Federal Register / Vol. 73, No. 190 / Tuesday, September 30, 2008 / Proposed Rules 56767 

this proposed AD and placed it in the 

AD docket. 

List of Subjects in 14 CFR Part 39 

Air transportation, Aircraft, Aviation 

safety, Safety. 

The Proposed Amendment 

Accordingly, under the authority 

delegated to me by the Administrator, 

the FAA proposes to amend 14 CFR part 

39 as follows: 

PART 39—AIRWORTHINESS 

DIRECTIVES 

1. The authority citation for part 39 

continues to read as follows: 

Authority: 49 U.S.C. 106(g), 40113, 44701. 

§ 39.13 [Amended] 

2. The FAA amends § 39.13 by adding 

the following new AD: 

Saab Aircraft AB: Docket No. FAA–2008– 

1044; Directorate Identifier 2008–NM– 

095–AD. 

Comments Due Date 

(a) We must receive comments by October 

30, 2008. 

Affected ADs 

(b) None. 

Applicability 

(c) This AD applies to Saab Model SAABFairchild SF340A (SAAB/SF340A) and 

SAAB 340B airplanes, all serial numbers, 

certificated in any category. 

Subject 

(d) Air Transport Association (ATA) of 

America Code 32: Landing Gear. 

Reason 

(e) The mandatory continuing 

airworthiness information (MCAI) states: 

Several landing gear emergency extension 

valves have been found seized when 

performing checks according to the SAAB 

340 Maintenance Review Board (MRB) 

Report, Section F (Airworthiness Limitation 

Section) task number 323106. The valves 

have seized due to lack of internal 

lubrication. This condition, if not corrected, 

could result in malfunctioning of the landing 

gear release during an operational 

emergency. 

Because the valve lubrication performance 

is dependant on calendar time since last 

valve operation, SAAB has revised the check 

to cycle the emergency release handle 5 times 

and amended the interval in MRB section F 

from 5,000 FH [flight hours] to every 2 years. 

For the reasons described above, this 

Airworthiness Directive (AD) requires a 

functional check [for discrepancies, (e.g., 

landing gear does not extend, does not lock 

in down position)] of the landing gear 

emergency extension valve at the newly 

established intervals. 

Malfunction of the landing gear release 

could cause failure of the landing gear to 

extend and lock in the extended position, 

which could result in a gear up landing and 

reduced controllability of the airplane on the 

ground. The corrective action for any 

discrepancy that is found is repair using a 

method approved by either the FAA or the 

European Aviation Safety Agency (EASA) (or 

its delegated agent). 

Actions and Compliance 

(f) Unless already done, do the following 

actions. 

(1) Within 6 months after the effective date 

of this AD, do a functional check of the 

landing gear emergency extension valve in 

accordance with the Accomplishment 

Instructions of Saab Service Bulletin 340–32– 

136, dated January 9, 2008. Repeat the 

functional check thereafter at intervals not to 

exceed 24 months. 

(2) If any discrepancy is found during any 

functional check required by paragraph (f)(1) 

of this AD, before further flight, repair using 

a method approved by either the Manager, 

International Branch, ANM–116, Transport 

Airplane Directorate, FAA; or the European 

Aviation Safety Agency (EASA) (or its 

delegated agent). 

FAA AD Differences 

Note: This AD differs from the MCAI and/ 

or service information as follows: Although 

the MCAI includes a note that allows the 

option of the repetitive inspections to be 

accomplished in accordance with SAAB 340 

MRB Report, Section F, Revision 6, task 

number 323106, this AD does not include 

that option. That document is not yet 

available. 

Other FAA AD Provisions 

(g) The following provisions also apply to 

this AD: 

(1) Alternative Methods of Compliance 

(AMOCs): The Manager, International 

Branch, ANM–116, FAA, has the authority to 

approve AMOCs for this AD, if requested 

using the procedures found in 14 CFR 39.19. 

Send information to ATTN: Shahrahm 

Daneshmandi, Aerospace Engineer, 

International Branch, ANM–116, Transport 

Airplane Directorate, FAA, 1601 Lind 

Avenue, SW., Renton, Washington 98057– 

3356; telephone (425) 227–1112; fax (425) 

227–1149. Before using any approved AMOC 

on any airplane to which the AMOC applies, 

notify your appropriate principal inspector 

(PI) in the FAA Flight Standards District 

Office (FSDO), or lacking a PI, your local 

FSDO. 

(2) Airworthy Product: For any 

requirement in this AD to obtain corrective 

actions from a manufacturer or other source, 

use these actions if they are FAA-approved. 

Corrective actions are considered FAAapproved if they are approved by the State 

of Design Authority (or their delegated 

agent). You are required to assure the product 

is airworthy before it is returned to service. 

(3) Reporting Requirements: For any 

reporting requirement in this AD, under the 

provisions of the Paperwork Reduction Act, 

the Office of Management and Budget (OMB) 

has approved the information collection 

requirements and has assigned OMB Control 

Number 2120–0056. 

Related Information 

(h) Refer to MCAI EASA Airworthiness 

Directive 2008–0054 dated March 5, 2008, 

and SAAB Service Bulletin 340–32–136, 

dated January 9, 2008, for related 

information. 

Issued in Renton, Washington, on 

September 20, 2008. 

Michael Kaszycki, 

Acting Manager, Transport Airplane 

Directorate, Aircraft Certification Service. 

[FR Doc. E8–22915 Filed 9–29–08; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF THE TREASURY 

31 CFR Part 50 

RIN 1505—AB92 

Terrorism Risk Insurance Program; 

Cap on Annual Liability 

AGENCY: Departmental Offices, Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Department of the 

Treasury (‘‘Treasury’’) is issuing this 

proposed rule as part of its 

implementation of Title I of the 

Terrorism Risk Insurance Act of 2002 

(‘‘TRIA’’ or ‘‘the Act’’), as amended by 

the Terrorism Risk Insurance Program 

Reauthorization Act of 2007 

(‘‘Reauthorization Act’’). The Act 

established a temporary Terrorism Risk 

Insurance Program (‘‘TRIP’’ or 

‘‘Program’’) under which the Federal 

Government would share with 

commercial property and casualty 

insurers the risk of insured losses from 

certified acts of terrorism. The 

Reauthorization Act has now extended 

the Program until December 31, 2014. 

