76208 Federal Register / Vol. 67, No. 238 / Wednesday, December 11, 2002 / Notices 

terrorism (as defined in the Act) at 

deductibles and limits that do not differ 

materially from the coverage provided 

for other perils. 

For the purposes of this interim 

guidance, the ‘‘make available’’

requirement does not mean that insurers 

must make available coverage for all 

types of risks. For example, if an insurer 

does not cover all types of risks, either 

because the insurer is outside of direct 

State regulatory oversight or a State 

permits exclusions for certain types of 

losses (e.g., nuclear, biological, or 

chemical events) an insurer would not 

be required to make such coverage 

available. 

This interim guidance is consistent 

with the Act’s stated purpose of 

ensuring widespread availability of 

terrorism risk insurance while 

preserving State insurance regulation. 

During the course of implementing the 

Program, Treasury will be monitoring 

the pricing and availability of terrorism 

risk insurance coverage as part of the 

Act’s requirements that Treasury study 

the effectiveness of the Program (section 

108(d)(1)) and compile information on 

the premium rates of insurers (section 

104(f)). 

How May Insurers Comply With the 

‘‘Make Available’’ Provision? 

For purposes of this interim guidance, 

an insurer that makes a formal offer of 

coverage to a policyholder that does not 

differ materially from the terms (other 

than price), amounts and other coverage 

limitations offered to the policyholder 

will be deemed in compliance with the 

‘‘make available’’ requirement. 

May an Insurer Offer Coverage for Acts 

of Terrorism (as Defined in the Act) 

That Differs Materially From the Terms, 

Amounts, and Other Coverage 

Limitations for Losses Arising From 

Events Other Than Acts of Terrorism?

For the purposes of this interim 

guidance, an insurer may offer coverage 

that is on different terms, amounts, or 

coverage limitations as long as the 

insurer satisfies the ‘‘make available’’

requirements (as described in the 

previous question and answer) and as 

long as such offers do not violate any 

State laws or regulations. For example, 

in a State that requires the provision of 

full coverage without any exclusion, the 

Act would not preempt that State’s 

preexisting requirements. In contrast, if 

a State permits certain exclusions or 

allows for other limitations, or if an 

insurance policy is not directly 

governed by State requirements, then 

after first satisfying the ‘‘make 

available’’ requirement (as described in 

the previous question and answer), an 

insurer could offer limited coverage or 

coverage with exclusions. 

C. Property and Casualty Insurance and 

Direct Earned Premium 

What Types of Property and Casualty 

Insurance Are Covered by the Program? 

Section 102(12) of the Act defines 

property and casualty insurance to 

mean commercial lines of property and 

casualty insurance, including excess 

insurance, workers’ compensation 

insurance, and surety insurance. 

As interim guidance prior to the 

issuance of regulations, Treasury deems 

the following lines of insurance from 

the NAIC’s Exhibit of Premiums and 

Losses (commonly known as Statutory 

Page 14) to be included in the Program: 

Line 1—Fire; Line 2.1—Allied Lines; 

Line 3—Farmowners Multiple Peril; 

Line 5.1—Commercial Multiple Peril 

(non-liability portion); Line 5.2—

Commercial Multiple Peril (liability 

portion); Line 8—Ocean Marine; Line 

9—Inland Marine; Line 16—Workers’

Compensation; Line 17—Other Liability; 

Line 18—Products Liability; Line 19.3—

Commercial Auto No-Fault (personal 

injury protection); Line 19.4—Other 

Commercial Auto Liability; Line 21.2—

Commercial Auto Physical Damage; 

Line 22—Aircraft (all perils); Line 24—

Surety; Line 26—Burglary and Theft; 

and Line 27—Boiler and Machinery. 

Section 102(12) (B) of the Act lists 

types of insurance coverage that are 

excluded from the Program. These are 

private mortgage or title insurance; 

financial guaranty insurance issued by 

monoline financial guaranty insurance 

corporations; insurance for medical 

malpractice; health or life insurance, 

including group life insurance; flood 

insurance provided under the National 

Flood Insurance Act of 1968; and 

reinsurance or retrocessional 

reinsurance. 

