Federal Register / Vol. 87, No. 42 / Thursday, March 3, 2022 / Proposed Rules 12003 

promulgated, would not have a 

significant economic impact on a 

substantial number of small entities 

under the criteria of the Regulatory 

Flexibility Act. 

Environmental Review 

This proposal will be subject to an 

environmental analysis in accordance 

with FAA Order 1050.1F, 

‘‘Environmental Impacts: Policies and 

Procedures’’ prior to any FAA final 

regulatory action. 

List of Subjects in 14 CFR Part 71 

Airspace, Incorporation by reference, 

Navigation (air). 

The Proposed Amendment 

Accordingly, pursuant to the 

authority delegated to me, the Federal 

Aviation Administration proposes to 

amend 14 CFR part 71 as follows: 

PART 71—DESIGNATION OF CLASS A, 

B, C, D, AND E AIRSPACE AREAS; AIR 

TRAFFIC SERVICE ROUTES; AND 

REPORTING POINTS 

■ 1. The authority citation for 14 CFR 

part 71 continues to read as follows: 

Authority: 49 U.S.C. 106(f), 106(g); 40103, 

40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 

1959–1963 Comp., p. 389. 

§ 71.1 [Amended] 

■ 2. The incorporation by reference in 

14 CFR 71.1 of FAA Order JO 7400.11F, 

Airspace Designations and Reporting 

Points, dated August 10, 2021, and 

effective September 15, 2021, is 

amended as follows: 

Paragraph 6005 Class E Airspace Areas 

Extending Upward From 700 Feet or More 

Above the Surface of the Earth. 

* * * * * 

ACE KS E5 Hugoton, KS [Amended] 

Hugoton Municipal Airport, KS 

(Lat. 37°09′48′′ N, long. 101°22′14′′ W) 

That airspace extending upward from 700 

feet above the surface within a 6.5-mile 

radius of Hugoton Municipal Airport. 

Issued in Fort Worth, Texas, on February 

28, 2022. 

Martin A. Skinner, 

Acting Manager, Operations Support Group, 

ATO Central Service Center. 

[FR Doc. 2022–04457 Filed 3–2–22; 8:45 am] 

BILLING CODE 4910–13–P 

FEDERAL TRADE COMMISSION 

[File No. R207009] 

16 CFR Part 4 

Petition for Rulemaking of Institute for 

Policy Integrity 

AGENCY: Federal Trade Commission. 

ACTION: Receipt of petition; request for 

comment. 

SUMMARY: Please take notice that the 

Federal Trade Commission 

(‘‘Commission’’) received a petition for 

rulemaking from NetChoice, Americans 

for Prosperity, Hispanic Leadership 

Fund, Innovation Economy Institute, 

Institute for Policy Innovation, James 

Madison Institute, National Taxpayers 

Union, R Street Institute, and Young 

Voices, and has published that petition 

online at https://www.regulations.gov. 

This petition requests that the 

Commission’s current rule regarding 

disqualification of Commissioners be 

amended to also apply to enforcement 

proceedings and include specific 

procedures on time to respond to 

petitions, review by the FTC Ethics 

Official and the Commissioners, and 

standards for determining recusal. The 

Commission invites written comments 

concerning the petition. Publication of 

this petition is pursuant to the 

Commission’s Rules of Practice and 

Procedure and does not affect the legal 

status of the petition or its final 

disposition. 

DATES: Comments must identify the 

petition docket number and be filed by 

April 4, 2022. 

ADDRESSES: You may view the petition, 

identified by docket number FTC–2022– 

0005, and submit written comments 

concerning its merits by using the 

Federal eRulemaking Portal at https://

www.regulations.gov. Follow the online 

instructions for submitting comments. 

Do not submit sensitive or confidential 

information. You may read background 

documents or comments received at 

https://www.regulations.gov at any time. 

FOR FURTHER INFORMATION CONTACT: 

Daniel Freer (phone: 202–326–2663, 

email: dfreer@ftc.gov), Office of the 

Secretary, Federal Trade Commission, 

600 Pennsylvania Avenue NW, 

Washington, DC 20580. 

SUPPLEMENTARY INFORMATION: Pursuant 

to Section 18(a)(1)(B) of the Federal 

Trade Commission Act, 15 U.S.C. 

57a(1)(B), and FTC Rule 1.31(f), 16 CFR 

1.31(f), notice is hereby given that the 

above-captioned petition has been filed 

with the Secretary of the Commission 

and has been placed on the public 

record for a period of thirty (30) days. 

Any person may submit comments in 

support of or in opposition to the 

petition. All timely and responsive 

comments submitted in connection with 

this petition will become part of the 

public record. 

The Commission will not consider the 

petition’s merits until after the comment 

period closes. It may grant or deny the 

petition in whole or in part, and it may 

deem the petition insufficient to warrant 

commencement of a rulemaking 

proceeding. The purpose of this 

document is to facilitate public 

comment on the petition to aid the 

Commission in determining what, if 

any, action to take regarding the request 

contained in the petition. This 

document is not intended to start, stop, 

cancel, or otherwise affect rulemaking 

proceedings in any way. 

Because your comment will be placed 

on the publicly accessible website at 

https://www.regulations.gov, you are 

solely responsible for making sure your 

comment does not include any sensitive 

or confidential information. In 

particular, your comment should not 

include any sensitive personal 

information, such as your or anyone 

else’s Social Security number; date of 

birth; driver’s license number or other 

state identification number, or foreign 

country equivalent; passport number; 

financial account number; or credit or 

debit card number. You are also solely 

responsible for making sure your 

comment does not include any sensitive 

health information, such as medical 

records or other individually 

identifiable health information. In 

addition, your comment should not 

include any ‘‘trade secret or any 

commercial or financial information 

which . . . is privileged or 

confidential’’—as provided by Section 

6(f) of the FTC Act, 15 U.S.C. 46(f), and 

FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). 

Authority: 15 U.S.C. 46; 15 U.S.C. 57a; 5 

U.S.C. 601 note. 

April J. Tabor, 

Secretary. 

[FR Doc. 2022–04489 Filed 3–2–22; 8:45 am] 

BILLING CODE 6750–01–P 

DEPARTMENT OF THE TREASURY 

Bureau of the Fiscal Service 

31 CFR Part 223 

RIN 1530–AA20 

Surety Companies Doing Business 

With the United States 

AGENCY: Bureau of the Fiscal Service, 

Treasury. 


khammond on DSKJM1Z7X2PROD with PROPOSALS
12004 Federal Register / Vol. 87, No. 42 / Thursday, March 3, 2022 / Proposed Rules 

1 84 FR 72138. 

ACTION: Notice of proposed rulemaking 

with request for comments. 

SUMMARY: The Department of the 

Treasury, Bureau of the Fiscal Service 

(Treasury) administers the corporate 

Federal surety bond program (the 

program). Treasury issues certificates of 

authority to qualified sureties to 

underwrite and reinsure Federal surety 

bond obligations. Treasury also 

recognizes qualified companies as 

admitted reinsurers who can provide 

reinsurance to certified companies 

except on Federal surety bonds. 

Treasury recognizes an admitted 

reinsurer for the purpose of providing 

credit to a surety for non-Federal 

obligations ceded to an admitted 

reinsurer when valuing the assets and 

liabilities of a surety for Treasury 

certificate purposes, as appropriate. 

Treasury is proposing to amend its 

regulations to allow for recognition of 

additional companies as reinsurers that 

are excluded under the current 

regulations. Additionally, Treasury 

proposes to amend its regulations to 

incorporate requirements for surety 

companies to submit information that 

Treasury uses to perform financial 

analysis of these companies, which was 

previously published in supplemental 

guidance documents. Treasury also 

proposes a reorganization of the existing 

regulations to modernize and improve 

their structure. 

DATES: Submit written comments on or 

before May 2, 2022. 

ADDRESSES: You may submit comments, 

identified by docket number FISCAL– 

2021–0006, using the following 

methods: 

• Federal eRulemaking Portal: 

(https://www.regulations.gov). Follow 

the instructions on the website for 

submitting comments. 

• Mail: Surety Bond Branch, Bureau 

of the Fiscal Service, 200 Third Street, 

Room 110, Parkersburg, WV 26106. 

Instructions: All submissions received 

must refer to Fiscal Service and docket 

number FISCAL–2021–0006. In general, 

comments received will be published on 

www.regulations.gov without change, 

including any business or personal 

information provided. Do not disclose 

any information in your comment or 

supporting materials that you consider 

confidential or inappropriate for public 

disclosure. Comments will not be edited 

to remove any identifying or contact 

information. 

FOR FURTHER INFORMATION CONTACT: 

Melvin Saunders, at melvin.saunders@

fiscal.treasury.gov or 304–480–5108; 

Bobbi McDonald, bobbi.mcdonald@

fiscal.treasury.gov or 304–480–7098; or 

David Crowe at david.crowe@

fiscal.treasury.gov or 304–480–8971. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Treasury’s Bureau of the Fiscal 

Service is responsible for administering 

the corporate Federal surety bond 

program under the authority of 31 

U.S.C. 9304–9308 and 31 CFR part 223 

(part 223). Treasury publishes 

supplemental guidance on its 

requirements in annual letters posted to 

its website. Congress delegated to 

Treasury the discretion to issue a 

certificate of authority to a surety 

company if Treasury determines that: 

The surety’s articles of incorporation 

authorize it to engage in the business of 

surety; the company has the requisite 

paid-up capital, cash, or equivalent 

assets; and the company is able to carry 

out its contracts. Treasury issues a 

certificate of authority to companies 

(‘‘certified sureties’’) to write or reinsure 

Federal surety bonds. Additionally, 

Treasury recognizes certain companies 

as admitted reinsurers, i.e., companies 

permitted by Treasury to provide 

reinsurance to the certified sureties 

except on excess risks that run to the 

United States. Treasury publishes 

annual lists of companies holding a 

certificate of authority and of companies 

recognized as admitted reinsurers. 

Treasury published a Request for 

Information (RFI) on December 30, 

2019.1 The RFI sought input from the 

public on a variety of topics relating to 

Treasury’s evaluation of surety 

companies, as well as the operations of 

the corporate Federal surety bond 

program. These topics included, among 

other things, Treasury’s financial 

analysis methodology, its rules 

regarding credit for reinsurance, and the 

documentation it requires to perform its 

review of companies seeking 

designation and renewal as certified 

sureties or admitted reinsurers. The RFI 

closed for comments on February 13, 

2020. The comments received informed, 

in part, Treasury’s decision to develop 

and propose this rulemaking. 

The Bureau of the Fiscal Service 

coordinated closely with Treasury’s 

Federal Insurance Office in developing 

both the RFI and the following proposed 

regulations. 

A. Reinsurance 

Since the earliest days of the surety 

program, Treasury considered an 

evaluation of reinsurance to be an 

important part of its review and analysis 

of surety companies’ abilities to carry 

out their contracts. Treasury Circular 

105, dated December 22, 1906, 

instituted a limitation on surety 

companies that prevented them from 

underwriting any risk in excess of 10 

percent of their paid-up capital and 

surplus unless the amount exceeding 

the 10 percent limitation was secured by 

‘‘reinsurance to the satisfaction of this 

Department.’’ This allowance for 

companies with satisfactory reinsurance 

applied only to risks running to parties 

other than the United States 

government; companies were not 

permitted to underwrite any Federal 

risk in excess of the 10 percent 

limitation. 

