2830 Federal Register / Vol. 70, No. 11 / Tuesday, January 18, 2005 / Proposed Rules 

DEPARTMENT OF THE TREASURY

31 CFR Part 50 

RIN 1505–AB09 

Terrorism Risk Insurance Program; 

Additional Claims Issues; Insurer 

Affiliations

AGENCY: Departmental Offices, Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: The Department of the 

Treasury (Treasury) is issuing this 

proposed rule as part of its 

implementation of Title I of the 

Terrorism Risk Insurance Act of 2002 

(Act). The Act established a temporary 

Terrorism Insurance Program (Program) 

under which the Federal Government 

will share the risk of insured loss from 

certified acts of terrorism with 

commercial property and casualty 

insurers until the Program ends on 

December 31, 2005. This proposed rule 

is a clarification that, for purposes of 

calculating insurer deductibles and 

meeting the requirements for claiming 

the Federal share of compensation for 

insured losses, affiliations are to be 

determined based on the insurer’s 

circumstances as of the date of the first 

certified act of terrorism in a Program 

Year.

DATES: Written comments may be 

submitted on or before February 17, 

2005.

ADDRESSES: Submit comments by e-mail 

to triacomments@do.treas.gov or by 

mail (if hard copy, preferably an original 

and two copies) to: Terrorism Risk 

Insurance Program, Public Comment 

Record, Suite 2100, Department of the 

Treasury, 1425 New York Ave., NW., 

Washington, DC 20220. All comments 

should be captioned with ‘‘Proposed 

Rule on Insurer Affiliations’’. Please 

include your name, affiliation, address, 

e-mail address and telephone number in 

your comment. Comments will be 

available for public inspection by 

appointment only at the Reading Room 

of the Treasury Library. To make 

appointments, call (202) 622–0990 (not 

a toll-free number).

FOR FURTHER INFORMATION CONTACT:

Howard Leikin, Senior Insurance 

Advisor; or David Brummond, Legal 

Counsel, Terrorism Risk Insurance 

Program, (202) 622–6770 (not a toll-free 

number).

SUPPLEMENTARY INFORMATION:

I. Background 

On November 26, 2002, the President 

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 

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 in 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. 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 (as defined under the Act) 

occurring during the period between 

November 26, 2002, and December 31, 

2005. 

Each entity that meets the 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 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 share prior to expiration 

of the Program. An insurer’s deductible 

is calculated based on a percentage of 

the value of direct earned premiums 

collected over certain statutory periods. 

Once an insurer has met its deductible, 

the federal payments cover 90 percent of 

insured losses above the deductible, 

subject to an annual industry-aggregate 

limit of $100 billion. 

The Program provides a federal 

reinsurance backstop for three years. 

The Act provides Treasury with 

authority to recoup federal payments 

made under the Program through 

policyholder surcharges, up to a 

maximum annual limit. The Act also 

prohibits duplicate payments for 

insured losses that have been covered 

under other Federal programs. 

The mandatory availability or ‘‘make 

available’’ provisions in section 103 of 

the Act require that, for Program Year 1, 

Program Year 2, and, if so determined 

by the Secretary of the Treasury, for 

Program Year 3, all entities that meet 

the definition of insurer under the 

Program must make available in all of 

their commercial property and casualty 

insurance policies coverage for insured 

losses resulting from an act of terrorism. 

This coverage cannot differ materially 

from the terms, amounts and other 

coverage limitations applicable to losses 

arising from events other than acts of 

terrorism. On June 18, 2004, the 

Secretary of the Treasury announced his 

decision to extend the make available 

requirements through Program Year 3. 

As conditions for federal payment 

under the Program, insurers must 

provide clear and conspicuous 

disclosure to the policyholders of the 

premium charged for insured losses 

covered by the Program and of the 

Federal share of compensation for 

insured losses under the Program. In 

addition, the Act requires that insurers 

make certain certifications to Treasury 

and process and submit claims for the 

insured loss in accordance with 

appropriate business practices and any 

reasonable procedures Treasury may 

prescribe.