In addition, the Act excludes, 

‘‘Federal crop insurance issued or 

reinsured under the Federal Crop 

Insurance Act, or any other type of crop 

or livestock insurance that is privately 

issued or reinsured.’’ As interim 

guidance to facilitate implementation, 

Treasury deems the phrase ‘‘any other 

type of crop or livestock insurance that 

is privately issued or reinsured’’ to 

mean Multiple Peril Crop insurance 

reported on Line 2.2 of the NAIC’s 

Exhibit of Premiums and Losses 

(commonly known as Statutory Page 

14). 

How Is Direct Earned Premium 

Measured? 

The Act contains the term ‘‘direct 

earned premium.’’ The Act specifies an 

insurer’s direct earned premiums over a 

given calendar year as the deductible 

base for purposes of calculating an 

‘‘insurer deductible’’ as defined in 

section 102(7) of the Act. For purposes 

of interim guidance to enable insurers 

that report to the NAIC to calculate their 

‘‘insurer deductible’’ and to facilitate 

immediate implementation of the 

Program, the term ‘‘direct earned 

premium’’ means the direct premiums 

earned as reported to the NAIC in the 

Annual Statement in column 2 of the 

Exhibit of Premiums and Losses 

(commonly known as Statutory Page 

14). Treasury will be issuing additional 

guidance for entities covered under the 

Program that do not report to the NAIC.

Dated: December 3, 2002. 

Peter R. Fisher, 

Under Secretary of the Treasury.

[FR Doc. 02–31256 Filed 12–10–02; 8:45 am] 

BILLING CODE 4810–25–P

DEPARTMENT OF THE TREASURY

Departmental Offices; Study of the 

Impact of Threat of Terrorism on 

Availability of Group Life Insurance

AGENCY: Department of the Treasury, 

Departmental Offices.

ACTION: Notice; request for comments.

SUMMARY: Recently enacted terrorism 

insurance legislation requires the 

Secretary of the Treasury (Treasury) to 

study, on an expedited basis, whether 

adequate and affordable catastrophe 

reinsurance for acts of terrorism is 

available to life insurers in the United 

States that issue group life insurance, 

and the extent to which the threat of 

terrorism is reducing the availability of 

group life insurance for consumers in 

the United States. To assist in this 

study, the Treasury is soliciting 

comments on the questions listed 

below.

DATES: Comments must be in writing 

and received by January 10, 2003.

ADDRESSES: Send comments by e-mail to 

grouplifestudy@do.treas.gov. Please 

include your name, affiliation, address, 

e-mail address, and telephone number. 

All submissions should be captioned 

‘‘Comments on Group Life Insurance 

Study’’.

FOR FURTHER INFORMATION CONTACT:

Lucy Huffman, Project Manager, Office 

of Microeconomic Analysis, 202–622–

0198; John Worth, Acting Director, 

Office of Microeconomic Analysis, 202–

622–2683; U.S. Treasury Department.

SUPPLEMENTARY INFORMATION: Section 

103(h) of the Terrorism Risk Insurance 

Act of 2002 (Public Law No. 107–297) 

Federal Register / Vol. 67, No. 238 / Wednesday, December 11, 2002 / Notices 76209

(Act) requires the Treasury to study, on 

an expedited basis, whether adequate 

and affordable catastrophe reinsurance 

for acts of terrorism is available to life 

insurers in the United States that offer 

group life insurance, and the extent to 

which the threat of terrorism is reducing 

the availability of group life insurance 

coverage for consumers in the United 

States. To the extent that the Treasury 

determines that such coverage is not or 

will not be reasonably available to both 

such insurers and consumers, the 

Treasury is directed to apply, in 

consultation with the National 

Association of Insurance 

Commissioners, the provisions of the 

Act, as appropriate, to group life 

insurers; and provide such restrictions, 

limitations, or conditions with respect 

to any financial assistance provided that 

Treasury deems appropriate, based on 

this study. 

The purpose of the Act is to establish 

a temporary Federal program that 

provides for a transparent system of 

shared public and private compensation 

for insured losses resulting from acts of 

terrorism, in order to protect consumers 

by addressing market disruptions and 

ensure the continued widespread 

availability and affordability of property 

and casualty insurance for terrorism 

risk; and 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. 

Treasury is soliciting comment in 

response to the following questions, 

including empirical data in support of 

such comments where appropriate and 

available. 

I. The Impact of Terrorism Risk on 

Group Life Insurers 

1.1 Who are the suppliers of the 

group life insurance in the U.S.; who are 

the buyers; and how are sellers and 

buyer brought together? 