As Treasury’s regulatory requirements 

for surety companies became more 

thorough, so too did the requirements 

regarding reinsurance. Treasury added a 

requirement in 1922 that such 

companies providing reinsurance file 

financial statements with Treasury 

annually. In addition to its list of 

certified surety companies, Treasury 

began publishing different lists of 

acceptable reinsurance companies, 

specifying which companies could 

reinsure Federal risks. 

The limitation of risk, and the 

protection required when a risk runs to 

the United States, endures in part 223 

today. Sections 223.10 and 223.11 

specify the 10 percent limitation (now 

referred to as the underwriting 

limitation) and the available methods of 

protecting risk in excess of that 

limitation. The regulations also require 

surety companies to submit quarterly 

schedules showing their risks in excess 

of the limitation and describing the 

protective methods they have taken to 

cover their excess risks. A surety 

company may only use a company 

holding a certificate of authority from 

Treasury to reinsure risks in excess of 

its underwriting limitation where the 

United States is the obligee. For a 

Treasury-certified surety to receive 

credit for an excess risk on a nonFederal bond ceded to a reinsurer, the 

excess risk must be reinsured either by 

another certified surety, or by an 

admitted reinsurer. 

Treasury examines a surety 

company’s reinsurance to determine 

compliance with the underwriting 

limitation provisions of part 223, and as 

part of Treasury’s analysis of whether 

the company is solvent and able to carry 

out its contracts. The provision at 31 

CFR 223.9 states that Treasury may 

value the assets and liabilities of 

companies in its discretion, and notes 

that credit for reinsurance will be 

allowed to the surety company if the 

reinsurer holds a certificate of authority 

from Treasury or is recognized by 

Treasury as an admitted reinsurer. 


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Additionally, Treasury allows credit for 

reinsurance ceded to recognized pools 

or secured by trust accounts in certain 

circumstances. For the surety company 

to receive credit for any other 

reinsurance, Treasury requires the 

reinsurer’s liability to be secured with 

approved collateral. 

Treasury has not significantly 

updated the requirements regarding 

reinsurance in part 223 in many years. 

In that time, various changes have taken 

place in the regulation of insurance that 

affect the companies applying to 

Treasury for a certificate of authority or 

renewal of their certificate. These 

include the completion and entry into 

force of the Covered Agreements with 

the European Union and the United 

Kingdom, providing for (among other 

things) the elimination of collateral 

requirements, under specified 

conditions, for reinsurers from those 

jurisdictions assuming business from 

United States ceding insurers. Relatedly, 

in 2011 and 2019, the National 

Association of Insurance Commissioners 

(NAIC) adopted significant amendments 

to its Credit for Reinsurance Model Law 

and Model Regulation. These 

amendments allow for United States 

insurers ceding reinsurance to certain 

foreign reinsurers to receive credit for 

the ceded reinsurance with reduced or 

eliminated collateral requirements. 

While these developments do not 

directly require changes to the 

regulations in part 223, surety 

companies have experienced increased 

difficulty in complying with Treasury’s 

requirements for collateral while also 

complying with their state of domicile 

regulations and reducing collateral 

previously used to secure non-U.S. 

reinsurance. 

B. Financial Analysis 

Prior to 1977, Treasury’s regulations 

outlined requirements for how it 

evaluated surety companies’ financial 

statements, valued assets and liabilities, 

reviewed investments, and performed 

its financial analysis. In 1977, 

Treasury’s approach changed. Treasury 

decided it would only publish highlevel requirements in its regulations 

and, moving forward, would provide the 

more specific guidance regarding its 

financial analysis in its annual letters or 

other guidance. Since then, the letters 

have been issued on an annual basis, 

and modified from time-to-time, to 

respond to program needs or to 

developments in the insurance industry, 

as appropriate. 

Over time, Treasury’s annual letters 

have therefore become the primary 

source for companies seeking 

information on the surety bond program 

and the process for becoming certified 

or admitted to the program. Treasury 

intends to amend its regulations to 

include the more detailed information 

related to its financial analysis of surety 

companies previously published in the 

annual letters. 

Treasury would like to provide 

companies, trade associations, and other 

members of the public the opportunity 

to formally comment on the proposed 

changes to the financial analysis and 

credit for reinsurance requirements in 

the surety bond regulations. 

II. Treasury’s Proposed Changes 

Treasury proposes to update part 223 

in three respects: 

1. Update 31 CFR 223.9, 223.11, 

223.12, and 223.22 to add two new 

categories of reinsurers eligible for 

recognition: Complementary reinsurers 

and alien reinsurers. 

2. Update 31 CFR 223.9 to provide 

more detail, previously provided in the 

program’s guidance, as to how Treasury 

conducts its financial analysis of surety 

companies, including the valuation of 

assets and liabilities. 

3. Make updates to 31 CFR 223.1, 

223.2, 223.3, 223.4, 223.5, 223.6, 223.7, 

223.8, 223.9, 223.10, 223.11, 223.12, 

223.13, 223.14, 223.15, 223.16, 223.17, 

223.18, 223.19, 223.20, 223.21, and 

223.22. These changes mostly reflect 

Treasury’s effort to reorganize part 223 

and to ensure it includes more detailed 

information for companies applying for 

a certificate of authority or recognition 

as an admitted reinsurer, or renewal 

thereof. As a part of this reorganization, 

§§ 223.4, 223.6, 223.13, and 223.14 will 

be reserved. These changes also include 

technical revisions, such as updating 

terminology and website addresses. 

Additionally, some of these changes 

clarify longstanding Treasury policies 

that may have been unclear in the 

current regulations or in the annual 

letters. 

A. New Categories of Recognized 

Reinsurance Companies 

Treasury proposes to add two new 

categories of companies that can receive 

recognition from Treasury, provided 

they apply for recognition and meet 

Treasury’s requirements. The first 

would be known as complementary 

reinsurers. Complementary reinsurers 

must be based in a non-U.S. jurisdiction 

that is subject to an in-force Covered 

Agreement addressing the elimination, 

under specified conditions, of collateral 

requirements and must meet other 

requirements defined in the proposed 

regulations. Certified sureties ceding 

reinsurance to companies recognized as 

complementary reinsurers would 

receive credit for the ceded reinsurance 

without it being secured by collateral. 

The second category would be known as 

alien reinsurers. These companies must 

be based in a jurisdiction that the NAIC 

recognizes as a Qualified Jurisdiction or 

a Reciprocal Jurisdiction, provided that 

the Reciprocal Jurisdiction is not party 

to an in-force Covered Agreement. 

These companies must also meet other 

requirements defined specifically in the 

proposed regulations. Certified sureties 

ceding reinsurance to companies 

recognized as alien reinsurers would be 

eligible to receive credit for the ceded 

reinsurance to the extent allowed by the 

ceding company’s state of domicile. 

In addition to receiving credit for 

reinsurance ceded to complementary or 

alien reinsurers, certified sureties could 

rely on complementary reinsurers or 

alien reinsurers to reinsure excess risks 

not running to the United States. 

Treasury believes these new 

categories of reinsurers reflect, and are 

informed by, developments and risk 

management practices that have 

occurred or been implemented 

internationally or at the state level since 

it last significantly updated its 

requirements. Treasury’s current 

collateral requirements were imposed 

due to the importance to the Federal 

Government of ensuring that certified 

sureties have reliable reinsurance. 

While it remains essential that those 

companies providing reinsurance to 

certified sureties be steadfast in their 

ability and willingness to pay when 

called upon, Treasury has determined 

that a risk-based approach (rather than 

an approach strictly favoring U.S.-based 

reinsurers)) to credit for reinsurance and 

collateral requirements provides 

sufficient protection to the Federal 

Government. Some insurance trade 

associations and companies responding 

to Treasury’s RFI pointed out that there 

have not been adverse effects for United 

States ceding insurers (or their 

policyholders) since the U.S. states 

began implementing revised NAIC 

model law and regulation provisions 

allowing reduced collateral for some 

non-U.S. reinsurance in 2011. 

Supporting this assertion, one company 

pointed to data from the NAIC showing 

that there has not been an increase in 

the amount of uncollectible reinsurance 

in the United States since 2010. The 

changes that have taken place in the 

regulation of reinsurance collateral at 

the state level demonstrate that it is 

appropriate to evaluate reinsurance 

companies based on the financial 

strength and market conduct of the 

companies themselves, provided they 

are from jurisdictions with sufficient 

prudential and market conduct 


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12006 Federal Register / Vol. 87, No. 42 / Thursday, March 3, 2022 / Proposed Rules 

regulatory regimes. There is thus little 

increased risk to the Federal 

Government of allowing Treasurycertified sureties to cede reinsurance to 

companies from these jurisdictions with 

reduced or eliminated collateral that 

satisfy the qualifications specified in the 

revised rule. Treasury’s proposed 

changes will still ensure that companies 

able and willing to pay when called 

upon will be recognized as being able to 

provide reinsurance for certified surety 

companies, but the proposed regulations 

acknowledge that limiting recognition to 

only United States domiciled companies 

(and requiring 100 percent collateral 

from all other reinsurers) is no longer 

the best way to do so. 

Treasury’s current collateral 

requirements and local presence 

requirements are not in alignment with 

industry trends and no longer provide 

sufficient benefit to the Federal 

Government to justify their 

restrictiveness. Many companies and 

insurance trade associations responding 

to the RFI stated that companies have 

had difficulty complying with 

Treasury’s continued imposition of 

100% collateral requirements on ceding 

companies’ non-U.S. reinsurance, even 

as the ceding companies’ state 

regulators began modernizing risk-based 

collateral requirements. Treasury has 

long considered an evaluation of a 

surety company’s entire portfolio of 

reinsurance, not just the reinsurance 

used to protect Federal risks, to be 

critical to its analysis of the surety’s 

solvency and ability to carry out its 

contracts. Thus, Treasury’s current 

requirements essentially give sureties 

the choice of reserving capital as 

collateral to comply with its 

requirements or reducing collateral (as 

allowed by their state regulator) with 

attendant risk of losing their Treasurycertified status. Accordingly, Treasury’s 

proposal to recognize these two new 

categories of reinsurers will ease the 

regulatory and financial burden on 

certified surety companies without 

significantly increasing the financial 

risk to the Federal Government. 

B. Update to Financial Analysis 

Methodology 

Treasury proposes amending 31 CFR 

223.9 to describe in greater detail the 

type of financial analysis it performs 

and incorporate certain requirements 

regarding the valuation of companies’ 

assets and liabilities, credit for 

reinsurance, financial ratios, and other 

aspects of the financial analysis. These 

revisions to 31 CFR 223.9 reflect 

requirements previously published in 

the annual letters and supplemental 

guidance. Treasury expects that 

publishing these requirements will give 

companies greater clarity as to 

Treasury’s requirements and policies 

moving forward. 

C. Reorganization of Part 223 and Other 

Changes 

As part of its effort to update and 

modernize the surety regulations, 

Treasury proposes a reorganization of 

the provisions contained in part 223. 

Current part 223’s structure is largely 

unchanged since it was originally 

codified into the Code of Federal 

Regulations from Treasury circulars. 

The current part 223 has similar 

requirements, such as baseline 

eligibility requirements for obtaining a 

certificate of authority, scattered across 

sections. A company seeking 

information about the requirements for 

applying for a certificate of authority 

would need to review at least five 

different sections in current part 223 as 

well as guidance on the surety 

program’s website, for example. 

Treasury proposes reorganizing part 223 

to group similar or related requirements 

together and to make the sections of part 

223 flow in a more logical order. Under 

these revisions, part 223 would list the 

requirements for an application for a 

certificate of authority in one section. 