This proposed rule is the latest in a 

series of regulations Treasury has issued 

to implement the Act. The proposed 

rule incorporates and implements 

statutory requirements in section 103(e) 

of the Act, as amended by the 

Reauthorization Act, for capping the 

annual liability for insured losses at 

$100 billion. In particular, the proposed 

rule describes how Treasury intends to 

determine the pro rata share of insured 

losses under the Program when insured 

losses would otherwise exceed the cap 

on annual liability. The rule builds 

upon previous rules issued by Treasury. 

DATES: Written comments must be 

submitted on or before October 30, 

2008. 

ADDRESSES: Submit comments 

electronically through the Federal 

eRulemaking Portal: http:// 

www.regulations.gov, or by mail (if hard 

copy, preferably an original and two 

copies) to: Terrorism Risk Insurance 


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56768 Federal Register / Vol. 73, No. 190 / Tuesday, September 30, 2008 / Proposed Rules 

Program, Public Comment Record, Suite 

2100, Department of the Treasury, 1425 

New York Avenue, NW., Washington, 

DC 20220. Because paper mail in the 

Washington, DC area may be subject to 

delay, it is recommended that comments 

be submitted electronically. All 

comments should be captioned with 

‘‘TRIA Cap on Annual Liability 

Proposed Rule Comments.’’ Please 

include your name, affiliation, address, 

e-mail address, and telephone number 

in your comment. Comments will be 

available for public inspection on the 

Federal eRulemaking Portal and by 

appointment at the TRIP Office. To 

make appointments, call (202) 622–6770 

(not a toll-free number). 

FOR FURTHER INFORMATION CONTACT: 

Howard Leikin, Deputy Director, 

Terrorism Risk Insurance Program, (202) 

622–6770 (not a toll-free number). 

SUPPLEMENTARY INFORMATION: 

I. Background 

On November 26, 2002, the President 

signed into law the Terrorism Risk 

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

116 Stat. 2322). The Act was effective 

immediately. The Act’s purposes are to 

address market disruptions, ensure the 

continued widespread availability and 

affordability of commercial property 

and casualty insurance for terrorism 

risk, and allow for a transition period 

for the private markets to stabilize and 

build capacity while preserving state 

insurance regulation and consumer 

protections. 

Title I of the Act establishes a 

temporary federal program of shared 

public and private compensation for 

insured commercial property and 

casualty losses resulting from an act of 

terrorism. The Act authorizes Treasury 

to administer and implement the 

Program, including the issuance of 

regulations and procedures. The 

Program provides a federal backstop for 

insured losses from an act of terrorism. 

Section 103(e) of the Act gives Treasury 

authority to recoup federal payments 

made under the Program through 

policyholder surcharges. The Act also 

contains provisions designed to manage 

litigation arising from or relating to a 

certified act of terrorism. 

The Program originally was to expire 

on December 31, 2005; however, on 

December 22, 2005, the President signed 

into law the Terrorism Risk Insurance 

Extension Act of 2005 (Pub. L. 109–144, 

119 Stat. 2660), which extended the 

Program through December 31, 2007. On 

December 26, 2007, the President signed 

into law the Terrorism Risk Insurance 

Program Reauthorization Act of 2007 

(Pub. L. 110–160, 121 Stat. 1839), 

extending the Program through 

December 31, 2014. 

The Reauthorization Act, among other 

Program changes, revised the provisions 

of the Act with regard to the cap on 

annual liability for insured losses of 

$100 billion. Previously, section 

103(e)(3) stated that Congress would 

determine the procedures for and the 

source of any payments for insured 

losses in excess of the cap. This was 

deleted. Instead, this section now 

requires the Secretary of the Treasury to 

notify Congress not later than 15 days 

after the date of an act of terrorism as 

to whether aggregate insured losses are 

estimated to exceed the cap. TRIA, as 

amended by the Reauthorization Act, 

also requires the Secretary to determine 

the pro rata share of insured losses to 

be paid by each insurer incurring losses 

under the Program when insured losses 

exceed the cap, and to issue regulations 

for carrying this out. 

II. Previous Rulemaking 

To assist insurers, policyholders, and 

other interested parties in complying 

with immediately applicable 

requirements of the Act, Treasury has 

issued interim guidance for reference 

until issuance of superseding regulation. 

Rules establishing general provisions 

implementing the Program, including 

key definitions, and requirements for 

policy disclosures and mandatory 

availability, can be found in Subparts A, 

B, and C of 31 CFR Part 50. Treasury’s 

rules applying provisions of the Act to 

State residual market insurance entities 

and State workers’ compensation funds 

are at Subpart D of 31 CFR Part 50. 

Rules setting forth procedures for filing 

claims for payment of the Federal share 

of compensation for insured losses are 

at Subpart F of 31 CFR Part 50. Subpart 

G of 31 CFR Part 50 contains rules on 

audit and recordkeeping requirements 

for insurers, while Subpart I of 31 CFR 

Part 50 contains Treasury’s rules 

implementing the litigation 

management provisions of section 107 

of the Act. 

III. The Proposed Rule 

This proposed rule would add a 

Subpart J to part 50, which comprises 

Treasury’s regulations implementing the 

Act. It also proposes to amend § 50.53 

of Subpart F. 

A. Overview 

Generally, section 103(e)(2), as 

amended, provides that, 

notwithstanding subsection (e)(1) 

regarding the Federal share of 

compensation or any other provision of 

Federal or State law, the Secretary shall 

not make any payments for any portion 

of insured losses in excess of the cap on 

annual liability of $100 billion. 