1.2 What is the corporate status of 

group life insurers? Are they generally 

stand-alone companies, or affiliates of 

other corporations? If the latter, what 

are the major business interests of the 

other corporations? 

1.3 What characterizes group life 

insurance offerings? Please describe 

typical terms of coverage, offer and 

renewal procedures, and other relevant 

information. 

1.4 How is group life insurance 

regulated in the U.S.? Are there 

significant differences in group life 

regulation among the states and, if so, 

what are these differences? 

1.5 What are the risk exposures of 

customers and how are they 

concentrated—by locality, by type of 

employer, other? What is the annual 

premium structure for these different 

exposures?

1.6 What amounts of loss exposure 

are typically reinsured? Please describe 

the structure of typical reinsurance 

contracts, including the period of 

coverage and typical renewal process. 

1.7 What was the amount of group 

life insurance losses in the terrorist 

attack of September 11, 2001; and how 

was it distributed—losses to insurers 

versus losses to reinsurers? How was it 

distributed within each group? 

1.8 What was the availability and 

price of reinsurance in the period before 

and following September 11, 2001, for 

group life insurance? What is it today? 

Please be specific by type and amount 

of coverage available, deductible, 

sublimit, renewability, and other 

relevant characteristics. 

1.9 What is the current capacity of 

group life insurers in the U.S. to bear 

terrorism risk, individually and as 

affiliates of other companies, taking into 

consideration their reinsurance 

situation? Please provide empirical 

support for responses as available and 

appropriate. 

1.10 Are there other sources of 

protection for terrorism risks in group 

life insurance, e.g., through capital 

markets? To what extent are these 

sources used currently? What are the 

issues associated with expanded use of 

these sources? 

1.11 Please address and provide 

empirical support for whether group life 

insurers have reasonable access to 

adequate and affordable catastrophe 

reinsurance, and, if not, why inclusion 

in the Act would correct this situation. 

In so doing, please compare the 

magnitude and scope of the situation of 

group life insurers to the situation 

previous to the passage of the Act of 

those property and casualty insurers 

that are included in the Act. 

II. The Impact of Terrorism Risk on 

Group Life Insurance Markets 

2.1 Please describe in detail, current 

group life insurance market conditions, 

including availability and pricing, by 

type and location of employers and 

other purchasers. 

2.2 What is the impact of terrorism 

risk on group life insurance availability 

for employees and other consumers? 

Please describe in as much detail as 

possible which employees and other 

consumers have been significantly 

affected, including availability and 

pricing, by type and location of 

employer or other purchaser of group 

life coverage. 

2.3 What is the cost and availability 

of alternative sources of life insurance 

coverage for those employees and other 

consumers affected by the reduced 

availability and affordability of group 

life insurance? 

2.4 Please explain and provide 

empirical support concerning the extent 

to which the threat of terrorism is 

reducing reasonable availability of 

group life insurance coverage for 

employees and other consumers in the 

U.S., and whether it would continue to 

be reduced if group life insurers 

continue to be excluded from the 

Program. Please compare the magnitude 

and scope of the impact on consumers 

of not including group life insurance to 

the impact on consumers previous to 

the passage of the Act of those property 

and casualty insurance lines covered 

under the Act. Please explain how 

inclusion would correct this situation. 

III. The Potential for Inclusion in the 

Federal Program 

3.1 Treasury presumes that, if it 

would be appropriate to include group 

life insurance under the Act, Treasury 

would apply the current provisions of 

the Act to group life insurers. If this is 

not the case, please discuss and provide 

a detailed explanation of the changes 

that would need to be made to 

implement the Program for group life 

insurers. Please include discussion of 

any operational difficulties with 

applying the current provisions in the 

Act to group life insurers, any other 

characteristics of group life insurance 

that should be considered with respect 

to any financial assistance if group life 

insurers were included under the Act, 

and the benefits and costs, including 

administrative costs, of any proposed 

changes to the provisions for group life 

insurers.

Dated: December 3, 2002. 

Mark Warshawsky, 

Deputy Assistant Secretary for Economic 

Policy, Microeconomic Analysis.

[FR Doc. 02–31211 Filed 12–10–02; 8:45 am] 

BILLING CODE 4810–25–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service 

Open Meeting of the Area 1 Taxpayer 

Advocacy Panel (Including the States 

of New York, Connecticut, 

Massachusetts, Rhode Island, New 

Hampshire, Vermont and Maine)

AGENCY: Internal Revenue Service (IRS), 

Treasury.