This proposed reorganization moves 

requirements in part 223 without 

substantive change. These changes 

would also add to part 223 some 

existing guidance and instructions from 

the program’s website, ensuring that 

part 223 could be the primary source of 

information for companies seeking 

information about the program’s 

requirements. 

Treasury also proposes changes 

throughout part 223 that are mostly 

technical in nature. These changes 

include updating organizational 

references, contact addresses, and 

website addresses, and updating 

terminology that may be outdated or 

confusing. Finally, some of the changes 

clarify or state longstanding Treasury 

policies that may have been unclear or 

unstated in the current part 223, the 

annual letters, or elsewhere on the 

program’s website. 

One such change concerns Treasury’s 

policy that any company engaged in 

only insuring or reinsuring business of 

its parent, affiliated, or controlled 

unaffiliated business is not eligible to 

obtain a certificate of authority or 

recognition as a reinsurer. Such 

companies have historically not been 

able to provide Treasury with the 

financial documentation it requires to 

ensure that they are solvent and able to 

carry out their contracts. The proposed 

regulations would codify this 

longstanding policy. 

Another change concerns Treasury’s 

issuance of certificates of authority to 

certain reinsurers. Treasury historically 

has allowed companies to apply for 

certificates of authority to act only as 

reinsurers on Federal surety bonds, 

provided that such reinsurers meet all of 

the requirements of certified surety 

companies, including the statutory 

requirements that the reinsurers be 

incorporated in the United States and 

submit quarterly financial reports. 

Because Treasury has historically 

required the reinsurers seeking a 

certificate of authority to comply with 

all of the requirements, including the 

statutory requirements, applicable to 

other certified companies, Treasury 

intends to amend its regulations to 

codify its longstanding interpretation 

that certificate-holding reinsurers must 

meet the requirements of the surety 

statutes. 

III. Section by Section Analysis 

Section 223.1 

Current § 223.1 provides information 

about the scope of the regulations 

regarding the issuance, renewal, and 

revocation of certificates of authority. 

Proposed § 223.1 adds a baseline 

requirement to be eligible for a 

certificate of authority, that a company 

that exists primarily to insure or 

reinsure business of its parent, affiliated 

company, or controlled unaffiliated 

business, is not eligible for a certificate 

of authority. 

Section 223.2 

Current § 223.2 provides information 

as to how a company can apply for a 

certificate of authority. Proposed § 223.2 

provides an overview of the information 

Treasury requires in an application 

package for a new certificate of 

authority or renewal of an existing 

certificate of authority. 

Section 223.3 

Current § 223.3 discusses the criteria 

for the issuance of a certificate of 

authority. Proposed § 223.3 adjusts the 

timing of the annual renewal of 

certificates of authority, from July to 

August. Proposed § 223.3 would also 

codify Treasury’s longstanding 

interpretation, in view of the statutory 

requirement that companies 

underwriting Federal surety bonds must 

be incorporated in the United States, 

that only companies incorporated in the 

United States can obtain a certificate of 

authority as a reinsuring company on 

Federal bonds. Finally, proposed § 223.3 


khammond on DSKJM1Z7X2PROD with PROPOSALS
Federal Register / Vol. 87, No. 42 / Thursday, March 3, 2022 / Proposed Rules 12007 

updates unclear terminology and 

phrasing throughout. 

Section 223.4 

We propose moving the requirement 

in existing § 223.4 to § 223.2 as a 

requirement for applicants for 

certificates of authority. Section 223.4 

will be reserved. 

Section 223.5 

Current § 223.5(a) requires that 

companies applying for authority to 

write surety bonds must be actively 

engaged in surety business. We propose 

moving this requirement to § 223.1 as a 

baseline eligibility requirement, with a 

modification that it applies to 

companies engaged in the business of 

writing fidelity contracts as well as 

surety contracts. Proposed § 223.5 also 

updates the list of U.S. territories where 

sureties may be licensed. 

Section 223.6 

We propose that § 223.6 be reserved, 

as the current provision is superfluous. 

Section 223.7 

Current § 223.7 contains a 

requirement regarding the investments 

of companies seeking or holding a 

certificate of authority. We propose 

moving this requirement to § 223.9(a), as 

it is a requirement regarding the assets 

on a company’s financial statements. 

Proposed § 223.7 would now codify 

provisions from the program’s annual 

guidance regarding instances where 

companies must notify Treasury of 

changes that may have a significant 

impact on the companies’ financial 

statements or solvency. 

Section 223.8 

Current § 223.8 requires that 

companies holding a certificate of 

authority must submit annual and 

quarterly financial statements on the 

forms utilized by the NAIC. We propose 

moving some of existing § 223.8 to 

§ 223.2 as an application requirement. 

Proposed § 223.8 contains more detailed 

information regarding certified 

companies’ quarterly reporting 

requirements. 

Section 223.9 

Current § 223.9 states that Treasury 

may value the assets and liabilities of 

companies in its discretion. It states that 

credit for reinsurance will be granted for 

business ceded to other certified 

companies or admitted reinsurers. 

Proposed § 223.9 would be retitled 

‘‘Determination of financial condition 

and other required information’’ and 

provides greater detail into how 

Treasury conducts its financial analysis 

than is currently provided in § 223.9. 

Treasury will still issue supplemental 

guidance as needed, but proposed 

§ 223.9 would become the primary 

source for information as to Treasury’s 

current requirements regarding 

admissibility of assets, treatment of 

securities and investments, ratios, 

financial trends, and other important 

items from a company’s financial 

statements. These changes to § 223.9 

largely reflect policies that have been 

published for many years in Treasury’s 

annual letter. Proposed § 223.9 also 

highlights the changes to Treasury’s 

approach to credit for reinsurance, in 

allowing credit for the two new 

categories of recognized reinsurers (in 

addition to admitted reinsurers) 

discussed in proposed § 223.12, below. 

Section 223.10 

Current § 223.10 defines the 

limitation of risk, known as the 

underwriting limitation. Proposed 

§ 223.10 would also contain a 

requirement moved from § 223.13 

regarding how Treasury determines the 

underwriting limitation. Proposed 

§ 223.10 also clarifies Treasury’s 

definition of the term ‘‘single risk.’’ 

Section 223.11 

Current § 223.11(b) provides the 

requirements for how a surety company 

can use reinsurance to protect excess 

risks. Proposed § 223.11(b) is updated to 

note that excess risks not running to the 

United States can be protected by the 

recognized reinsurers in proposed 

§ 223.12, below. Proposed § 223.11(b) 

updates form titles and terminology. 

Proposed § 223.11(c) codifies in 

regulation a longstanding Treasury 

policy previously published in the 

annual letters that collateral used to 

secure amounts in excess of a 

company’s underwriting limitation 

cannot also be used to secure 

reinsurance not authorized by Treasury 

to obtain credit for reinsurance under 

§ 223.9. Proposed § 223.11 also breaks 

out and renumbers the paragraphs in 

§ 223.11(b) for ease of reading and 

clarity. Proposed § 223.11 also updates 

unclear language and terminology 

throughout. 

Section 223.12 

Section 223.12 establishes the 

application requirements and standards 

for a company to be recognized by 

Treasury as an admitted reinsurer for 

surety companies doing business with 

the United States. Proposed § 223.12 

maintains the standards for recognition 

as an admitted reinsurer, while 

clarifying some existing terminology 

and adding the timeframe for 

applications. Proposed § 223.12 adds 

two new categories of reinsurers eligible 

for recognition: Complementary 

reinsurers and alien reinsurers. 

To obtain recognition as a 

complementary reinsurer, a company 

must be from a non-U.S. jurisdiction 

that is subject to an in-force Covered 

Agreement. The company must also be 

recognized by at least one U.S. state as 

a Reciprocal Jurisdiction Reinsurer, as 

defined by the NAIC Credit for 

Reinsurance Model Law and Model 

Regulation. 

To obtain recognition as an alien 

reinsurer, a company must be from a 

non-U.S. jurisdiction that is recognized 

by the NAIC as a Qualified Jurisdiction 

or as a Reciprocal Jurisdiction, provided 

the Reciprocal Jurisdiction is not party 

to an in-force Covered Agreement. The 

company must also be recognized by at 

least one state as a Certified Reinsurer 

or Reciprocal Jurisdiction Reinsurer, as 

those terms are defined by the NAIC, to 

obtain recognition by Treasury as an 

alien reinsurer. Proposed § 223.12, taken 

in concert with proposed § 223.11, 

would thus allow a certified surety to 

rely on one or more admitted reinsurers, 

complementary reinsurers, and/or alien 

reinsurers to provide reinsurance for the 

surety’s excess risks not running to the 

United States, in addition to the other 

acceptable methods already described in 

§ 223.11. Additionally, proposed 

§ 223.12, in concert with proposed 

§ 223.9, would recognize that certified 

surety companies may obtain credit for 

reinsurance for amounts ceded to other 

certified companies, admitted 

reinsurers, complementary reinsurers, 

or alien reinsurers. Under current 

§§ 223.12 and 223.9, amounts ceded to 

other certified companies and admitted 

reinsurers are eligible for full credit 

without the posting of collateral. Under 

proposed § 223.12, in concert with 

Proposed § 223.9, amounts ceded to 

complementary reinsurers would also 

be eligible for full credit without the 

posting of collateral, provided the 

amounts were ceded after the 

complementary reinsurer has been 

recognized by at least one U.S. state 

regulator as a Reciprocal Jurisdiction 

Reinsurer from a jurisdiction that is 

subject to an in-force Covered 

Agreement. Under proposed §§ 223.12 

and 223.9, amounts ceded to alien 

reinsurers would be eligible for credit to 

the extent such credit is authorized by 

the surety’s state of domicile regulator. 

Because some alien reinsurers may be 

eligible for full credit for reinsurance 

under state law, proposed § 223.12 

would also allow amounts ceded to 

those reinsurers to be eligible for full 

credit without the posting of collateral. 


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In reviewing applications for 

recognition as an alien reinsurer (or 

renewal of such recognition), Treasury 

will consider all relevant financial data 

to determine if it is appropriate to grant 

credit for reinsurance to the full extent 

allowed by the ceding company’s state 

of domicile. Additionally, proposed 

§ 223.9 contains a provision that states 

that if Treasury determines that either 

the alien reinsurer or the certified surety 

may be unable to carry out its 

obligations, Treasury may require 

additional collateral for ceding 

companies to receive credit for 

reinsurance to the extent allowed by the 

state. 

Proposed § 223.12 also codifies 

Treasury’s policy that companies that 

exist to only reinsure business of their 

parent, affiliated, or controlled 

unaffiliated business are not eligible for 

recognition as a reinsurer under the 

program. 

Section 223.13 

Current § 223.13 requires that when 

applying a certified surety company 

underwriting limitation, the full penalty 

of the obligation will be regarded as the 

liability, and lists exceptions to that 

general rule. We propose moving this 

requirement to § 223.10 to group 

requirements regarding the 

underwriting limitation together in the 

same section. We propose reserving this 

section. 

Section 223.14 

Current § 223.14 requires certified 

surety companies to report to Treasury 

on their excess risks and protective 

measures taken. We propose moving 

this requirement to § 223.8 so it is 

grouped with other ongoing, quarterly 

reporting requirements for certified 

companies. We propose reserving this 

section. 

Section 223.15 

Section 223.15 explains how Treasury 

determines a company’s paid-up capital 

and surplus. Proposed § 223.15 clarifies 

that this provision applies to companies 

holding or seeking a certificate of 

authority or to companies recognized or 

seeking to be recognized as admitted 

reinsurers. 

