insurance. In 

response, Treasury emphasizes that 

commercial property and casualty 

umbrella insurance is included in the 

Program because it falls within the 

Program’s definition of commercial 

property and casualty insurance. 

Therefore, an insurer that offers such 

umbrella insurance coverage is subject 

to the make available requirements.

Section 102(12) of the Act defines 

commercial lines of property and 

casualty insurance to specifically 

include ‘‘excess insurance.’’ Section 

50.5(l) of the regulations further defines 

commercial property and casualty 

insurance with reference to certain lines 

of insurance business reported on 

NAIC’s Annual Statement’s Exhibit of 

Premiums and Losses, commonly 

known as Statutory Page 14. 

Commercial property and casualty 

umbrella insurance is reported on 

Statutory Page 14 and not otherwise 

excluded. Such umbrella policies are 

within the definition of ‘‘commercial 

property and casualty insurance.’’ If the 

umbrella policy issuer is an insurer 

under the Act, it must participate in the 

Program and it is subject to the Act’s 

requirements. 

Accordingly, insurers that issue 

commercial property and casualty 

insurance through umbrella policies are 

subject to the make available 

requirements of the Program. This 

means that they must (1) make available 

in all of their commercial property and 

casualty insurance policies coverage for 

insured losses and (2) make available 

such coverage for insured losses that 

does not differ materially from the 

terms, amounts, and other coverage 

limitations applicable to losses arising 

from events other than acts of terrorism. 

The commenter also stated that some 

policyholders have declined insurance 

coverage for losses caused by an act of 

terrorism from their primary insurance 

carriers, electing instead to have such 

losses covered by the ‘‘drop down’’

coverage afforded through their 

(presumably less expensive) umbrella 

insurance policies. To prevent what the 

commenter characterizes as 

policyholder ‘‘gaming,’’ the commenter 

suggests that ‘‘Treasury permit an 

umbrella insurer, in accordance with 

normal business practice, to refuse to 

drop down where the insured 

intentionally elected to forego primary 

coverage for acts of terrorism.’’

Although Treasury understands that 

certain provisions of the Act may not fit 

neatly with typical business practices of 

umbrella policy underwriters and other 

insurers, Treasury has determined to not 

revise the interim final rule as suggested 

because it may create a situation that 

appears to excuse an insurer from 

fulfilling its contractual obligation to 

pay a policyholder’s claim for an 

insured loss that otherwise may be 

covered by the terms and conditions of 

a policy covered by the Program. 

Instead, it is Treasury’s view that the 

commenter’s concern is more 

appropriately addressed by the insurer 

that issues the umbrella policy, for 

example, through the insurer’s 

underwriting procedures, pricing, and/

or policy drafting. Therefore, an 

umbrella insurer could draft policy 

language that excludes from ‘‘drop 

down’’ coverage any losses arising from 

perils for which insurance was available 

from the primary or underlying insurer 

but was intentionally not purchased by 

the policyholder, provided: (1) The 

language does not differ materially from 

the terms and other coverage limitations 

applicable to losses arising from events 

other than acts of terrorism and (2) the 

59726 Federal Register / Vol. 68, No. 201 / Friday, October 17, 2003 / Rules and Regulations 

exclusion is otherwise permitted by 

State law. 

Another commenter raised similar 

questions with regard to Difference-InConditions (DIC) commercial property 

and casualty insurance. DIC insurance is 

included within the Program definition 

of commercial property and casualty 

insurance. DIC insurance is reported by 

insurers on commercial lines of 

Statutory Page 14 included in the 

Program (see section 50.5(l)). DIC 

insurance policies generally provide 

coverage for certain risks not covered by 

other policies. The commenter 

suggested that DIC commercial property 

and casualty insurance should not be 

included in the Program. The 

commenter contended that the Act and 

section 50.23 mean that all underlying 

commercial property and casualty 

policies must provide for—and cannot 

exclude—insured losses caused by an 

act of terrorism, and thus DIC coverage 

will never be triggered. 