The Act also contains specific 

provisions designed to manage litigation 

arising out of or resulting from a 

certified act of terrorism. Among other 

provisions, section 107 creates, upon 

certification of an act of terrorism by the 

Secretary, an exclusive Federal cause of 

action and remedy for property damage, 

personal injury, or death arising out of 

or relating to an act of terrorism; 

preempts certain State causes of action; 

provides for consolidation of all civil 

actions in Federal court for any claim 

(including any claim for loss of 

property, personal injury, or death) 

relating to or arising out of an act of 

terrorism; and provides that amounts 

awarded in actions for property damage, 

personal injury, or death that are 

attributable to punitive damages are not 

to be counted as ‘‘insured losses’’ and 

not paid under the Program. The Act 

also provides the United States with the 

right of subrogation with respect to any 

payment or claim paid by the United 

States under the Program. 

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 in a useful 

and efficient manner. Second, in accord 

with the Act’s stated purposes, Treasury 

seeks to rely as much as possible on the

Federal Register / Vol. 70, No. 11 / Tuesday, January 18, 2005 / Proposed Rules 2831

State insurance regulatory structure. In 

that regard, Treasury has coordinated 

the 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 that insurers develop their own 

capacity, resources, and mechanisms for 

terrorism insurance coverage when the 

Program expires. 

II. Previous Rulemaking 

To assist insurers, policyholders, and 

other interested parties in complying 

with immediately applicable 

requirements of the Act, Treasury issued 

interim guidance to be relied upon by 

insurers until superseded by 

regulations. These notices of interim 

guidance have now been superseded by 

final regulations. General provisions, 

including the scope of the Program and 

key definitions, and rules on disclosures 

and mandatory availability are at 

Subparts A, B, and C of 31 CFR part 50 

(68 FR 41250; 68 FR 59720). Treasury’s 

rules applying provisions of the Act to 

State residual market insurance entities 

and State workers’ compensation funds 

are at Subpart D of 31 CFR part 50 (68 

FR 59715). The rules setting forth 

procedures for filing claims for payment 

of the Federal share of compensation for 

insured losses are at Subpart F of 31 

CFR part 50 (69 FR 39296). Subpart G 

of 31 CFR part 50 (69 FR 39296) 

contains the rules on audit and 

recordkeeping, which specify record 

retention by insurers in connection with 

the handling and settlement of claims to 

enable Treasury to perform financial 

and claim audits. Subpart I of 31 CFR 

part 50 (69 FR 44932) contains 

Treasury’s rules implementing the 

litigation management provisions of 

section 107 of the Act. 

III. The Proposed Rule 

Under the Act and regulations, 

‘‘affiliates’’ are treated collectively as 

one insurer for purposes of calculating 

the insurer deductible. This proposed 

rule amends Subpart F of 31 CFR part 

50, which contains the claims 

procedures for insurers seeking the 

Federal share of compensation for 

insured losses, to clarify that for that 

Subpart’s purposes, insurer affiliations 

for any Program Year shall be 

determined based on the insurer’s 

circumstances as of the date of the first 

certified act of terrorism in that Program 

Year. 

This change will clarify how 

deductible calculations, loss 

certifications, claims for the Federal 

share of compensation and receipt of 

payment are to be handled, considering 

that (1) affiliations of insurers may 

change over the course of a Program 

Year, and (2) there may be more than 

one act of terrorism certified in a 

Program Year. It is Treasury’s intention 

to make known how such a combination 

of circumstances will be addressed 

under the Program so that insurers can 

plan their business affairs and 

transactions accordingly. 

An insurer’s deductible for a Program 

Year is based on direct earned premium 

from the prior calendar year. Through 

an interpretive letter, issued on 

December 1, 2003, Treasury addressed 

the question of how the direct earned 

premium (and consequently, the insurer 

deductible) would be determined for an 

insurer or insurer group where the 

composition of the affiliations has 

changed since the prior calendar year. 

The interpretive letter indicated that the 

affiliations in place at the time of the 

occurrence of the certified act of 

terrorism would govern how an 

insurer’s or insurer group’s direct 

earned premium would be determined 

and the resulting deductible calculated. 

This interpretation did not address the 

circumstance where more than one 

event is certified in the same Program 

Year. 

Treasury thus believes it is necessary 

to provide additional guidance to 

insurers to clarify Program 

implementation should more than one 

act of terrorism be certified in a Program 

Year. In developing this proposed rule, 

Treasury examined a variety of other 

alternatives for determining insurer 

affiliations, including: 

1. The determination of affiliations as 

of each certified act of terrorism; 

2. The determination of affiliations as 

of the first certified act in a Program 

Year for which the particular insurer 

has losses; 

3. The determination of all affiliations 

as of January 1 of each Program Year. 