Section 223.16 

Section 223.16 describes Treasury’s 

list of companies holding certificates of 

authority. Proposed § 223.16 updates 

terminology and website addresses, and 

also changes the publication date of the 

list from July to August. 

Section 223.17 

Section 223.17 describes the 

circumstances under which an agency 

official can decline to accept a bond 

underwritten by a certified surety. 

Proposed § 223.17 updates unclear 

language. 

Section 223.18 

Section 223.18 describes the ways in 

which Treasury may initiate revocation 

proceedings against a certified 

company. Proposed § 223.18 updates 

some phrasing to enhance clarity. 

Section 223.19 

Section 223.19 describes Treasuryinitiated revocation proceedings. 

Proposed § 223.19 updates some 

phrasing to enhance clarity. 

Section 223.20 

Section 223.20 describes agencyinitiated revocation proceedings. 

Proposed § 223.20 updates unclear 

phrasing in § 223.20(b)(1) and (h)(8). 

Proposed § 223.20 also updates section 

223.20(h)(9) by removing references to 

the Treasury Financial Manual and the 

Annual Letter to Executive Heads of 

Surety Companies. 

Section 223.21 

Section 223.21 describes how a 

company may become reinstated after 

non-renewal or revocation of its 

certificate of authority. Proposed 

§ 223.21 updates unclear language and 

codifies Treasury’s practice of allowing 

a waiver of the one-year waiting period 

in limited instances where a company 

demonstrates exigent circumstances that 

warrant such a waiver. 

Section 223.22 

Section 223.22 describes the 

categories of fees that Treasury charges 

companies applying for certification or 

recognition, or renewal of their status. 

Proposed § 223.22 adds that fees will be 

charged for new applications and 

applications for renewal of recognition 

as a complementary or alien reinsurer. 

DISTRIBUTION CHART FOR REVISED

PART 223 

Old section New section 

223.3(a)(1)(i) ............. 223.2(a)(3) and 

(a)(8). 

223.4 ......................... 223.2(a)(10). 

223.5(a) ..................... 223.1(b). 

223.6 ......................... Removed. 

223.7 ......................... 223.9(a)(1). 

223.8(a) ..................... 223.2(a)(8), 

223.2(b)(4). 

223.8(b) ..................... 223.8(a)(5). 

223.13 ....................... 223.10(b). 

223.14 ....................... 223.8(a)(2). 

IV. Procedural Analysis 

Request for Comment 

Treasury welcomes comments on all 

aspects of this proposed rulemaking, but 

particularly on the specific questions 

below: 

1. Does Treasury’s proposal to 

recognize two new classes of reinsurers 

benefit the surety industry without 

significantly increasing risks? 

2. Should Treasury consider 

alternative approaches to credit for 

reinsurance than those proposed in 

§§ 223.9, 223.11, and 223.12? 

3. In §§ 223.2, 223.7, 223.8, and 223.9, 

Treasury proposes publishing, without 

substantive change, several 

requirements that have been previously 

contained in annual guidance or on the 

surety program’s website. Should 

Treasury consider modifying these 

regulations or not codifying them in the 

regulations? 

4. Does the proposed reorganization of 

part 223 make the regulations clearer 

and easier to follow, and would 

additional changes more effectively 

accomplish this goal? 

5. Are there additional changes 

Treasury should consider to better help 

the surety program accomplish its 

mission of evaluating and approving 

surety companies to do business with 

the United States? 

Regulatory Planning and Review 

The proposed rule does not meet the 

criteria for a ‘‘significant’’ regulatory 

action under Executive Order 12866. 

Therefore, the regulatory review 

procedures contained therein do not 

apply. 

Regulatory Flexibility Act Analysis 

It is hereby certified that the proposed 

rule will not have a significant 

economic impact on a substantial 

number of small entities. The proposed 

changes allowing for recognition of 

additional reinsurance companies 

would not increase any regulatory 

burden or have an economic impact on 

small entities. The proposed rule adopts 

criteria for recognition outlined in the 

Covered Agreements and in the NAIC 

Credit for Reinsurance Model Law. 

Accordingly, by the time these proposed 

rules are published and become 

effective, reinsurance companies from 

relevant non-U.S. jurisdictions seeking 

to assume business from U.S. ceding 

insurers will already be complying with 

similar financial requirements. 

Additionally, adherence to these 

requirements is only required for 

companies seeking recognition by 

Treasury; participation in the program is 

voluntary. The proposed rule changes 


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2 44 U.S.C. 3507(d). 

regarding Treasury’s financial analysis 

mainly codify existing requirements and 

policies of which Treasury-certified 

sureties were already aware. Therefore, 

this proposed rule will not have a 

significant economic impact on a 

substantial number of small entities and 

a regulatory flexibility analysis under 

the Regulatory Flexibility Act is not 

required. 

Unfunded Mandates Act of 1995 

Section 202 of the Unfunded 

Mandates Reform Act of 1995, 2 U.S.C. 

1532, requires agencies to prepare 

budgetary impact statements before 

promulgating any rule likely to result in 

a Federal mandate that may result in the 

expenditure by state, local, and tribal 

governments, in the aggregate, or by the 

private sector, of $100 million or more 

in any one year. If a budgetary impact 

statement is required, section 205 of the 

Unfunded Mandates Reform Act also 

requires the agency to identify and 

consider a reasonable number of 

regulatory alternatives before 

promulgating the rule. This proposed 

rule will not result in expenditures by 

state, local, and tribal governments, or 

by the private sector, of $100 million of 

more in any one year. Accordingly, 

Treasury has not prepared a budgetary 

impact statement or specifically 

addressed any regulatory alternatives. 

Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(Act) requires that collections of 

information prescribed in the proposed 

rules be submitted to the Office of 

Management and Budget (OMB) for 

review and approval.2 In accordance 

with that requirement, Treasury has 

submitted the collection of information 

contained in this notice of proposed 

rulemaking for review. Under the Act, 

an agency may not conduct or sponsor, 

and a person is not required to respond 

to, a collection of information unless it 

displays a valid OMB control number. 

Comments on the collection of 

information may be submitted 

electronically to oira.submission@

omb.eop.gov, or may be mailed to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: Desk Officer for 

Department of the Treasury, 

Washington, DC 20503; and to the 

Surety Bond Branch, Bureau of the 

Fiscal Service, at the address specified 

at the beginning of this document. 

The collection of information in the 

proposed amendments is contained in 

proposed § 223.12(i) and (j). The 

proposed amendments require 

companies applying for initial 

recognition as a complementary 

reinsurer to submit to Treasury all 

information provided by the company 

or by the supervisory authority of the 

company’s domiciliary jurisdiction to 

any U.S. state regulator in the two most 

recently completed calendar years. For 

renewal of such recognition, companies 

will submit all semi-annual and annual 

filing information provided by the 

company or by the supervisory 

authority of the company’s domiciliary 

jurisdiction to any U.S. state regulator in 

the most recently completed calendar 

year. Companies applying for initial 

recognition as an alien reinsurer will 

submit to Treasury all information 

provided to any U.S. state regulator in 

the two most recently completed 

calendar years. For renewal of such 

recognition, companies will submit all 

annual filing information provided to 

any U.S. state regulator in the most 

recently completed calendar year. 

Treasury invites further comments on: 

(1) Whether the proposed collection of 

information is necessary for the proper 

performance of Treasury’s functions, 

including whether the information has 

practical utility; (2) the accuracy of 

Treasury’s estimate of the burden; (3) 

enhancement of the quality, utility, and 

clarity of information to be collected; 

and (4) minimizing the information 

collection burden on respondents, 

including through the use of automated 

collection techniques or other forms of 

information technology. 

Estimated total annual reporting 

burden: 400 hours. 

Estimated annual number of 

respondents: 100. 

Estimated annual frequency of 

response: 1. 

Proposed Regulations 

List of Subjects in 31 CFR Part 223 

Financial analysis, Reinsurance, 

Surety bonds. 

For the reasons set forth in the 

preamble, we propose to amend 31 CFR 

part 223 as set forth below: 

PART 223—SURETY COMPANIES 

DOING BUSINESS WITH THE UNITED 

STATES 

■ 1. The authority citation for part 223 

continues to read as follows: 

Authority: 5 U.S.C. 301; 31 U.S.C. 9304– 

9308. 

■ 2. Revise § 223.1 to read as follows: 

§ 223.1 Certificate of authority. 

(a) The regulations in this part govern 

the issuance, renewal, and revocation by 

the Secretary of the Treasury, acting 

through the U.S. Department of the 

Treasury, Bureau of the Fiscal Service 

(Treasury), of certificates of authority to 

bonding companies to do business with 

the United States as sureties on, or 

reinsurers of, Federal surety bonds 

(hereinafter ‘‘bonds’’ or ‘‘obligations’’) 

under the authority of 31 U.S.C. 9304– 

9308 and this part, and the acceptance 

of such obligations. 

(b) A company applying for authority 

to write surety bonds in favor of the 

United States must be engaged in the 

business of writing surety or fidelity 

contracts at the time of its application 

to Treasury, whether or not also making 

contracts in other classes of insurance, 

but shall not be engaged in any type or 

class of business not authorized by its 

charter or the laws of the state in which 

the company is incorporated. It must be 

the intention of the company to engage 

actively in the execution of surety bonds 

or fidelity contracts in favor of the 

United States. 

(c) A company is not eligible for a 

certificate of authority if it only insures 

or reinsures risks of its parent, affiliated, 

or controlled unaffiliated business, or is 

deemed by Treasury to be primarily 

engaged in self-insurance. 

■ 3. Revise § 223.2 to read as follows: 

§ 223.2 Application for certificate of 

authority. 

(a) Application for issuance of 

certificate of authority. Every company 

not currently holding a certificate of 

authority wishing to apply for a 

certificate of authority shall submit an 

application to Treasury, c/o Surety 

Bonds Program, to the location, and in 

the manner, specified online at https:// 

www.fiscal.treasury.gov/surety-bonds/. 

The company shall file the following 

data with Treasury, and shall transmit 

therewith the fee in accordance with the 

provisions of § 223.22: 

(1) Receipt or proof of payment of the 

application fee in accordance with the 

provisions of § 223.22; 

(2) A written request for a certificate 

of authority, signed by an officer of the 

company. This request must indicate: 

(i) Whether the company has 

previously applied for a certificate of 

authority from Treasury and, if so, the 

date of the previous application; and 

(ii) Whether Treasury has ever 

previously issued the company a 

certificate of authority, the reason for 

termination of its certificate of 

authority, and the applicable dates; 

(3) A certified copy of its charter or 

articles of incorporation showing that it 

is duly authorized to conduct the 

business referenced under 31 U.S.C. 