Treasury does not agree. As stated 

above with regard to umbrella polices, 

the Act requires all insurers under the 

Program to make available commercial 

property and casualty coverage for 

insured losses under the Program. If the 

issuer of a DIC commercial property and 

casualty insurance policy is an insurer 

as defined under the Program, then the 

DIC insurer must comply with the 

requirements of the Act and Treasury’s 

implementing regulations, including 

those concerning the make available 

requirements. Insurers can exclude 

coverage for insured losses if the 

policyholder declines or elects not to 

purchase the coverage. If a DIC insurer’s 

policyholder declines or elects not to 

purchase terrorism risk insurance 

coverage in an underlying policy, the 

Act requires that the DIC insurer must 

make available terrorism risk insurance 

for insured losses as part of the DIC 

policy. As with umbrella policies, 

Treasury recognizes that certain 

provisions of the Act may not fit neatly 

within typical business practices of DIC 

insurers but it is Treasury’s view that 

the commenter’s concern is more 

appropriately addressed through DIC 

underwriting procedures, pricing or 

policy drafting. Thus, in the final rule, 

Treasury is making no change to section 

50.21 to provide special treatment to 

DIC or umbrella insurance policies. 

5. Limitations on Types of Risk (Section 

50.23) 

Section 103(c)(1)(B) of the Act 

provides that insurers under the 

Program ‘‘shall make available property 

and casualty insurance coverage for 

insured losses that does not differ 

materially from the terms, amounts, and 

other coverage limitations applicable to 

losses arising from events other than 

acts of terrorism.’’ Sections 50.20 

through 50.24 of the interim final rule 

reflect the statutory language and 

previously issued interim guidance. 

Section 50.23(b) addresses limitations 

on types of risk and provides that if an 

insurer does not cover all types of 

commercial property and casualty risks, 

then it is not required to cover the 

excluded risks in satisfying the make 

available requirements. For example, if 

an insurer does not cover all types of 

commercial property and casualty risk, 

either because the insurer is outside of 

direct State regulatory oversight, or 

because a State permits certain 

exclusions for certain types of losses, 

such as nuclear, biological, or chemical 

events, then the insurer is not required 

to make such coverage available. In 

addition, Section 50.24 addresses the 

applicability of State law. 

A comment, submitted by a coalition 

of trade and professional associations 

expressed concern about the make 

available provisions in the interim final 

regulation. The commenter contended 

that the interim final rule’s deference to 

State law exclusions for certain types of 

losses is not consistent with the 

purposes of the Act. The commenter 

also stated that the purpose of the Act 

was to put policyholders back to the 

level of coverage (or availability) that 

existed prior to September 11, 2001. 

Although acknowledging that whether a 

policyholder purchases terrorism risk 

insurance may be related to the price of 

the coverage, the commenter suggested 

that a lack of coverage for biological and 

chemical perils may adversely affect the 

policyholder’s decision to purchase 

terrorism risk insurance. 

After carefully considering the 

concerns expressed by the commenter 

and reviewing the purposes of the Act, 

Treasury is not making any change in 

the make available requirement as set 

forth in the interim final rule for the 

following reasons. First, it is Treasury’s 

view that the make available 

requirement in the interim final rule, 

including the deference to state law 

exclusions, is fully consistent with the 

purposes of the Act. As stated in Section 

101(b), the purposes of the Act include 

establishment of a temporary federal 

Program to ‘‘allow for a transitional 

period for the private markets to 

stabilize, resume pricing of such 

insurance and build capacity to absorb 

any future losses, while preserving State 

insurance regulation and consumer 

protections.’’ In addition, other 

provisions of the Act, such as section 

106, generally support narrow State law 

preemption, consistent with the 

McCarran Ferguson Act. Moreover, 

throughout the implementation process, 

Treasury has followed Congress’s 

direction to consult with the NAIC, and 

in that regard, has relied to the greatest 

extent possible on the existing State 

regulatory structure for this temporary 

Program.