Furthermore, no insurer that has met its 

insurer deductible shall be liable for any 

portion of insured losses in excess of the 

cap. For these purposes, the Secretary 

determines the pro rata share of insured 

losses to be paid by each insurer 

incurring losses under the Program. 

Section 103(e)(2) further provides that 

no insurer may be required to make any 

payment for insured losses in excess of 

its deductible combined with its share 

of insured losses above its deductible. 

The Reauthorization Act also added a 

provision (Section 103(b)(3) of TRIA) 

requiring insurers to make a disclosure 

to policyholders of the existence of the 

$100 billion cap under subsection (e)(2). 

The cap on insured losses may be 

reached as a result of a single act of 

terrorism, or as a result of multiple 

smaller acts. Either case would 

represent an unprecedented level of 

losses and present many difficulties in 

assessment and projection of insured 

losses. The cap’s impact on the Federal 

government’s and insurer’s liabilities, 

based on industry-wide insured losses, 

involves insurance contract issues not 

normally encountered in the insurance 

market. Examining different approaches 

to pro rating payments of insured losses 

within the cap, it is apparent that no 

alternative eliminates the potential for 

inequities in how insured losses are 

settled, mainly due to the timing of 

events and the timing of loss 

settlements. 

In developing a proposed process, 

Treasury is guided by its authorities 

provided in the Act. Treasury is 

attempting, within these authorities, to 

reduce the potential for inequitable 

treatment of policyholders resulting 

from the timing of insured losses, the 

location of insured losses, or the 

particular insurer of the policyholder, 

while providing a process that is 

relatively easily understood and that is 

operationally reasonable to execute, 

control, and audit. The proration 

process must be established on a going 

forward basis so insureds that have 

already received payments from their 

insurers would not have to return any 

of those payments. The process must 

also be flexible enough to address 

changing circumstances presented by 

subsequent events or by the 

development of new, more accurate 

information regarding insured losses. 

The proposed rule describes how 

Treasury would initially estimate 

whether the cap will be exceeded, the 

means by which Treasury would 

develop and maintain estimates for 

determining the pro rata share of 

insured losses to be paid, the factors 


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Federal Register / Vol. 73, No. 190 / Tuesday, September 30, 2008 / Proposed Rules 56769 

that would be considered in 

determining a pro rata percentage of the 

insured losses that are to be paid in 

order to stay within the cap, and the 

application of the pro rata percentage in 

paying insured losses. Treasury has 

consulted with the National Association 

of Insurance Commissioners in 

developing this rule. Treasury seeks 

comment on all aspects of the proposed 

rule and welcomes the submission of 

alternatives to the proposed process for 

prorating insured losses when aggregate 

insured losses would exceed the cap on 

annual liability. 

B. Description of the Proposed Rule 

The major provisions of the proposed 

rule are as follows: 

1. Notice to Congress (§ 50.91) 

Section 103(e)(3) of the Act requires 

the Secretary to provide an initial notice 

to Congress not later than 15 days after 

the date of an act of terrorism, stating 

whether the Secretary estimates that 

aggregate insured losses will exceed 

$100 billion. TRIA defines an ‘‘act of 

terrorism,’’ in part, as any act that is 

certified by the Secretary, in 

concurrence with the Secretary of State 

and the Attorney General of the United 

States. Treasury intends to meet this 

requirement within the designated time 

following the certification of an act of 

terrorism, although there may be 

significant challenges involved in 

obtaining data for such an estimate 

within the designated time. The first 

challenge could be restrictions on access 

to the affected areas that would hinder 

the ability of anyone to accurately assess 

losses. Additionally, from the Program’s 

perspective, since the $100 billion cap 

applies only to insured losses, the 

distinction between estimation of 

insured and uninsured losses will be 

critical. 

In determining initial estimates of 

insured losses, Treasury’s preferred 

means of gathering information would 

be through contacting insurance 

industry statistical organizations such as 

the Property Claims Services of 

Insurance Services Office, Inc. To the 

extent that insurers are able to estimate 

their insured losses early on, aggregate 

loss information would become 

available through such industry sources. 

Supplemented with other information 

regarding insurer deductibles and 

expectations for insured losses that 

would emerge later, such as liability 

losses, this represents, we believe, the 

best source for an initial report as to 

whether the cap will be exceeded. 

Treasury is also exercising its own data 

call authority, which is further 

discussed in the description below for 

§ 50.94 in the proposed rule. For the 

purposes of this initial reporting to 

Congress, however, a Treasury data call, 

separate from other industry efforts, 

may not be timely enough. 

Treasury has also considered the 

utility of certain computer models to 

estimate initial insured losses. (This 

modeling has been developed as an 

industry tool for analyzing the terrorism 

risk for underwriting purposes.) While 

this may be of some value in making 

initial estimates, we have also been 

advised that the values for input 

parameters necessary for model 

accuracy for an actual terrorist event are 

not likely to be as readily available in 

the immediate aftermath as they are 

from natural hazard events such as 

hurricanes. This seems to limit the 

utility of this approach for purposes of 

the report to Congress. 

Treasury may also look to Federal, 

state, and local sources of damage 

assessments in advance of any disaster 

response and recovery efforts. These 

will likely also be helpful, but, as 

discussed above, such overall estimates 

may not be refined enough for us to 

estimate the more limited insured losses 

of concern to the Program. 