9304(a)(2) and a statement from an 

officer of the company certifying that: 


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(i) The company is authorized to 

transact surety business; and 

(ii) If granted a certificate of authority, 

there are no restrictions upon the 

company preventing it from being able 

to execute and guarantee bonds and 

undertakings in judicial proceedings, 

and guarantee contracts to which the 

United States is a party; 

(4) A listing of the names of the 

company’s current officers and directors 

as of the date of application, including 

a biographical affidavit of each officer 

and director per instructions online at 

https://www.fiscal.treasury.gov/suretybonds/; 

(5) A memorandum setting forth: 

(i) A comprehensive statement of the 

company’s method of operation, 

including, but not limited to, 

underwriting guidelines, claims 

adjustment procedures, reinsurance 

philosophy, and control over collateral; 

(ii) The classes of business in which 

it engages; 

(iii) Any special underwriting 

agreements, management agreements, or 

pooling agreements in force. Copies of 

agreements must be included with the 

memorandum; and 

(iv) Present plans of the company as 

to the types of Federal bonds it intends 

to write, the anticipated annual 

premium volume of the Federal bonds, 

and the geographical areas in which it 

intends to write the Federal bonds; 

(6) A certified copy of a license from 

its state of incorporation and a 

completed Surety License Form (Form 

No. FS 2208); 

(7) A copy of the latest available 

report of its examination by its 

domiciliary State Insurance Department 

including a copy of company responses 

to any significant findings or 

recommendations; 

(8) A statement of its financial 

condition, as of the close of the last two 

years preceding the date of application, 

on the annual statement form of the 

National Association of Insurance 

Commissioners (hereinafter referred to 

in this part as NAIC) with all Schedules 

and Exhibits completed, showing that it 

has paid-up capital of at least $250,000 

in cash or its equivalent, in the case of 

a stock insurance company, or has net 

assets of not less than $500,000 over and 

above all liabilities, in the case of a 

mutual insurance company. The annual 

financial statement’s Jurat Page (only) is 

to be signed (facsimile signatures are 

acceptable) by the company President, 

Secretary, and a Notary Public who 

shall also affix a notary seal; 

(9) The Insurance Regulatory 

Information System (hereinafter referred 

to in this part as IRIS) ratio results, and 

an explanation for any ratios outside the 

normal ranges as established by the 

NAIC for the last two years preceding 

the date of application; 

(10) A written statement signed by the 

Insurance Commissioner or other proper 

financial officer of any state attesting 

that the company maintains on deposit 

legal investments having a current 

market value of not less than $100,000 

for the protection of claimants, 

including all of its policyholders in the 

U.S.; 

(11) A completed Treasury Schedule 

F (Form No. TFS 6314), as referenced in 

§ 223.9(c) for the last two years 

preceding the date of application; 

(12) Copies of all reinsurance treaties 

currently in force along with a 

completed Summary of Reinsurance 

Treaties, per instructions provided 

online at https://

www.fiscal.treasury.gov/surety-bonds/; 

(13) A completed Schedule of Excess 

Risks form (Form No. FS 285–A) as of 

the date of the application; 

(14) A Statement of Actuarial Opinion 

as of the close of the last two years 

preceding the date of application 

provided by an independent qualified 

actuary, as defined by the NAIC, on the 

adequacy of all loss reserves with the 

scope and format of the statement also 

conforming to the requirements of the 

NAIC; and 

(15) Such other evidence as Treasury 

may request to establish that the 

company is solvent, willing, and able to 

meet the continuing obligation to carry 

out its contracts. Treasury will publish 

supplemental guidance annually 

regarding evidence it may require, 

submission methods, and format of the 

data listed in paragraphs (a)(1) through 

(14) of this section. 

(b) Applications for renewal of 

certificate of authority. Every company 

wishing to apply for the annual renewal 

of its certificate of authority shall 

submit an application to Treasury, c/o 

Surety Bonds Program, to the location, 

and in the manner, specified online at 

https://www.fiscal.treasury.gov/suretybonds/. The company shall file the 

following data with Treasury, and shall 

transmit therewith the fee in accordance 

with the provisions of § 223.22: 

(1) Receipt or proof of payment of the 

application fee in accordance with the 

provisions of § 223.22; 

(2) A completed Surety License Form 

(Form No. FS 2208) and a certified copy 

of the licenses from any states indicated 

on the Surety License Form that were 

not indicated on the company’s most 

recent form; 

(3) A copy of the latest available 

report of its examination by its 

domiciliary State Insurance Department 

including a copy of company responses 

to any significant findings or 

recommendations; 

(4) A statement of its financial 

condition, as of the close of the 

preceding year, on the annual statement 

form of the NAIC with all Schedules 

and Exhibits completed, showing that it 

has paid-up capital of at least $250,000 

in cash or its equivalent, in the case of 

a stock insurance company, or has net 

assets of not less than $500,000 over and 

above all liabilities, in the case of a 

mutual insurance company. The Annual 

Financial Statement’s Jurat Page (only) 

is to be signed (facsimile signatures are 

acceptable) by the company President, 

Secretary, and a Notary Public who 

shall also affix a notary seal; 

(5) IRIS ratio results, and an 

explanation for any ratios outside the 

normal ranges as established by the 

NAIC, as of the close of the preceding 

year; 

(6) A completed Treasury Schedule F 

(Form No. TFS 6314), as referenced in 

§ 223.9(c) as of the close of the 

preceding year; 

(7) A completed Schedule of Excess 

Risks form (Form No. FS 285–A) as of 

the close of the preceding year; 

(8) A Statement of Actuarial Opinion 

as of the close of the preceding year 

provided by an independent qualified 

actuary, as defined by the NAIC, on the 

adequacy of all loss reserves with the 

scope and format of the statement also 

conforming to the requirements of the 

NAIC; 

(9) A listing of the names of the 

company’s current officers and directors 

as of the close of the preceding year, 

including a biographical affidavit of any 

new officer and director for whom a 

biographical affidavit was not 

previously provided, per instructions 

online at https://

www.fiscal.treasury.gov/surety-bonds/; 

(10) A Report of Federal Business 

Written/or Assumed and Outstanding as 

of the close of the preceding year, per 

instructions provided online at https:// 

www.fiscal.treasury.gov/surety-bonds/; 

and 

(11) Such other evidence as Treasury 

may request to establish that the 

company is solvent, willing, and able to 

meet the continuing obligation to carry 

out its contracts. Treasury will publish 

supplemental guidance annually 

regarding evidence it may require, 

submission methods, and format of the 

data listed in paragraphs (b)(1) through 

(10) of this section. 

■ 4. Revise § 223.3 to read as follows: 

§ 223.3 Issuance of certificates of 

authority. 

(a) In determining whether to issue or 

renew a certificate of authority, 


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Treasury will evaluate the whole 

application package under § 223.2, the 

financial condition of the company as 

determined under § 223.9, the past 

history of the company, and any further 

evidence or information that Treasury 

may require the company to submit (at 

the company’s expense). 

(b) A certificate of authority will be 

effective for a term that expires on the 

last day of the next July. All such 

statutory requirements and regulatory 

requirements under this part are 

continuing obligations, and any 

certificate issued is expressly subject to 

continuing compliance with such 

requirements. The certificate of 

authority will be renewed annually on 

the first day of August, provided the 

company remains qualified under the 

law, the regulations in this part, and 

other pertinent Treasury requirements, 

and the company submits the fee 

required under § 223.22 by March 1st of 

each year. 

(c) If a company meets the 

requirements for a certificate of 

authority as an acceptable surety on 

Federal bonds in all respects except it 

is limited to reinsure business only, it 

may be issued a certificate of authority 

as a reinsuring company on Federal 

bonds. The fees for initial application 

and renewal of a certificate as a 

reinsuring company will be the same as 

the fees for a certificate of authority as 

an acceptable surety on Federal bonds. 

§ 223.4 [Removed and Reserved] 

■ 5. Remove and reserve § 223.4. 

■ 6. Revise § 223.5 to read as follows: 

§ 223.5 Business. 

A company holding a certificate of 

authority, or its agent, may only execute 

(sign or otherwise validate) a surety 

bond in favor of the United States in a 

state where it is licensed to do surety 

business. It need not be licensed in the 

state or other area in which the 

principal resides or where the contract 

is to be performed. The term other area 

includes the District of Columbia, 

American Samoa, Guam, the Northern 

Mariana Islands, Puerto Rico, and the 

U.S. Virgin Islands. 

§ 223.6 [Removed and Reserved] 

■ 7. Remove and reserve § 223.6. 

■ 8. Revise § 223.7 to read as follows: 

§ 223.7 Notification of changes. 

(a) Every company certified under this 

part or recognized as an admitted 

reinsurer pursuant to § 223.12(h) must 

notify Treasury of changes that have a 

significant impact on its financial 

statements or solvency. The following is 

not intended to be an exhaustive list of 

all changes that Treasury may require to 

be reported and may evaluate as part of 

this analysis of the company. Treasury 

will publish supplemental guidance on 

additional information that may be 

required. Every company certified under 

this part or recognized as an admitted 

reinsurer pursuant to § 223.12(h) must 

notify Treasury of the following: 

(1) Capital changes. Companies must 

forward to Treasury, when available, 

approvals by the insurance authorities 

of the company’s lead state regulator 

when changes in paid-up capital or 

contributions/withdrawals to surplus 

have occurred; 

(2) Changes in stock ownership. Stock 

insurance companies must provide a 

statement signed and sworn to by the 

Secretary or Assistant Secretary and by 

the Treasurer or Assistant Treasurer of 

the company each time any person 

(whether an individual, corporation, or 

organization of any kind) becomes 

owner of more than 5 percent of any 

class of outstanding stock issued by the 

company; 

(3) Mergers, transfer, assumption, and 

group/pool restructuring. Companies 

must notify Treasury at least six months 

prior to any merger, consolidation, 

transfer, assumption, material group or 

pool restructuring, or name changes in 

which the reporting company is 

involved. The company must furnish to 

Treasury copies or agreements or 

documents pertaining to the same, as 

approved by the insurance authorities of 

the company’s lead state regulator; and 

(4) Charters and bylaws amendments. 

Whenever a company amends its charter 

or bylaws it must submit a certified 

copy of the amended charter or bylaws 

to Treasury. 

(b) Noncompliance with this section 

may result in Treasury denying a 

company’s application for its certificate 

of authority, its recognition as an 

admitted reinsurer, renewal of its 

certificate of authority, renewal of its 

recognition as an admitted reinsurer, or 

in Treasury revoking a company’s 

certificate of authority or recognition as 

an admitted reinsurer. 

■ 9. Revise § 223.8 to read as follows: 

§ 223.8 Quarterly financial reporting 

requirements. 

Every company certified under this 

part is required to file the following 

quarterly with Treasury, c/o Surety 

Bonds Program, to the location, and in 

the manner, specified online at https:// 

www.fiscal.treasury.gov/surety-bonds/: 

(a) A statement of its financial 

condition, as of the close of the 

preceding quarter, on the quarterly 

statement form of the NAIC with all 

Schedules and Exhibits completed, 

showing that it has paid-up capital of at 

least $250,000 in cash or its equivalent, 

in the case of a stock insurance 

company, or has net assets of not less 

than $500,000 over and above all 

liabilities, in the case of a mutual 

insurance company. The Quarterly 

Financial Statement’s Jurat Page (only) 

is to be signed (facsimile signatures are 

acceptable) by the company President, 

Secretary, and a Notary Public who 

shall also affix a notary seal; 

(b) A completed Schedule of Excess 

Risks form (Form No. FS 285–A) as of 

the close of the preceding quarter; 

(c) A Report of Federal Business 

Written/or Assumed and Outstanding as 

of the close of the preceding quarter, per 

instructions provided online at https:// 

www.fiscal.treasury.gov/surety-bonds/; 

(d) A copy of the latest available 

report of its examination by its 

domiciliary State Insurance Department 

including a copy of company responses 

to any significant findings or 

recommendations; 

(e) A listing of the names of the 

company’s current officers and directors 

as of the close of the preceding quarter, 

including a biographical affidavit of 

each new officer and director per 

instructions online at https://

www.fiscal.treasury.gov/surety-bonds/; 

and 

(f) Such other evidence as Treasury 

may request to establish that the 

company is solvent, willing, and able to 

meet the continuing obligation to carry 

out its contracts. Treasury will publish 

supplemental guidance annually 

regarding evidence it may require, 

submission methods, and format of the 

data listed in paragraphs (a) through (e) 

of this section along with the due dates 

for quarterly reporting. 