Treasury has concluded that the first 

alternative would produce unacceptable 

results because the insurer deductible is 

a Program Year deductible, not a perevent deductible. Any calculation of the 

deductible, in Treasury’s view, must be 

applied against all insured losses 

consistently for the entire Program Year.

The second alternative, determining 

affiliations at the time of a first certified 

act in a Program Year for which an 

insurer actually has insured losses, 

would provide a higher degree of 

accuracy in reflecting the appropriate 

affiliations at the time of such an event. 

However, after examining the different 

ways that affiliations may change in the 

interim between events, Treasury 

considers this approach to be very 

complicated to describe and administer. 

Given the temporary nature of the 

Program, Treasury believes that this 

alternative would require too great an 

effort to overcome the possibility of 

confusion for both insurers and the 

Program. 

The third alternative, determining 

affiliations as of January 1 of a Program 

Year, would be inconsistent with the 

interpretation Treasury has already 

issued. More importantly, Treasury 

considers this approach to have too 

great a potential to provide an 

inaccurate reflection of the insurance 

entity at the time of an actual certified 

act of terrorism. Since such an event can 

occur well into a Program Year, changes 

in affiliations may be significant. 

It is Treasury’s view that the proposed 

rule is a reasonable compromise 

approach, one that can be relatively easy 

to understand and follow and practical 

to administer. Under this approach, the 

affiliations used for calculating direct 

earned premium and the resultant 

insurer deductible for a Program Year 

are determined for all insurers as of the 

date of the first act of terrorism certified 

by the Secretary in a Program Year. This 

is regardless of whether the insurer has 

had any insured losses from the event. 

Treasury believes that the direct earned 

premium reported for the calendar year 

prior to the Program Year in which the 

certified act occurs can readily be 

determined for the insurers affiliated at 

the time of the first event. The insurer 

deductibles calculated from this 

information can be reasonably applied 

to that first event’s insured losses as 

well as to the insured losses resulting 

from any certified acts in the remainder 

of the Program Year. 

As a practical matter, Treasury is 

proposing that all requests for the 

Federal share of compensation for a 

Program Year will be processed based 

on the affiliations as of the first certified 

act in a Program Year, regardless of 

actual changes to those affiliations prior 

to the occurrence of another certified act 

within the same Program Year. This 

approach will allow Treasury to receive 

and maintain consistent information in 

providing the Federal share of 

compensation and reduce the potential 

administrative burden that Treasury 

might otherwise have in tracking and 

reviewing claims in this temporary 

program.

2832 Federal Register / Vol. 70, No. 11 / Tuesday, January 18, 2005 / Proposed Rules 

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 

therefore has not been reviewed by the 

Office of Management and Budget. 

Regulatory Flexibility Act. Pursuant to 

the Regulatory Flexibility Act, 5 U.S.C. 

601 et seq., it is hereby certified that this 

proposed rule will not have a significant 

economic impact on a substantial 

number of small entities. Treasury is 

required to pay the Federal share of 

compensation to insurers for insured 

losses in accordance with the Act. A 

condition of Federal payment is that the 

insurer must submit to Treasury, in 

accordance with procedures established 

by Treasury, a claim for payment and 

certain certifications. The Act itself 

requires all insurers receiving direct 

earned premium for any type of 

property and casualty insurance, as 

defined in the Act, to participate in the 

Program. This includes all insurers 

regardless of size or sophistication. The 

Act also defines property and casualty 

insurance to mean commercial lines of 

insurance without any reference to the 

size or scope of the insurer or the 

insured. Accordingly, any economic 

impact associated with the proposed 

rule flows from the Act and not the 

proposed rule. The proposed rule 

merely clarifies the point in time at 

which insurer affiliations are 

determined for purposes of the Program. 

A regulatory flexibility analysis is thus 

not required.

List of Subjects in 31 CFR Part 50

Terrorism risk insurance.

PART 50—TERRORISM RISK 

INSURANCE PROGRAM 

1. The authority citation for 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. Subpart F is proposed to be 

amended by adding a new section 50.55 

to read as follows:

§ 50.55 Determination of Affiliations. 

For the purposes of this Subpart F, an 

insurer’s affiliates for any Program Year 

shall be determined based on the 

insurer’s circumstances as of the date of 

the first certified act of terrorism in that 

Program Year.

Dated: January 11, 2005. 