2. Determination of Pro Rata Share 

(§ 50.92) 

Under the Reauthorization Act, the 

Secretary shall not make any payment 

for any portion of the amount of such 

insured losses that exceeds $100 billion; 

and no insurer that has met its 

deductible shall be liable for the 

payment of any portion of the amount 

of such insured losses that exceeds $100 

billion. As previously noted, the timing 

of events and the timing of resulting loss 

payments have the potential for 

inequities that may be impossible to 

avoid completely. Treasury is proposing 

a rule that ensures fair and equal 

treatment of insurers, policyholders, 

and claimants, to the extent possible 

given the inequities inherent in the cap 

provisions of the Act and the possibility 

that proration may need to be 

implemented midway in the settlement 

of insured losses arising from a Program 

Year. Generally, Treasury’s approach 

would be to establish any pro ration 

relatively conservatively when it is 

estimated that the cap will be reached, 

so that early payments are not 

inequitably higher than later payments, 

and so that, barring a subsequent act of 

terrorism, later refinements to the pro 

ration would allow additional payments 

to policyholders for prior settled losses. 

During a Program Year, until events 

have transpired that lead Treasury to 

believe that the cap could be reached, it 

would be our intention that no pro 

ration would be established. 

The proposed rule includes a 

definition of ‘‘pro rata loss percentage’’ 

(‘‘PRLP’’). This would be the percentage 

determined by the Secretary to be 

applied against the amount that would 

otherwise be paid by an insurer under 

the terms and conditions of an 

insurance policy providing property and 

casualty insurance under the Program if 

there were no cap on annual liability. 

An insurer would apply the PRLP to 

compute the pro rata share of insured 

losses to be paid under an insurance 

policy. 

Treasury has examined the issue of 

whether different lines of business or 

different types of insured losses should 

have different pro rata loss percentages 

applied. Given the inherent potential for 

inequities arising out of the timing and 

nature of multiple acts of terrorism that 

are the cause of insured losses, the 

difficulties in quickly estimating 

aggregate losses, as well as the difficulty 

in prioritizing certain insured losses 

over others, Treasury believes a single 

pro rata loss percentage should be used 

in determining the pro rata share of 

insured losses from all lines of business 

covered by the Program. 

The proposed rule provides that if 

Treasury estimates that insured losses 

may exceed the cap on annual liability 

for a Program Year, then Treasury 

would determine an initial PRLP and an 

effective date for that PRLP. This 

percentage would be applied in 

determining insured loss payments for 

insured losses incurred during the 

subject Program Year, starting with the 

effective date until Treasury determines 

a revised PRLP. Considerations in 

establishing the PRLP are proposed to 

be: (1) Estimates of insured losses from 

insurance industry statistical 

organizations; (2) any data calls issued 

by Treasury; (3) expected reliability and 

accuracy of insured loss estimates and 

likelihood that insured loss estimates 

could increase; (4) estimates of insured 

losses and expenses not included in 

available statistical reporting; and (5) 

such other factors as the Secretary 

considers important. Revisions to the 

PRLP would be based on the same 

considerations, as needed. Notices of 

the initial and any revised PRLP would 

be provided through the Federal 

Register, or in another manner Treasury 

deems appropriate, based upon the 

circumstances of the act of terrorism 

under consideration. 

It will almost certainly be necessary to 

continue to update aggregate insured 

loss estimates, in light of more 

information regarding losses from 

events which have already occurred or 


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because of subsequent events. New and 

refined information may result in 

Treasury’s determination of a new 

PRLP. In developing this proposed rule, 

Treasury contemplated including a 

schedule for updating estimates of 

aggregate insured losses. Because of the 

unique circumstances of any act of 

terrorism, we believe that it would be 

better to formulate a plan for updating 

this information when we know more 

about what has actually occurred. 

Treasury needs information on 

unprorated insured losses in order to 

accurately determine an appropriate 

initial or subsequent PRLP. It is 

Treasury’s understanding that as 

insured losses develop and are paid 

under a pro rata share calculation, 

insurer loss reserves generally will 

reflect the reduced payments expected 

to be made. For this reason, Treasury 

anticipates requiring, both for data call 

purposes discussed below, and for 

insurer claim submissions for the 

Federal share of compensation, the 

provision to Treasury of insured loss 

amount information that would reflect 

the unprorated amounts of both 

settlements and losses yet to be paid in 

the future. 

Treasury is concerned that there 

could be circumstances where we 

estimate that the cap on annual liability 

will be exceeded, but there is not yet 

adequate knowledge of insured losses 

with which to determine a PRLP. 

Allowing payments for early insured 

losses to continue without proration 

appears to be inequitable to those 

coming in later, for which the pro rata 

share calculation would have to be that 

much more severe. Treasury is 

proposing in this rule that in such a 

circumstance it would call a brief hiatus 

in insurer loss payments of up to two 

weeks. During this time Treasury would 

develop a PRLP as quickly as possible. 

During this hiatus, insurers could still 

make payments, but with the 

understanding that the PRLP would be 

effective retroactively to the start of the 

hiatus. Any insured losses later 

submitted in support of an insurer’s 

claim for the Federal share of 

compensation would be reviewed for 

compliance with the regulations 

pertaining to the pro rata share 

payments. 

3. Application of Pro Rata Share 

(§ 50.93) 

Treasury is proposing that the PRLP 

be applied by insurers prospectively on 

individual insured losses that have not 

been settled as of the effective date of a 

PRLP. The intention is that the process 

of pro ration will not retroactively 

require repayment of any claims already 

legitimately made (or agreed to be paid) 

to insureds for insured losses. The 

impracticality of recovering payments 

already made is generally recognized. 

From the standpoint of operational 

ease and in the interest of equitable 

treatment of all insured losses once it is 

expected that the cap on annual liability 

will be reached, Treasury sees merit in 

applying pro rata sharing of insured 

losses whether they are within or in 

excess of an individual insurer’s 

deductible. In closely examining its 

authorities as stipulated in the 

Reauthorization Act, however, Treasury 

has concluded that it cannot provide for 

pro rata sharing of insured losses in 

such a way that an insurer’s liability 

would be limited when it has not met 

its deductible. The proposed rule 

addresses this issue. 