■ 10. Revise § 223.9 to read as follows: 

§ 223.9 Determination of financial 

condition and other required information. 

In determining the financial condition 

of every company applying for a 

certificate of authority or renewal of a 

certificate of authority under this part, 

Treasury will generally compute its 

assets and liabilities in accordance with 

paragraphs (a) through (f) of this section, 

provided that Treasury may exercise 

discretion in valuing the assets and 

liabilities of such companies. While 

paragraphs (a) through (f) of this section 

specify how Treasury will value certain 

classes of assets and liabilities and the 

analysis that Treasury will perform, 

they are not intended to be an 

exhaustive list of all assets and 

liabilities that Treasury may require to 

be reported and may evaluate as part of 

this analysis. Treasury will annually 

publish supplemental guidance on the 


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financial analysis performed by 

Treasury, including applicable ratios 

and acceptable ranges for ratios. 

(a) Assets—(1) General criteria for 

admissibility. The cash capital and other 

funds included in the financial 

statement must be safely invested in 

accordance with the laws of the state in 

which it is incorporated. Admissible 

assets must be reported in U.S. Dollars 

and are generally limited to investments 

in cash, cash equivalents, short term 

investments, mortgage loans (within 

certain limits), and real property 

necessary for the conduct of a 

company’s business. In cases where an 

investment (other than U.S. Government 

securities and securities of affiliates or 

subsidiaries) exceeds 10 percent of the 

total admitted assets, Treasury may 

require additional supporting 

documentation as needed on a case-bycase basis in order for the asset to be 

admissible. Additionally, Treasury 

considers normal account balances 

(such as, but not limited to, investment 

income due and accrued, agents’ 

balances and premiums receivables, 

reinsurance recoverables on paid losses, 

and funds held by or deposited with 

ceding reinsuring companies) to be 

admissible provided they meet 

Treasury’s standards. In order to be 

admissible, normal account balances 

may be evaluated for transactional 

substance, quality, and liquidity. Some 

assets that may be admissible under 

codification and/or certain state 

permitted practices may require 

supporting documentation as needed on 

a case-by-case basis in order to be 

admissible under Treasury’s criteria. 

Assets resulting from reinsurance 

transactions must meet the credit for 

reinsurance standards listed under 

paragraph (c) of this section. 

(2) Securities. Bonds, unaffiliated 

common stocks, and unaffiliated 

preferred stocks must be valued and 

reported in accordance with the NAIC’s 

Accounting Practices and Procedures 

Manual (as updated or amended from 

time to time) and the NAIC Securities 

Valuation Office (SVO). Those with an 

investment grade designation will be 

admissible and those with a noninvestment grade designation will be 

considered on a case-by-case basis. 

(i) All other securities. The value of all 

other securities should be valued as of 

December 31 and reported in U.S. 

Dollars. For securities that do not have 

a SVO designation or have a SVO noninvestment grade designation and are 

significant for Treasury purposes, 

Treasury may consider, if it deems 

appropriate, other relevant data (e.g., 

prospectus, marketability/liquidity 

information, internal investment 

strategies/philosophies) and perform an 

analysis to determine whether the 

securities meet Treasury’s criteria for 

admissibility. 

(ii) Securities of controlled 

companies. Investments in subsidiaries, 

controlled entities, and affiliated 

entities must be reported in accordance 

with the NAIC Accounting Practices and 

Procedures Manual (as updated or 

amended from time to time). 

(A) Other insurance companies. 

Companies owning securities of other 

insurance companies, which are under 

the same direction and control as the 

reporting company, must furnish copies 

of the NAIC File Upload of the 

subsidiaries. The assets of these 

subsidiaries will be analyzed according 

to the criteria set forth in this section. 

(B) Non-insurance companies. 

Companies owning securities of noninsurance companies, which are under 

the same direction and control as the 

reporting company, must furnish copies 

of independently audited financial 

statements of such companies as of the 

reporting date. 

(3) Real estate and mortgages. Only 

real estate essential to the operating 

needs of the company for conducting its 

business, and conventional first 

mortgage loans on unencumbered, 

improved, or productive real estate 

located within the United States, are 

admissible. These must be reported in 

accordance with the NAIC’s Accounting 

Practices and Procedures Manual (as 

updated or amended from time to time). 

The real estate and mortgaged property 

must be supported by an appraisal 

report that includes the information and 

computations normally used in arriving 

at a competent appraised value. In 

instances where the aggregate values 

exceed 20 percent of the policyholders’ 

surplus, Treasury may, if it deems 

appropriate, require additional 

supporting documentation. 

(b) Minimum bail reserve 

requirements. Companies transacting 

surety bail business must submit a 

schedule showing bail premiums in 

force, bail liability, and the amount of 

any associated unearned premium 

reserve. 

(c) Reinsurance. (1) Companies are 

required to submit Treasury Schedule F 

(Treasury Form No. TFS 6314) reflecting 

information in the company’s annual 

statements. Credit for reinsurance may 

be taken for reinsurance in all classes of 

risk provided it is ceded to the 

following companies: 

(i) Companies holding a current 

certificate of authority from Treasury; 

(ii) Non-Treasury certified or 

recognized parents, subsidiaries, and/or 

affiliates if the parent, subsidiary, and/ 

or affiliate participate in a pooling 

agreement with the Treasury certified/ 

recognized company and Treasury 

determines that the pool is financially 

solvent; 

(iii) Admitted reinsurers as defined 

under § 223.12(h); 

(iv) Complementary reinsurers as 

defined under § 223.12(i); 

(v) Alien reinsurers as defined under 

§ 223.12(j), up to the extent credit is 

given for reinsurance ceded to the alien 

reinsurer by the ceding company’s state 

of domicile (subject to paragraph (c)(3) 

of this section); and 

(vi) An instrumentality or agency of 

the United States that is permitted by 

Federal law or regulation to execute 

reinsurance contracts. 

(2) Treasury will give credit for 

reinsurance not covered in paragraph 

(c)(1) of this section, to the extent of 

funds withheld or letters of credit or 

trust agreements from unauthorized 

companies, provided the company 

advises Treasury of the amount of funds 

held, letters of credit posted or funds 

secured in trust for each company. 

Treasury will also give credit for trust 

account assets associated with multibeneficiary trust agreements established 

and maintained in the United States by 

overseas accredited or trusteed 

reinsurers listed online at https://

www.fiscal.treasury.gov/surety-bonds/, 

to the extent the unauthorized ceded 

business is covered by these trust 

account assets. 

(3) If Treasury, after its review of the 

financial documentation submitted by 

an alien reinsurer recognized pursuant 

to § 223.12(j) and of the financial 

documentation submitted by the ceding 

company, determines that either 

company may be unable to carry out its 

obligations, Treasury may require 

additional collateral for the ceding 

company to receive credit for 

reinsurance to the extent credit is given 

for reinsurance ceded to the Alien 

Reinsurer by the ceding company’s state 

of domicile. 

(d) Risk based capital (RBC). Treasury 

uses RBC in determining the financial 

solvency of companies, together with 

such companies’ overall financial 

results, ratios, and trends. Companies 

must maintain RBC results that fall 

within acceptable ranges as established 

by the NAIC or provide a satisfactory 

explanation for results that do not. 

(e) Financial ratios. Treasury uses the 

NAIC IRIS ratios to measure companies’ 

solvency, profitability, and liquidity. 

Companies must maintain results for 

these ratios that fall within acceptable 

ranges as established by the NAIC or 

provide a satisfactory explanation for 

results that do not. 


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(f) Financial results and trends. 

Treasury analyzes financial results from 

annual and quarterly financial 

statements required under this part for 

evidence of negative financial results or 

trends. Treasury may require companies 

to submit additional documentation or 

explanation regarding financial 

statements with evidence of negative 

financial results or trends such as 

decreasing policyholders’ surplus, large 

underwriting losses, negative cashflows, 

or unsatisfactory IRIS ratio results. 

(g) Noncompliance. Noncompliance 

with paragraphs (a) through (f) of this 

section may result in Treasury denying 

a company’s application for its 

certificate of authority, or renewal of its 

certificate, or in Treasury revoking a 

company’s certificate. 

■ 11. Revise § 223.10 to read as follows: 

§ 223.10 Limitation of risk. 

(a) Except as provided in § 223.11, no 

company holding a certificate of 

authority shall underwrite any single 

risk on any bond or policy on behalf of 

any individual, firm, association, or 

corporation, whether or not the United 

States is interested as a party thereto, 

the amount of which is greater than 10 

percent of the paid-up capital and 

surplus of such company, as determined 

by Treasury. Such figure is hereinafter 

referred to as the underwriting 

limitation. For purposes of this part, 

‘‘single risk’’ is defined as the total risk 

under one bond or policy regardless of 

the number of individual risks under 

that bond or policy. 

(b) In determining the underwriting 

limitation, the full penalty of any surety 

and fidelity obligation will be regarded 

as the liability, and no offset will be 

allowed on account of any estimate of 

risk that is less than such full penalty, 

except in the following cases: 

(1) Appeal bonds; in which case the 

liability will be regarded as the amount 

of the judgment appealed from, plus 10 

percent of said amount to cover interest 

and costs; 

(2) Bonds of executors, 

administrators, trustees, guardians, and 

other fiduciaries, where the penalty of 

the bond or other obligation is fixed in 

excess of the estimated value of the 

estate; in which cases the estimated 

value of the estate, upon which the 

penalty of the bond was fixed, will be 

regarded as the liability; 

(3) Indemnifying agreements executed 

by sole heirs or beneficiaries of an estate 

releasing the surety from liability; 

(4) Contract bonds given in excess of 

the amount of the contract; in which 

cases the amount of the contract will be 

regarded as the liability; or 

(5) Bonds for banks or trust 

companies as principals, conditioned to 

repay moneys on deposit, whereby 

pursuant to any law or decree of a court, 

the amount to be deposited shall be less 

than the penalty of the bond; in which 

cases the maximum amount on deposit 

at any one time will be regarded as the 

liability. 

■ 12. Revise § 223.11 to read as follows: 

§ 223.11 Limitation of risk: Protective 

methods. 

The limitation of risk prescribed in 

§ 223.10 may be complied with by the 

following methods: 

(a) Coinsurance. Two or more 

companies may underwrite a single risk 

on any bond or policy, the amount of 

which does not exceed their aggregate 

underwriting limitations. Each company 

must limit its liability upon the face of 

the bond or policy to an amount which 

must be within its underwriting 

limitation. 

(b) Reinsurance—(1) Bonds running to 

the United States. (i) With respect to all 

bonds running to the United States, a 

company writing such bonds must 

reinsure liability in excess of the 

underwriting limitation with one or 

more companies holding a certificate of 

authority from Treasury within 45 days 

from the date of execution and delivery 

of the bond. Such reinsurance shall not 

be in excess of the underwriting 

limitation of the reinsuring company. 

Where reinsurance is contemplated, 

Federal agencies may accept a bond 

from the direct writing company in 

satisfaction of the total bond 

requirement even though it may exceed 

the direct writing company’s 

underwriting limitation. Within the 45- 

day period, the direct writing company 

shall furnish to the Federal agency any 

requested reinsurance agreements. 