Second, based on information 

provided by the NAIC, it is Treasury’s 

understanding that, even prior to 

September 11, 2001, insurers offered 

limited coverage for nuclear reaction or 

radiation or radioactive contamination, 

however caused, in commercial 

property and casualty insurance. In 

addition, deference to existing State law 

as it relates to the make available 

requirement does not mean that all 

losses associated with a nuclear, 

biological or chemical event would be 

excluded under the Program. Even with 

State exclusions, there may be 

commercial property and casualty 

insurance coverage in certain 

circumstances for certain biological, 

chemical or nuclear events. Moreover, 

the make available requirements in the 

interim final rule do not limit an 

insurer’s ability to provide coverage for 

nuclear, biological, or chemical 

exposures as part of the Program, if the 

insurer chooses to offer such coverage. 

If an insurer provided such coverage in 

a commercial property and casualty 

policy, and met its insurer deductible 

and other conditions for federal 

payment, the insurer would receive 

federal payment under the Program for 

a claim filed based on that policy. 

Third, the availability of terrorism 

risk insurance is affected by the 

affordability of such insurance. Neither 

the Act nor the Program mandates 

particular pricing. Therefore even if the 

‘‘make available’’ requirement were 

applied in markets where exclusions are 

permitted, insurers would be able to 

price the coverage as appropriate, 

within any constraints, if any, imposed 

by the particular State. In such cases, if 

insurers believed they had insufficient 

capacity or that they lacked the ability 

to adequately evaluate the risks 

associated with a nuclear, biological, or 

chemical event, the corresponding price 

for such coverage along with the overall 

price for terrorism coverage could 

remain relatively high as insurers 

sought to build greater capacity and to 

account for greater uncertainty 

associated with these types of events. 

III. Procedural Requirements 

The Act established a Program to 

provide for loss sharing payments by the 

Federal Government for insured losses 

resulting from certified acts of terrorism. 

The Act became effective immediately 

Federal Register / Vol. 68, No. 201 / Friday, October 17, 2003 / Rules and Regulations 59727

upon the date of enactment (November 

26, 2002). Preemptions of terrorism risk 

exclusions in policies, mandatory 

participation provisions, disclosure and 

other requirements, and conditions for 

federal payment contained in the Act 

applied immediately to those entities 

that came within the Act’s definition of 

‘‘insurer.’’

The disclosure requirements are 

statutory conditions for federal payment 

under the Program. The disclosure 

requirements were effective 

immediately upon enactment and 

remain ongoing requirements that apply 

to new and renewed policies throughout 

the life of the Program. In the event of 

an act of terrorism resulting in insured 

losses under the Program, insurers must 

certify, and Treasury must ascertain, 

that these disclosure requirements have 

been met before federal payment is 

made. Similarly, the make available 

requirements are important elements of 

the Act. These requirements were 

effective immediately upon enactment 

and applied to policies in effect at that 

time. The make available requirements 

will continue to apply to new and 

renewed policies through the end of 

2004 (and if the requirements are 

extended by the Secretary, through 

2005). Given the significance of the 

disclosure and make available 

requirements to policyholders and 

insurers, there is an urgent need to issue 

immediately effective regulations. This 

includes the need to clarify, as 

necessary, the previously issued interim 

final rule. Moreover, because the 

changes are in the nature of 

clarifications, there should be no 

operational impact on insurers and no 

need for a delayed effective date. 

Accordingly, pursuant to 5 U.S.C. 

553(d)(3), Treasury has determined that 

there is good cause for this final rule to 

become effective immediately upon 

publication. 

This final rule is a significant 

regulatory action and has been reviewed 

by the Office of Management and 

Budget under the terms of Executive 

Order 12866. 

It is hereby certified that this final 

rule will not have a significant 

economic impact on a substantial 

number of small entities. The Act 

requires all licensed or admitted 

insurers to participate in the Program. 

This includes all insurers regardless of 

size or sophistication. The Act also 

defines property and casualty insurance 

without any reference to the size or 

scope of the commercial entity. The 

disclosure and make available 

requirements are required by the Act. 