Proposed § 50.93 directs insurers to 

apply the PRLP to determine the pro 

rata share of each insured loss to be 

paid by the insurer on all insured losses 

where there is not a signed settlement 

as of the effective date established by 

Treasury for the PRLP. The same 

procedure applies whether this is an 

initial PRLP or a subsequent PRLP that 

is superseding the prior determination. 

Treasury is proposing that the pro rata 

share is determined based on the final 

claim settlement amount that would 

otherwise be paid. If partial payments 

have already been made as of the 

effective date of the PRLP, then the pro 

rata share for that loss is the greater of 

the amount already paid or the amount 

computed by applying the PRLP to the 

final claim settlement amount. The 

proposed rule refers to ‘‘estimated or 

actual’’ final claim settlement amounts. 

This recognizes that insurers may be 

submitting underlying claim 

information in support of a claim for the 

Federal share of compensation after 

making partial payments, but prior to a 

final adjustment of the claim. 

Some insured losses, such as those 

associated with workers’ compensation 

or business interruption, may involve 

ongoing regular payments. In these 

cases, the proration is still determined 

based on the final claim settlement 

amount that would otherwise be paid. 

In the claims procedures regulations 

and in the forms for insurer submissions 

for the Federal share of compensation 

that Treasury has promulgated, workers’ 

compensation losses are required to be 

substantiated at the policy level. That is 

to say, underlying loss information on 

the bordereaux and reviewed by 

Treasury in determining the Federal 

share is submitted in aggregate by 

policy/employer rather than individual 

claimant/employee. In this proposed 

rule, Treasury proposes to continue that 

scheme. The application of the PRLP to 

determine the pro rata share would be 

against the estimated or actual 

unprorated loss amounts by policy 

(broken down by medical only, medical 

portion of indemnity, and indemnity 

portion of indemnity), following the 

way loss information has been required 

to be reported as part of the TRIP 

Certifications of Loss. Despite this 

calculation of the pro rata share at the 

policy level for purposes of reporting to 

Treasury, Treasury expects that insurers 

would pro rate payments made to 

individual claimants. 

If an insurer that has not yet made 

payments in excess of its insurer 

deductible estimates it will exceed its 

deductible making payments based on 

the application of the PRLP, then that 

insurer shall apply the PRLP as of the 

effective date of the PRLP. If an insurer 

that has not yet made payments in 

excess of its insurer deductible 

estimates it will not exceed its 

deductible making payments based on 

the application of the PRLP, then that 

insurer may make payments on the 

same basis as prior to the effective date 

of the PRLP. This means there is no 

requirement to pro-rate losses. In such 

circumstances, whether to pro-rate as of 

the effective date of the PRLP is up to 

the insurer. If the insurer pro rates and 

does not exceed its deductible, then it 

is liable for additional, retroactive loss 

payments that in the aggregate bring the 

insurer’s total insured loss payments up 

to an amount equal to the lesser of its 

insured losses without proration or its 

insurer deductible. If the insurer does 

not pro rate, but does exceed its 

deductible, then it must apply the PRLP 

to its remaining insured losses once it 

makes payments equal to its insurer 

deductible. Once an insurer exceeds its 

deductible and submits a claim for the 

Federal share of compensation, 

however, Treasury’s review of eligible 

payments associated with the 

underlying losses and calculations for 

the Federal share would be based on the 

application of the PRLP as if the insurer 

had originally been subject to paragraph 

(b) of this section. 

4. Data Call Authority (§ 50.94) 

Treasury is proposing that it may 

issue a data call to insurers for the 

submission of insured loss information. 

We anticipate requesting summary level 

information on insured losses and 

insurer deductible information. Such a 

collection of data may be necessary not 

only for the purposes of the cap on 

annual liability, but also with regard to 

potential recoupment. Treasury intends, 

to the extent possible, to rely on existing 

industry statistical reporting 


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mechanisms in making initial estimates. 

However, in order to estimate whether 

the cap on annual liability will be 

reached and determine an initial or 

subsequent PRLP, it may be necessary to 

have more timely detail regarding 

insurer deductibles and reserves for 

insured losses from lines of business not 

normally included in existing industry 

reporting. 

It is Treasury’s intention to proceed 

with the development of forms for the 

electronic submission of insurer 

responses to a data call, with 

appropriate opportunity provided for 

public review and comment. It has been 

observed that reporting similar to that 

required on the current TRIP Initial 

Notice of Loss may be sufficient for 

these purposes. Treasury will review 

this as part of its forms development 

process. The circumstances of a 

particular Program Trigger Event will 

likely have a significant bearing on 

which insurers should receive the data 

call and how the data should be 

coordinated, perhaps with the NAIC or 

a particular state. Additional data call 

guidance will be provided as necessary 

based on the circumstances of the 

particular Program Trigger Event. 

5. Final Amount (§ 50.95) 

As previously discussed, Treasury 

intends to establish, to the extent 

possible, pro ration of insured losses 

conservatively so as to not exceed the 

legislative cap on annual liability. The 

proposed rule includes provision for 

Treasury to determine a final PRLP that 

would be used for determining the pro 

rata share to be paid on all remaining 

insured losses as well as for being able 

to provide additional payments on 

previously settled losses and still 

remain within the cap. The proposed 

rule also proposes that there may be a 

need for supplementary explanation 

regarding how additional payments are 

provided on previously settled losses 

that would accompany the Certifications 

of Loss submitted by insurers for the 

Federal share of compensation. The 

proposed rule also includes a provision, 

consistent with the above discussion of 

the treatment of pro rata sharing in 

connection with insurer deductibles, 

that at the time of determination of a 

final pro ration, an insurer may still be 

liable for loss payments that in the 

aggregate bring the insurer’s total loss 

payments up to an amount equal to the 

lesser of its insured losses without 

proration or its insurer deductible. 