However, a Federal agency may, in its 

discretion, require that the direct 

writing company obtain reinsurance 

within a lesser period than 45 days, and 

may require the direct writing company 

to provide completely executed 

reinsurance agreements before making a 

final determination that any bond is 

acceptable. 

(ii) Direct writing companies may use 

reinsurance to protect liability in excess 

of their underwriting limitation for 

bonds required to be furnished to the 

United States by the Miller Act (40 

U.S.C. 3131, as amended) covering 

contracts for the construction, 

alteration, or repair of any public 

building or public work of the United 

States, as well as other types of Federal 

bonds. Use of reinsurance or 

coinsurance to protect such bonds is at 

the discretion of the direct writing 

company. In addition to complying with 

the requirements of paragraph (b)(1)(i) 

of this section, the direct writing 

company must execute the following 

reinsurance agreement forms: Standard 

Form 273 (Reinsurance Agreement for a 

Bonds Statute Performance Bond), 

Standard Form 274 (Reinsurance 

Agreement for a Bonds Statute Payment 

Bond), and Standard Form 275 

(Reinsurance Agreement in Favor of the 

United States). These forms are 

available on the General Services 

Administration website at www.gsa.gov. 

(2) Bonds not running to the United 

States. A company holding a certificate 

of authority from Treasury writing risks 

covered by bonds or policies not 

running to the United States must 

reinsure liability in excess of its 

underwriting limitation within 45 days 

from the date of execution and delivery 

of the bond or policy with any of: 

(i) One or more companies holding a 

certificate of authority from Treasury; 

(ii) One or more companies 

recognized as a reinsurer in accordance 

with § 223.12; 

(iii) A pool, association, etc., to the 

extent that it is composed of such 

companies; or 

(iv) An instrumentality or agency of 

the United States that is permitted by 

Federal law or regulation to execute 

reinsurance contracts. 

(3) Limitation. No certificate-holding 

company may cede to a reinsuring 

company recognized under § 223.12 any 

single risk in excess of 10 percent of the 

latter company’s paid-up capital and 

surplus. 

(c) Other methods. With respect to all 

risks other than Miller Act performance 

and payment bonds running to the 

United States, which must be coinsured 

or reinsured in accordance with 

paragraph (a) or (b)(1)(ii) of this section 

respectively, the excess liability may be 

protected: 

(1) By the deposit with the company 

in pledge, or by conveyance to it in trust 

for its protection, of assets admitted by 

Treasury, the current market value of 

which is at least equal to the liability in 

excess of its underwriting limitation. 

Assets used to protect excess liability 

pursuant to this paragraph (c) cannot 

also be used to obtain credit for 

reinsurance pursuant to § 223.9(c); or 

(2) If such obligation was incurred on 

behalf of or on account of a fiduciary 

holding property in a trust capacity, by 

a joint control agreement providing that 

the whole or a sufficient portion of the 

property so held may not be disposed of 

or pledged in any way without the 

consent of the insuring company. 

■ 13. Revise § 223.12 to read as follows: 


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§ 223.12 Recognition as reinsurer. 

(a) Use of recognized reinsurers. 

Companies holding a certificate of 

authority may: 

(1) Receive credit for reinsurance 

ceded to a reinsurer recognized 

pursuant to this section, as described in 

§ 223.9(c), and 

(2) Protect liability in excess of their 

underwriting limit on risks not running 

to the United States by reinsuring the 

excess liability with a reinsurer 

recognized pursuant to this section. 

(b) Application. Every company 

applying for recognition by Treasury as 

one of the categories of reinsurers in 

paragraphs (c) through (j) of this section, 

or annual renewal of such recognition, 

shall submit an application to Treasury, 

c/o Surety Bonds Program, to the 

location, and in the manner, specified 

online at https://

www.fiscal.treasury.gov/surety-bonds/. 

The applicant company must submit the 

documentation and must meet the 

requirements as outlined in this section 

and in supplemental guidance 

published by Treasury on its website. 

(c) Treasury recognition. Recognition 

by Treasury will be effective for a term 

that expires on the last day of the 

following October. A list of reinsuring 

companies so recognized by Treasury 

will be published online at https://

www.fiscal.treasury.gov/surety-bonds/. 

(d) Notice to Treasury. Each company 

recognized pursuant to this section shall 

immediately notify Treasury if a U.S. 

state takes action to suspend or revoke 

the company’s license or its status or 

eligibility as a Certified Reinsurer or 

Reciprocal Jurisdiction Reinsurer, or if 

the company notifies a U.S. state that a 

supervisory authority in its domiciliary 

jurisdiction takes regulatory action 

against it for serious noncompliance 

with applicable law (as determined by 

the supervisory authority in its 

domiciliary jurisdiction). 

(e) Eligibility. A company is not 

eligible for recognition under this 

section if it only insures or reinsures 

risks of its parent, affiliated, or 

controlled unaffiliated business, or is 

deemed by Treasury to be primarily 

engaged in self-insurance. 

(f) Guidance. Treasury may issue 

supplemental guidance regarding the 

timing, form, content, and its analysis of 

the submissions required pursuant to 

this section. Such guidance will be 

posted on its website. 

(g) Noncompliance. Noncompliance 

with the requirements of this section 

may result in a company’s application 

for recognition, or for renewal of its 

recognition, being denied. 

(h) Admitted reinsurers—(1) 

Application for recognition by U.S. 

company. Any company organized 

under the laws of the United States or 

of any state thereof, wishing to apply for 

recognition as an admitted reinsurer of 

surety companies doing business with 

the United States, shall submit an 

application to Treasury, c/o Surety 

Bonds Program, to the location, and in 

the manner, specified online at https:// 

www.fiscal.treasury.gov/surety-bonds/. 

The company shall file the following 

data with Treasury and shall transmit 

therewith the fee in accordance with the 

provisions of § 223.22: 

(i) Receipt or proof of payment of the 

application fee in accordance with the 

provisions of § 223.22; 

(ii) A written request for recognition 

as an admitted reinsurer, signed by an 

officer of the company. This request 

must indicate: 

(A) The reason for applying for 

recognition; 

(B) Whether the company has ever 

previously applied for recognition as an 

admitted reinsurer, whether Treasury 

approved the application, and the 

applicable dates; and 

(C) If Treasury previously approved 

the company for recognition as an 

admitted reinsurer, the reason for 

termination of its recognition and the 

applicable date; 

(iii) A certified copy of its charter or 

articles of incorporation with all 

amendments as of the date of 

application showing the legal name of 

the company and that it is authorized to 

write reinsurance; 

(iv) A listing of the names of the 

company’s current officers and directors 

as of the date of application, including 

a biographical affidavit of each officer 

and director per instructions online at 

https://www.fiscal.treasury.gov/suretybonds/; 

(v) A certified copy of a license from 

any one state in which it has been 

authorized to do business showing its 

authority to write reinsurance and/or 

other lines of insurance; 

(vi) A copy of the latest available 

report of its examination by its 

domiciliary State Insurance Department 

including a copy of company responses 

to any significant findings or 

recommendations; 

(vii) Annual statements of its financial 

condition, as of the close of the last two 

years preceding the date of application, 

on the annual statement form of the 

NAIC with all Schedules and Exhibits 

completed, showing that it has paid-up 

capital of at least $250,000 in cash or its 

equivalent, in the case of a stock 

insurance company, or has net assets of 

not less than $500,000 over and above 

all liabilities, in the case of a mutual 

insurance company. The Annual 

Financial Statement’s Jurat Page (only) 

is to be signed (facsimile signatures are 

acceptable) by the company President, 

Secretary, and a Notary Public who 

shall also affix a notary seal; 

(viii) IRIS ratio results, and an 

explanation for any ratios outside the 

normal ranges as established by the 

NAIC for the last two years preceding 

the date of application; 

(ix) A memorandum setting forth the 

company’s method of operation, 

including lines of business written and 

the company’s underwriting and claims 

philosophy; 

(x) A completed Treasury Schedule F 

(Form No. TFS 6314), as referenced in 

§ 223.9(c) for two years preceding the 

date of application; 

(xi) A Statement of Actuarial Opinion 

as of the close of the last two years 

preceding the date of application 

provided by an independent qualified 

actuary, as defined by the NAIC, on the 

adequacy of all loss reserves with the 

scope and format of the statement also 

conforming to the requirements of the 

NAIC; and 

(xii) Such other evidence as Treasury 

may request to establish that the 

company is solvent and able to meet the 

continuing obligation to carry out its 

contracts. Treasury will publish 

supplemental guidance annually 

regarding evidence it may require, 

submission methods, and format of the 

data listed in paragraphs (h)(1)(i) 

through (xi) of this section. 

(2) Application by a U.S. branch. A 

U.S. branch of a non-U.S. company 

applying for such recognition must file 

the following data with Treasury, and 

shall transmit therewith the fee in 

accordance with the provisions of 

§ 223.22: 

(i) The submissions listed in 

paragraphs (h)(1)(i) through (xii) of this 

section, except that the financial 

statement of such branch shall show 

that it has net assets of not less than 

$250,000 over and above all liabilities; 

and 

(ii) Evidence satisfactory to Treasury 

to establish that it has on deposit in the 

United States not less than $250,000 

available to its policyholders and 

creditors in the United States. 

(3) Application for renewal of 

recognition as an admitted reinsurer. 

Any company recognized pursuant to 

paragraphs (h)(1) or (2) of this section 

wishing to apply for renewal of its 

recognition shall submit an application 

to Treasury, c/o Surety Bonds Program, 

to the location, and in the manner, 

specified online at https://

www.fiscal.treasury.gov/surety-bonds/. 

The company must file the following 

data with Treasury and shall transmit 


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therewith the fee in accordance with the 

provisions of § 223.22: 

(i) Receipt or proof of payment of the 

application fee in accordance with the 

provisions of § 223.22; 

(ii) A copy of the latest available 

report of its examination by its 

domiciliary State Insurance Department 

including a copy of company responses 

to any significant findings or 

recommendations; 

(iii) Annual statements of its financial 

condition, as of the close of the 

preceding year, on the annual statement 

form of the NAIC with all Schedules 

and Exhibits completed, showing that it 

has paid-up capital of at least $250,000 

in cash or its equivalent, in the case of 

a stock insurance company, or has net 

assets of not less than $500,000 over and 

above all liabilities, in the case of a 

mutual insurance company. The Annual 

Financial Statement’s Jurat Page (only) 

is to be signed (facsimile signatures are 

acceptable) by the company President, 

Secretary, and a Notary Public who 

shall also affix a notary seal; 

(iv) IRIS ratio results, and an 

explanation for any ratios outside the 

normal ranges as established by the 

NAIC as of the close of the preceding 

year; 

(v) A completed Treasury Schedule F 

(Form No. TFS 6314), as referenced in 

§ 223.9(c) as of the close of the 

preceding year; 

(vi) A Statement of Actuarial Opinion 

as of the close of the preceding year 

provided by an independent qualified 

actuary, as defined by the NAIC, on the 

adequacy of all loss reserves with the 

scope and format of the statement also 

conforming to the requirements of the 

NAIC; 

(vii) A listing of the names of the 

company’s current officers and directors 

as of the close of the preceding year, 

including a biographical affidavit of 

each new officer and director per 

instructions online at https://

www.fiscal.treasury.gov/surety-bonds/; 

and 

(viii) Such other evidence as Treasury 

may request to establish that the 

company is solvent and able to meet the 

continuing obligation to carry out its 

contracts. Treasury will publish 

supplemental guidance annually 

regarding evidence it may require, 

submission methods, and format of the 

data listed in paragraphs (h)(3)(i) 

through (vii) of this section. 