Wayne A. Abernathy, 

Assistant Secretary of the Treasury.

[FR Doc. 05–925 Filed 1–14–05; 8:45 am] 

BILLING CODE 4811–15–P

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 122 

[OW–2002–0068; FRL–7862–1] 

RIN 2040–AE71 

Extension of National Pollutant 

Discharge Elimination System 

(NPDES) Permit Deadline for Storm 

Water Discharges for Oil and Gas 

Construction Activity That Disturbs 

One to Five Acres

AGENCY: Environmental Protection 

Agency (EPA).

ACTION: Notice of Proposed Rulemaking.

SUMMARY: Today EPA proposes to 

amend the rule on National Pollutant 

Discharge Elimination System storm 

water permits to postpone until June 12, 

2006, the requirement to obtain permit 

coverage for oil and gas construction 

activity that disturbs one to five acres of 

land. This would be the second 

postponement promulgated by EPA for 

these activities. EPA proposes this 

postponement in order to afford the 

Agency additional time to complete 

consideration of the issues raised by 

stakeholders about storm water runoff 

from construction activities at oil and 

gas sites and of procedures for 

controlling storm water discharges as 

appropriate to mitigate impacts on water 

quality. EPA intends to take final action 

with respect to today’s proposal by 

March 10, 2005. Within six months of 

this final action (September 12, 2005), 

EPA intends to publish a notice of 

proposed rulemaking in the Federal 

Register for addressing these discharges 

and invite public comments.

DATES: Comments on the proposed rule 

must be received on or before February 

17, 2005.

ADDRESSES: Submit your comments, 

identified by Docket ID No. OW–2002–

0068, by one of the following methods: 

• Federal eRulemaking Portal: http://

www.regulations.gov. Follow the on-line 

instructions for submitting comments. 

• Agency Web site: http://

www.epa.gov/edocket. EDOCKET, EPA’s 

electronic public docket and comment 

system, is EPA’s preferred method for 

receiving comments. Follow the on-line 

instructions for submitting comments. 

• E-mail: ow-docket@epa.gov. 

Attention Docket ID No. OW–2002–

0068. 

• Mail: Water Docket, Environmental 

Protection Agency, Mailcode: 4101 T, 

1200 Pennsylvania Avenue, NW., 

Washington, DC 20460. 

• Hand Delivery: Deliver your 

comments to: EPA Docket Center, EPA 

West, Room B102, 1301 Constitution 

Avenue, NW., Washington, DC, 

Attention Docket ID No. OW–2002–

0068. Such deliveries are only accepted 

during the Docket’s normal hours of 

operation. The EPA Docket Center 

Public Reading Room is open from 8:30 

a.m. to 4:30 p.m., Monday through 

Friday, excluding legal holidays. The 

telephone number for the Public 

Reading Room is (202) 566–1744, and 

the telephone number for the Water 

Docket is (202) 566–2426. 

Instructions: Direct your comments to 

Docket ID No. OW–2002–0068. EPA’s 

policy is that all comments received 

will be included in the public docket 

without change and may be made 

available online at http://www.epa.gov/

edocket, including any personal 

information provided, unless the 

comment includes information claimed 

to be Confidential Business Information 

(CBI) or other information whose 

disclosure is restricted by statute. Do 

not submit information that you 

consider to be CBI or otherwise 

protected through EDOCKET, 

regulations.gov, or e-mail. The EPA 

EDOCKET and the federal 

regulations.gov Web sites are 

‘‘anonymous access’’ systems, which 

means EPA will not know your identity 

or contact information unless you 

provide it in the body of your comment. 

If you send an e-mail comment directly 

to EPA without going through 

EDOCKET or regulations.gov, your email address will be automatically 

captured and included as part of the 

comment that is placed in the public 

docket and made available on the 

Internet. If you submit an electronic 

comment, EPA recommends that you 

include your name and other contact 

information in the body of your 

comment and with any disk or CD–ROM 

you submit. If EPA cannot read your 

comment due to technical difficulties 

and cannot contact you for clarification, 

EPA may not be able to consider your 

comment. Electronic files should avoid 

the use of special characters, any form 

of encryption, and be free of any defects 

or viruses. For additional instructions 

on submitting comments, go to Section 

I.C of the SUPPLEMENTARY INFORMATION

section of this document. 

Docket: All documents in the docket 

are listed in the EDOCKET index at