IV. Procedural Requirements 

Executive Order 12866, ‘‘Regulatory 

Planning and Review’’. This rule is a 

significant regulatory action for 

purposes of Executive Order 12866, 

‘‘Regulatory Planning and Review,’’ and 

has been reviewed by the Office of 

Management and Budget. 

Regulatory Flexibility Act. Pursuant to 

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

601 et seq., it is hereby certified that this 

proposed rule will not have a significant 

economic impact on a substantial 

number of small entities. Under the Act, 

Treasury shall not make any payment 

for any portion of the amount of annual 

aggregate insured losses that exceed 

$100 billion and no insurer that has met 

its insurer deductible is liable for the 

payment of any portion of the amount 

of annual aggregate insured losses that 

exceeds $100 billion. Further, the Act 

requires the Secretary to determine the 

pro rata share of insured losses to be 

paid by each insurer and to issue 

regulations for determining the pro rata 

share of insured losses under the 

Program. Accordingly, any economic 

impact associated with the proposed 

rule flows from the Act and not the 

proposed rule. A regulatory flexibility 

analysis is thus not required. 

Paperwork Reduction Act. The 

collection of information contained in 

this proposed rule has been submitted 

to the Office of Management and Budget 

(OMB) for review under the 

requirements of the Paperwork 

Reduction Act, 44 U.S.C. 3507(d). 

Organizations and individuals 

desiring to submit comments 

concerning the collection of information 

in the proposed rule should direct them 

to: Office of Management and Budget, 

Attn: Desk Officer for the Department of 

the Treasury, Office of Information and 

Regulatory Affairs, Washington, DC 

20503, or by e-mail to 

Alexander_T._Hunt@omb.eop.gov. A 

copy of the comments should also be 

sent to Treasury at the addresses 

previously specified. Comments on the 

collection of information should be 

received by December 1, 2008. 

Treasury specifically invites 

comments on: (a) Whether the proposed 

collection of information is necessary 

for the proper performance of the 

mission of Treasury, and whether the 

information will have practical utility; 

(b) the accuracy of the estimate of the 

burden of the collections of information 

(see below); (c) ways to enhance the 

quality, utility, and clarity of the 

information collection; (d) ways to 

minimize the burden of the information 

collection, including through the use of 

automated collection techniques or 

other forms of information technology; 

and (e) estimates of capital or start-up 

costs and costs of operation, 

maintenance, and purchase of services 

to maintain the information. 

The forms to be prescribed by 

Treasury for the data call pursuant to 

the authority in § 50.94 to collect 

information to ascertain the aggregate 

amount of insured losses will require 

information readily derived from 

existing normal industry internal and 

external reporting. Treasury may issue 

data calls to insurers to make initial 

estimates of aggregate losses where 

available industry statistical information 

is not specific enough, and to further 

refine the information needed to 

determine the PRLP. The number of 

respondents to such a data call is not 

expected to exceed 200 insurers. The 

data to be obtained in the immediate 

aftermath of certification of an act of 

terrorism would include the insurers’ 

total expected losses and estimated 

insurer deductibles. Subsequent data 

calls to refine the information would 

include catastrophe code, line of 

business, losses paid, allocated loss 

adjustment expenses paid, case reserves, 

incurred but not reported reserves as 

well as the total expected loss 

(unprorated) and insurer deductible 

data. Treasury estimates that an insurer 

will require 5 hours, on average, to 

assemble data and respond to the 

Treasury request. The estimated total 

burden would therefore be 1,000 hours 

(200 insurers × 5 hours). At a blended, 

fully loaded hourly rate of $85.00, the 

cost would $85,000. (Note, the data call 

forms and submission would, as 

appropriate, also be utilized to obtain 

aggregate insured loss data needed for 

making recoupment determinations and 

notices required by the Act). 

In the event of imposition of a PRLP, 

it will be necessary to determine insurer 

compliance when the Treasury is 

processing insurer claims for payment 

of the Federal share of compensation. 

This would be accomplished by revision 

to the currently approved Treasury form 

TRIP 02C, revised April 2006 (OMB 

1505–0200, expiration December 31, 

2010). This form, the ‘‘Bordereau’’ or 

‘‘Schedule C’’ is submitted in support of 

the insurer’s certification of loss (see 31 

CFR 50.53) and provides detailed 

information about individual 

underlying claims. The revised form 

would require the addition of the 

settlement date of an underlying claim, 

the total unprorated amount of the loss, 

and the date of the latest payment on 

the claim. These are data that are 

normally in the insurer’s own file and 

their reporting and recordkeeping are 

estimated to not represent any 

measurable additional reporting or 

recordkeeping burden. 

Executive Order 13132, ‘‘Federalism.’’ 

The proposed rule may have federalism 

implications to the extent it deals with 


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56772 Federal Register / Vol. 73, No. 190 / Tuesday, September 30, 2008 / Proposed Rules 

the making of payments by insurers to 

their policyholders under contracts of 

insurance, which is ordinarily regulated 

under State insurance law. However, 

TRIA established a temporary Federal 

program that is national in scope and 

significance. Section 106 of TRIA 

preserves the jurisdiction or regulatory 

authority of State insurance 

commissioners or similar offices, except 

as specifically provided in TRIA. 

Section 103(e)(2) requires Treasury to 

issue regulations for determining the 

pro rata share of insured losses under 

the Program when insured losses exceed 

$100 billion. 

Treasury consulted with the National 

Association of Insurance Commissioners 

early in the process of formulating this 

proposed rule. State insurance 

commissioners who are members of the 

NAIC Terrorism Insurance Working 

Group were given an opportunity to 

submit comments, and a few minor and 

technical comments were received and 

considered by Treasury. The NAIC and 

State insurance commissioners will 

have a further opportunity to comment 

on this proposed rule. 

The provision in the proposed rule 

(Sec. 50.92(e)) where Treasury would 

call for a hiatus in payments by insurers 

in circumstances where the cap on 

annual liability may be exceeded, but an 

appropriate PRLP cannot yet be 

determined, could potentially conflict 

with State insurance laws prescribing 

fixed periods for insurers to pay claims. 