(i) Complementary reinsurers. Any 

company may apply for recognition as 

a complementary reinsurer or annual 

renewal of such recognition provided 

the company is licensed to write 

reinsurance by and has its head office in 

(or is domiciled in) a non-U.S. 

jurisdiction that is subject to an in-force 

Covered Agreement entered into with 

the United States pursuant to 31 U.S.C. 

313–314, which Covered Agreement 

addresses the elimination, under 

specified conditions, of collateral 

requirements as a condition for entering 

into any reinsurance agreement with a 

ceding insurer domiciled in a U.S. state 

or for allowing the ceding insurer to 

recognize credit for reinsurance. To 

obtain such recognition, the company 

must submit to Treasury the fee in 

accordance with the provisions of 

§ 223.22 and must: 

(1) Meet and maintain all capital and 

surplus, solvency, and market conduct 

requirements under the applicable 

Covered Agreement; 

(2) Be recognized by at least one U.S. 

state as a Reciprocal Jurisdiction 

Reinsurer, as defined by the NAIC, and 

submit proof of such recognition; and 

(3) Submit to Treasury: 

(i) For initial applications for 

recognition, all information provided by 

the company or by the supervisory 

authority of the company’s domiciliary 

jurisdiction to any U.S. state regulator in 

the two most recently completed 

calendar years. 

(ii) For applications for renewal of 

recognition, all semi-annual and annual 

filing information provided by the 

company or by the supervisory 

authority of the company’s domiciliary 

jurisdiction to any U.S. state regulator in 

the most recently completed calendar 

year. 

(iii) Receipt or proof of payment of the 

application fee in accordance with the 

provisions of § 223.22. 

(j) Alien reinsurers. Any company 

may apply for recognition or annual 

renewal of such recognition as an alien 

reinsurer, provided it is licensed to 

write reinsurance by, and has its head 

office or domicile in, a non-U.S. 

jurisdiction that is recognized by the 

NAIC as a Qualified Jurisdiction or as a 

Reciprocal Jurisdiction, provided that 

the Reciprocal Jurisdiction is not party 

to an in-force Covered Agreement as 

described in paragraph (i) of this 

section. To obtain such recognition, the 

company must submit to Treasury the 

fee in accordance with the provisions of 

§ 223.22 and must: 

(1) Be recognized by at least one U.S. 

state as a ‘‘Certified Reinsurer’’ or a 

‘‘Reciprocal Jurisdiction Reinsurer,’’ as 

defined by the NAIC or state law, and 

submit proof of such recognition; 

(2) Meet and maintain all capital and 

surplus, market conduct, and other 

requirements for eligibility as a 

‘‘Certified Reinsurer’’ or ‘‘Reciprocal 

Jurisdiction Reinsurer’’ in accordance 

with the law and regulation of any U.S. 

state granting it such recognition; and 

(3) Submit to Treasury: 

(i) For initial applications for 

recognition, all information provided to 

any U.S. state regulator in the two most 

recently completed calendar years. 

(ii) For applications for renewal of 

such recognition, all annual filing 

information provided to any U.S. state 

regulator in the most recently completed 

calendar year. 

(iii) Receipt or proof of payment of the 

application fee in accordance with the 

provisions of § 223.22. 

§ 223.13 [Removed and Reserved] 

■ 14. Remove and reserve § 223.13. 

§ 223.14 [Removed and Reserved] 

■ 15. Remove and reserve § 223.14. 

■ 16. Revise § 223.15 to read as follows: 

§ 223.15 Paid-up capital and surplus for 

Treasury rating purposes; how determined. 

Treasury determines the amount of 

paid-up capital and surplus of any 

company holding or seeking a certificate 

of authority or recognized (or seeking 

recognition) as an admitted reinsurer 

pursuant to § 223.12(h) on an insurance 

accounting basis under the regulations 

in this part, from the company’s 

financial statements and other 

information, or by such examination of 

the company at its own expense as 

Treasury may deem appropriate. 

■ 17. Revise the first three sentences of 

§ 223.16 to read as follows: 

§ 223.16 List of certificate holding 

companies. 

A list of certificate holding companies 

is published annually as of August 1 in 

Department Circular No. 570, 

Companies Holding Certificates of 

Authority as Acceptable Sureties on 

Federal Bonds and as Acceptable 

Reinsuring Companies, with 

information as to underwriting 

limitations, areas in which listed 

sureties are licensed to transact surety 

business, and other details. If Treasury 

shall take any exceptions to the 

financial statements submitted by a 

company, before issuing Department 

Circular 570, Treasury shall give a 

company due notice of such exceptions. 

Copies of the Circular are available at 

https://www.fiscal.treasury.gov/suretybonds/list-certified-companies.html, or 

from the Surety Bonds Program, upon 

request. * * * 

■ 18. Amend § 223.17 by revising 

paragraphs (b)(1)(iii) and (iv) to read as 

follows: 

§ 223.17 Acceptance and non-acceptance 

of bonds. 

* * * * * 


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12016 Federal Register / Vol. 87, No. 42 / Thursday, March 3, 2022 / Proposed Rules 

(b) * * * 

(1) * * * 

(iii) Provide the company with an 

opportunity to rebut the stated reasons 

or cause; and 

(iv) Provide the company with an 

opportunity to cure the stated reasons or 

cause. 

* * * * * 

■ 19. Amend § 223.18 by revising 

paragraphs (a) introductory text and 

(a)(1) to read as follows: 

§ 223.18 Revocation. 

(a) Treasury may initiate a revocation 

proceeding against a Treasury-certified 

company in one of two ways: 

(1) Treasury, of its own accord, under 

§ 223.19, may initiate revocation 

proceedings against the company when 

it has reason to believe that the 

company is not complying with 31 

U.S.C. 9304–9308 and/or the regulations 

under this part; or 

* * * * * 

■ 20. Amend § 223.19 by revising the 

introductory text and paragraph (b)(2) to 

read as follows: 

§ 223.19 Treasury-initiated revocation 

proceedings. 

Whenever Treasury has reason to 

believe that a company is not complying 

with the requirements of 31 U.S.C. 

9304–9308 and/or the regulations under 

this part, including but not limited to a 

failure to satisfy corporate and financial 

standards, Treasury shall: 

* * * * * 

(b) * * * 

(2) The company responded, was 

provided an opportunity to demonstrate 

or achieve compliance, and failed to do 

so. 

■ 21. Amend § 223.20 by revising 

paragraphs (b)(1) and (h)(8) and (9) to 

read as follows: 

§ 223.20 Revocation proceedings initiated 

by Treasury upon receipt of an agency 

complaint. 

* * * * * 

(b) * * * 

(1) The agency has determined, 

consistent with agency authorities, the 

principal is in default on the obligation 

covered by the bond. Alternatively, if 

the default has been litigated, 

documentation indicating a court of 

competent jurisdiction has determined 

the principal is in default; 

* * * * * 

(h) * * * 

(8) The formal adjudication standards 

under the Administrative Procedure 

Act, 5 U.S.C. 554, 556, and 557, do not 

apply to the informal hearing or 

adjudication process. 

(9) Treasury may promulgate 

additional procedural guidance 

governing the conduct of informal 

hearings. 

* * * * * 

■ 22. Revise § 223.21 to read as follows: 

§ 223.21 Reinstatement. 

If, after one year from the date that 

Treasury notifies the company of its 

decision to decline to renew or revoke 

the certificate of authority of a company 

under this part, the company can 

demonstrate that the basis for the nonrenewal or revocation has been cured, as 

determined by Treasury in its 

discretion, and that it can comply with, 

and does meet, all continuing 

requirements for certification under 31 

U.S.C. 9304–9308 and this part, the 

company may submit an application to 

Treasury for reinstatement or reissuance 

of a certificate of authority, which will 

be granted without prejudice if all such 

requirements are met. Treasury may 

waive the one year waiting period for 

good cause shown, as determined by 

Treasury in its sole discretion. 

■ 23. Revise § 223.22 to read as follows: 

§ 223.22 Fees for service of the Treasury 

Department. 

(a) Fees shall be imposed and 

collected, for the services listed in 

paragraphs (a)(1) through (6) of this 

section that are performed by Treasury, 

regardless of whether the action 

requested is granted or denied. An 

online payment portal is provided at 

https://www.fiscal.treasury.gov/suretybonds/. The amount of the fee will be 

based on which of the following 

categories of service is requested: 

(1) Examination of a company’s 

application for a certificate of authority 

as an acceptable surety on Federal 

bonds or for a certificate of authority as 

an acceptable reinsuring company on 

such bonds (see § 223.2(a)); 

(2) Examination of a company’s 

application for recognition as an 

admitted reinsurer of surety companies 

doing business with the United States 

(see § 223.12(h)); 

(3) Examination of a company’s 

application for recognition as a 

complementary reinsurer of surety 

companies doing business with the 

United States (see § 223.12(i)); 

(4) Examination of a company’s 

application for recognition as an alien 

reinsurer of surety companies doing 

business with the United States (see 

§ 223.12(j)); 

(5) Determination of a company’s 

continuing qualifications for annual 

renewal of its certificate of authority 

(see § 223.2(b)); or 

(6) Determination of a company’s 

continuing qualifications for annual 

renewal of its authority as an admitted 

reinsurer, complementary reinsurer, or 

alien reinsurer (see § 223.12). 

(b) In a given year a uniform fee will 

be collected from every company 

requesting a particular category of 

service, e.g., determination of a 

company’s continuing qualifications for 

annual renewal of its certificate of 

authority. However, Treasury reserves 

the right to redetermine the amounts of 

fees annually. Fees are determined in 

accordance with Office of Management 

and Budget Circular A–25, as amended. 

(c) Specific fee information may be 

obtained from the Surety Bonds 

Program, or online at https://

www.fiscal.treasury.gov/files/suretybonds/user-fees.pdf. In addition, a 

notice of the amount of a fee referred to 

in paragraphs (a)(1) through (6) of this 

section will be published in the Federal 

Register as each change in such fee is 

made. 

David A. Lebryk, 

Fiscal Assistant Secretary. 

[FR Doc. 2022–03937 Filed 3–2–22; 8:45 am] 

BILLING CODE 4810–AS–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R01–OAR–2021–0785; FRL–9591–01– 

R1] 

Air Plan Approval; New Hampshire; 

Env-A 800 Testing and Monitoring 

Procedures, Env-A 619.03 PSD 

Program Requirements, and Env-A 

1200 VOC RACT 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: The Environmental Protection 

Agency (EPA) is proposing to approve 

State Implementation Plan (SIP) 

revisions submitted by the State of New 

Hampshire. These revisions amend 

Testing and Monitoring Procedures for 

sources of air pollution; revise New 

Hampshire’s Prevention of Significant 

Deterioration (PSD) permitting program 

with respect to requirements for air 

quality modeling; fully approve certain 

infrastructure SIP requirements as they 

related to PSD permitting requirements 

for the 2015 Ozone and 2012 fine 

particle matter (PM2.5) National Ambient 

Air Quality Standards (NAAQS); and 

amend Volatile Organic Compounds 

(VOCs) Reasonably Available Control 

Technology (RACT). This action is being 

taken under the Clean Air Act (CAA). 

DATES: Written comments must be 

received on or before April 4, 2022. 


khammond on DSKJM1Z7X2PROD with PROPOSALS