The final rule allows all insurers, 

whether large or small, to use existing 

systems and business practices to 

demonstrate compliance. Accordingly, 

any economic impact associated with 

the final rule flows from the Act and not 

the final rule. However, the Act and the 

Program are intended to provide 

benefits to the U.S. economy and all 

businesses, including small businesses, 

by providing a federal reinsurance 

backstop to commercial property and 

casualty insurers and their 

policyholders and by spreading the risk 

of insured loss resulting from an act of 

terrorism.

List of Subjects in 31 CFR Part 50 

Terrorism risk insurance.

Authority and Issuance

■ For the reasons set forth above, the 

interim final rule amending Subparts B 

and C of 31 CFR Part 50, which was 

published at 68 FR 19302 on April 18, 

2003, is adopted as a final rule with the 

following changes:

PART 50—TERRORISM RISK 

INSURANCE PROGRAM

■ 1. The authority citation for 31 CFR 

Part 50 continues to read as follows:

Authority: 5 U.S.C. 301; 31 U.S.C. 321; 

Title I, Pub. L. 107–297, 116 Stat. 2322 (15 

U.S.C. 6701 note).

■ 2. Section 50.12(d) of Subpart B is 

revised to read as follows:

§ 50.12 Clear and conspicuous disclosure.

* * * * *

(d) Use of producer. If an insurer 

normally communicates with a 

policyholder through an insurance 

producer or other intermediary, an 

insurer may provide disclosures through 

such producer or other intermediary. If 

an insurer elects to make the disclosures 

through an insurance producer or other 

intermediary, the insurer remains 

responsible for ensuring that the 

disclosures are provided by the 

insurance producer or other 

intermediary to policyholders in 

accordance with the Act.

* * * * *

■ 3. Section 50.14 of Subpart B is revised 

to read as follows:

§ 50.14 Separate line item. 

An insurer is deemed to be in 

compliance with the requirement of 

providing disclosure on a ‘‘separate line 

item in the policy’’ under § 50.10(d) if 

the insurer makes the disclosure: 

(a) On the declarations page of the 

policy; 

(b) Elsewhere within the policy itself; 

or 

(c) In any rider or endorsement, or 

other document that is made a part of 

the policy.

■ 4. Section 50.18(b)(2) of Subpart B is 

revised to read as follows:

§ 50.18 Disclosure required by 

reinstatement provision

* * * * *

(b) * * *

(2) The insurer provided notice at 

least 30 days before any such 

reinstatement of the increased premium 

for such terrorism coverage and the 

rights of the insured with respect to 

such coverage, including the date upon 

which the exclusion would be 

reinstated if no payment is received, 

and the insured fails to pay any 

increased premium charged by the 

insurer for providing such terrorism 

coverage.

■ 5. Section 50.21(a) of Subpart C is 

revised to read as follows:

§ 50.21 Make available. 

(a) General. The requirement to make 

available coverage as provided in 

§ 50.20 applies to policies in existence 

on November 26, 2002, new policies 

issued and renewals of existing policies 

during the period beginning on 

November 26, 2002 and ending on 

December 31, 2004 (the last day of 

Program Year 2), and if the requirement 

is extended by the Secretary, to new 

policies issued and renewals of existing 

policies in Program Year 3 (calendar 

year 2005). The requirement applies at 

the time an insurer makes the initial 

offer of coverage as well as at the time 

an insurer makes an initial offer of 

renewal of an existing policy.

* * * * *

Dated: October 1, 2003. 

Wayne A. Abernathy, 

Assistant Secretary of the Treasury.

[FR Doc. 03–26251 Filed 10–16–03; 8:45 am] 

BILLING CODE 4811–15–P

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[CGD09–03–270] 

RIN 1625–AA00 

Safety Zone; Wisconsin Central Rail 

Road Bridge Fox River, Green Bay, WI

AGENCY: Coast Guard, DHS.

ACTION: Temporary final rule.

SUMMARY: The Coast Guard is 

establishing a temporary safety zone on