However, Treasury believes the impact 

is limited in the proposed rule because 

the period of the hiatus is brief (up to 

two weeks), and it would apply shortly 

after an act of terrorism occurs. Treasury 

has concluded that a brief hiatus is 

necessary to carry out the purpose of the 

statute to establish shares of insured 

losses on a pro rata basis by avoiding 

the inequity of allowing early claims to 

be paid in full before a PRLP can be 

determined. 

List of Subjects in 31 CFR Part 50 

Terrorism risk insurance. 

Authority and Issuance 

For the reasons set forth above, 31 

CFR part 50 is proposed to be amended 

as follows: 

PART 50—TERRORISM RISK 

INSURANCE PROGRAM 

1. The authority citation for part 50 

continues to read as follows: 

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

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

amended by Pub. L. 109–144, 119 Stat. 2660 

and Pub. L. 110–160, 121 Stat. 1839 (15 

U.S.C. 6701 note). 

2. Subpart J is added to read as 

follows: 

Subpart J—Cap on Annual Liability 

Sec. 

50.90 Cap on annual liability. 

50.91 Notice to Congress. 

50.92 Determination of pro rata share. 

50.93 Application of pro rata share. 

50.94 Data call authority. 

50.95 Final amount. 

§ 50.90 Cap on annual liability. 

Pursuant to Section 103 of the Act, if 

the aggregate insured losses exceed 

$100,000,000,000 during any Program 

Year: 

(a) The Secretary shall not make any 

payment for any portion of the amount 

of such losses that exceeds 

$100,000,000,000; 

(b) No insurer that has met its insurer 

deductible shall be liable for the 

payment of any portion of the amount 

of such losses that exceeds 

$100,000,000,000; and 

(c) The Secretary shall determine the 

pro rata share of insured losses to be 

paid by each insurer that incurs insured 

losses under the Program. 

§ 50.91 Notice to Congress. 

Pursuant to Section 103(e)(3) of the 

Act, the Secretary shall provide an 

initial notice to Congress within 15 days 

of the certification of an act of terrorism, 

stating whether the Secretary estimates 

that aggregate insured losses will exceed 

$100,000,000,000 for the Program Year 

in which the event occurs. Such initial 

estimate shall be based on insured loss 

amounts as compiled by insurance 

industry statistical organizations and 

any other information the Secretary in 

his or her discretion considers 

appropriate. The Secretary shall also 

notify Congress if estimated or actual 

aggregate insured losses exceed 

$100,000,000,000 during any Program 

Year. 

§ 50.92 Determination of pro rata share. 

(a) Pro rata Loss Percentage (PRLP) is 

the percentage determined by the 

Secretary to be applied by an insurer 

against the amount that would 

otherwise be paid by the insurer under 

the terms and conditions of an 

insurance policy providing property and 

casualty insurance under the Program if 

there were no cap on annual liability 

under Section 103(e)(2)(A) of the Act. 

(b) Except as provided in paragraph 

(e) of this section, if Treasury estimates 

that aggregate insured losses may 

exceed the cap on annual liability for a 

Program Year, then Treasury will 

determine an initial PRLP. The PRLP 

applies to insured loss payments by 

insurers for insured losses incurred in 

the subject Program Year, as specified in 

§ 50.93, from the effective date of the 

PRLP, as established by Treasury, until 

such time as Treasury provides notice 

that the PRLP is revised. Treasury will 

determine the PRLP based on the 

following considerations: 

(1) Estimates of insured losses from 

insurance industry statistical 

organizations; 

(2) Any data calls issued by Treasury 

(see § 50.94); 

(3) Expected reliability and accuracy 

of insured loss estimates and likelihood 

that insured loss estimates could 

increase; 

(4) Estimates of insured losses and 

expenses not included in available 

statistical reporting; 

(5) Such other factors as the Secretary 

considers important. 

(c) Treasury shall provide notice of 

the determination of the PRLP through 

publication in the Federal Register, or 

in another manner Treasury deems 

appropriate, based upon the 

circumstances of the act of terrorism 

under consideration. 

(d) As appropriate, Treasury will 

determine any revision to a PRLP based 

on the same considerations listed in 

paragraph (b) of this section, and will 

provide notice for its application to 

insured loss payments. 

(e) If Treasury estimates based on an 

initial act of terrorism or subsequent act 

of terrorism within a Program Year that 

aggregate insured losses may exceed the 

cap on annual liability, but an 

appropriate PRLP cannot yet be 

determined, Treasury will provide 

notification advising insurers of this 

circumstance and calling a hiatus in 

insurer loss payments for insured losses 

of up to two weeks. In such a 

circumstance, Treasury will determine a 

PRLP as quickly as possible. The PRLP, 

as later determined, will be effective 

retroactively as of the start of the hiatus. 

Any insured losses submitted in support 

of an insurer’s claim for the Federal 

share of compensation will be reviewed 

for the insurer’s compliance with pro 

rata payments in accordance with the 

effective date of the PRLP. 

§ 50.93 Application of pro rata share. 

An insurer shall apply the PRLP to 

determine the pro rata share of each 

insured loss to be paid by the insurer on 

all insured losses where there is not a 

signed settlement as of the effective date 

established by Treasury. Payments 

based on the application of the PRLP 

and determination of the pro rata share 

satisfy the insurer’s liability for payment 

under the Program. Application of the 

PRLP and the determination of the pro 


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Federal Register / Vol. 73, No. 190 / Tuesday, September 30, 2008 / Proposed Rules 56773 

rata share are the exclusive means for 

calculating the amount of insured losses 

for Program purposes. The pro rata 

share is subject to the following: 

(a) The pro rata share is determined 

based on the estimated or actual final 

claim settlement amount that would 

otherwise be paid. If partial payments 

have already been made as of the 

effective date of the PRLP, then the pro 

rata share for that loss is the greater of 

the amount already paid or the amount 

computed by applying the PRLP to the 

estimated or actual final claim 

settlement amount. 

