FROM THE OFFICE OF PUBLIC AFFAIRS

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The Treasury Department today announced interim guidance for the insurance industry in meeting certain requirements under the Terrorism Risk Insurance Act of 2002, which was signed into law by President Bush on November 26, 2002. 

Treasury Under Secretary for Domestic Finance Peter R. Fisher outlined the interim guidance at a Treasury news conference.  He was joined by National Association of Insurance Commissioners (NAIC) President Therese M. Vaughan, who also serves as Commissioner of Insurance for the state of Iowa.

“The Terrorism Risk Insurance Program became effective upon enactment by the President,” said Fisher. “Commercial property and casualty insurance companies now are required to make terrorism insurance coverage available to their policyholders and, in many cases, such
coverage is in place today as a result of the legislation. That is good news for our economy.

“Through the working of the competitive marketplace, the economic benefits expected as a result of the Program should begin to be realized in the near term.”

Fisher emphasized that the Program relies upon the state insurance oversight mechanism to monitor insurance companies' implementation of, and compliance with, many of the program's requirements.  "Our partnership with the state insurance regulators has worked very well, and in the upcoming months Treasury will continue to work closely with the state insurance regulators on the implementation process," he said.

"State regulators will continue consulting with the Treasury Department on an array of implementation issues," said Vaughan.

 "We are committed to a smooth implementation and want to help companies and regulators comply with the new law's requirements as quickly and uniformly as possible."

The interim guidance covers several mandates of the new law, including policyholder disclosure requirements and the requirement that insurance companies make coverage for terrorism risk, as defined by the Act, available to their policyholders. The interim guidance released today follows the NAIC’s release of model disclosure forms last week.  Treasury interim guidance states that use of the NAIC's model disclosures constitutes compliance with the Act's disclosure requirements while noting that the model disclosures are not the exclusive means by which insurers may comply with the Act.

Treasury's interim guidance also provides useful information to commercial entities that wish to obtain terrorism risk insurance. Insurance companies generally have 90 days to notify their policyholders of the Program and of any changes that may be available in their insurance coverage and insurance premium as a result.  In some cases, policyholders must respond affirmatively within 30 days of the notice in order to be covered under the Program.

Fisher also pointed to more work ahead for Treasury:

Near Term
Treasury plans to follow-up on the interim guidance by drafting regulations, where appropriate.  It also expects to provide guidance or regulations in the near future on several other aspects of the program, including how Treasury intends to apply the law to captive insurers and other self-insurance arrangements.

Treasury today also released a request for public comment on group life insurance coverage.  The Act requires Treasury to prepare, on an expedited basis, a study of the impact of terrorism risk on group life insurers and on the availability of group life insurance coverage and then to determine, in consultation with NAIC, whether to apply the Program to group life insurers.  The request for public comments, which will be published shortly in the Federal Register, solicits information from the public to assist in the study.

Moreover, Treasury intends to begin right away its work on a separate study and report on the Program required by Section 108(d).  In that provision, Congress directed Treasury to "assess the effectiveness of the Program and the likely capacity of the property and casualty insurance industry to offer insurance for terrorism risk after termination of the Program, and the availability and affordability of such insurance for various policyholders, including railroads, trucking and public transit."  By initiating the study now, Treasury hopes to establish a baseline from which to monitor developments in the industry and evaluate the Program on an ongoing basis over its life.

Intermediate Term
Treasury intends to establish a Terrorism Risk Insurance Program Office, headed by a Program Administrator, to carry out many of Treasury's responsibilities under the Act, including claims processing. 
As part of that effort, Treasury will carry out the President's instructions for a rule requiring approval of settlement of causes of action as part of the claims processing framework.

Treasury expects to send the interim guidance this week to the Federal Register for publication, and it is also available on Treasury's website, www.treasury.gov/trip.

Related Documents:

• Interim Guidance
• Group Life