(b) If an insurer that has not yet made 

payments in excess of its insurer 

deductible estimates that it will exceed 

its insurer deductible making payments 

based on the application of the PRLP to 

its insured losses, then the insurer shall 

apply the PRLP as of the effective date 

specified in § 50.92(b). 

(c) If an insurer that has not yet made 

payments in excess of its insurer 

deductible estimates that it will not 

exceed its insurer deductible making 

payments based on the application of 

the PRLP to its insured losses, then the 

insurer may make payments on the 

same basis as prior to the effective date 

of the PRLP. If such insurer thereafter 

reaches its insurer deductible, then the 

insurer shall apply the PRLP to its 

remaining insured losses. When such an 

insurer submits a claim for the Federal 

share of compensation, the amount of 

the insurer’s losses will be deemed to be 

the amount it would have paid if it had 

applied the PRLP as of the effective 

date, and the Federal share of 

compensation will be calculated on that 

amount. However, an insurer may 

request an exception if it can 

demonstrate that its estimate was 

invalidated as a result of insured losses 

from a subsequent act of terrorism. 

§ 50.94 Data call authority. 

For the purpose of determining initial 

or recalculated PRLPs Treasury may 

issue a data call to insurers for insured 

loss information. Submission of data in 

response to a data call shall be on a form 

promulgated by Treasury. 

§ 50.95 Final amount. 

(a) Treasury shall determine if, as a 

final pro ration, remaining insured loss 

payments, as well as adjustments to 

previous insured loss payments, can be 

made by insurers based on an adjusted 

PRLP, and aggregate insured losses still 

remain within the cap on annual 

liability. In such a circumstance, 

Treasury will notify insurers as to the 

final PRLP and its application to 

insured losses. 

(b) If paragraph (a) of this section 

applies, Treasury may require, as part of 

the insurer submission for the Federal 

share of compensation for insured 

losses, supplementary explanation 

regarding how additional payments will 

be provided on previously settled 

insured losses. 

(c) An insurer that has pro rated its 

insured losses, but that has not met its 

insurer deductible, remains liable for 

loss payments that in the aggregate bring 

the insurer’s total insured loss payments 

up to an amount equal to the lesser of 

its insured losses without proration or 

its insurer deductible. 

§ 50.53 [Amended] 

3. Section 50.53 is amended by 

adding paragraph (b)(5) to read as 

follows: 

* * * * * 

(b) * * * 

(5) A certification that if Treasury has 

determined a Pro rata Loss Percentage 

(PRLP) (see § 50.92), the insurer has 

complied with applying the PRLP to 

insured loss payments, where required. 

* * * * * 

David G. Nason, 

Assistant Secretary (Financial Institutions). 

[FR Doc. E8–22940 Filed 9–29–08; 8:45 am] 

BILLING CODE 4810–25–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[Docket No. USCG–2008–0440] 

RIN 1625–AA87 

Security Zone; Coast Guard Base San 

Juan, San Juan Harbor, Puerto Rico 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Coast Guard proposes to 

establish a permanent security zone in 

the vicinity of the Coast Guard Base in 

San Juan, Puerto Rico. The security zone 

is needed for national security reasons 

to protect the public and the Coast 

Guard base from potential subversive 

acts. The proposed rule would exclude 

entry into the security zone by all 

vessels and personnel without 

permission of the U.S. Coast Guard 

Captain of the Port San Juan. 

DATES: Comments and related material 

must reach the Coast Guard on or before 

December 1, 2008. 

ADDRESSES: You may submit comments 

identified by Coast Guard docket 

number USCG–2008–0440 to the Docket 

Management Facility at the U.S. 

Department of Transportation. To avoid 

duplication, please use only one of the 

following methods: 

(1) Online: http:// 

www.regulations.gov. 

(2) Mail: Docket Management Facility 

(M–30), U.S. Department of 

Transportation, West Building Ground 

Floor, Room W12–140, 1200 New Jersey 

Avenue, SE., Washington, DC 20590– 

0001. 

(3) Hand delivery: Room W12–140 on 

the Ground Floor of the West Building, 

1200 New Jersey Avenue, SE., 

Washington, DC 20590, between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. The telephone 

number is 202–366–9329. 

(4) Fax: 202–493–2251. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this proposed 

rule, call Ensign Rachael Love of Sector 

San Juan, Prevention Operations 

Department at (787) 289–2071. If you 

have questions on viewing or submitting 

material to the docket, call Renee V. 

Wright, Program Manager, Docket 

Operations, telephone 202–366–9826. 

SUPPLEMENTARY INFORMATION: 

Public Participation and Request for 

Comments 

We encourage you to participate in 

this rulemaking by submitting 

comments and related materials. All 

comments received will be posted, 

without change, to http:// 

www.regulations.gov and will include 

any personal information you have 

provided. We have an agreement with 

the Department of Transportation (DOT) 

to use the Docket Management Facility. 

Please see DOT’s ‘‘Privacy Act’’ 

paragraph below. 

Submitting Comments 

If you submit a comment, please 

include the docket number for this 

rulemaking (USCG–2008–0440), 

indicate the specific section of this 

document to which each comment 

applies, and give the reason for each 

comment. We recommend that you 

include your name and a mailing 

address, an e-mail address, or a phone 

number in the body of your document 

so that we can contact you if we have 

questions regarding your submission. 

You may submit your comments and 

material by electronic means, mail, fax, 

or delivery to the Docket Management 

Facility at the address under ADDRESSES; 

but please submit your comments and 

material by only one means. If you 

submit them by mail or delivery, submit 

them in an unbound format, no larger 


ebenthall on PROD1PC60 with PROPOSALS