FROM THE OFFICE OF PUBLIC AFFAIRS

Thank you all for coming. 

I would like to welcome Terri Vaughan, President of the National Association of Insurance Commissioners and the Iowa Insurance Commissioner. 

I would also like to introduce Wayne Abernathy who was sworn in yesterday as our new Assistant Secretary for Financial Institutions.  Wayne has arrived just in time to lead the implementation of the Terrorism Risk Insurance Program.

Last Tuesday, President Bush signed into law the Terrorism Risk Insurance Act of 2002.

Effective Immediately – Benefits Start now

The Terrorism Risk Insurance Program became effective upon enactment by the President.  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.

The new law establishes a temporary Federal program that provides for a system of shared public and private compensation for insured commercial property and casualty losses arising from acts of terrorism under the Act.  The program will be administered by the Treasury Department and will sunset on December 31, 2005. 

Role of State Insurance Regulators

Terri Vaughan’s presence here today is very important to Treasury.

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.

Purpose Today – Issue Interim Guidance

The purpose of today’s press conference is to announce that Treasury is releasing today interim guidance that will assist the insurance industry in meeting certain requirements under the Act. 

This guidance is available on the web site we set up for the program, www.treas.gov/trip.  We expect to send the interim guidance this week to the Federal Register for publication.

The interim guidance covers several requirements 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.

Policyholder Disclosures

Last week, Terri Vaughan and her fellow state insurance commissioners issued a bulletin to insurers that contained model disclosures that insurance companies could use in satisfying the Act’s policyholder disclosure requirements.

The interim guidance Treasury is releasing today states that use of the NAIC's model disclosures constitutes compliance with the Act's disclosure requirements.  In other words, if an insurer uses the appropriate NAIC model disclosure form in disclosing the Program to its policyholders, it will be deemed by Treasury to be in compliance with the law’s disclosure requirements.

We are grateful to the NAIC for their quick action in preparing these model disclosures.  At the same time, insurers should also note that the model disclosures are not the exclusive means by which they may comply with the Act.

The disclosure 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.

Make Available

From enactment through the end of December 2004, the Act requires that an insurer shall make available, in all of its property and casualty insurance policies, coverage for insured losses that does not differ materially from the terms, amounts, and other coverage limitations  applicable to losses arising from events other than acts of terrorism. 

Until Treasury issues regulations or provides further guidance on this requirement, “make available” means an insurer is required to offer coverage to a policyholder for acts of terrorism (as defined in the Act) that does not differ materially from the terms, amounts, and other coverage limitations offered to the policyholder for losses from events other than acts of terrorism. 

For example, compliance with “make available” means that insurers offer coverage for acts of terrorism (as defined in the Act) at deductibles and limits that do not differ materially from the coverage provided for other perils.

Group Life

Today we are also releasing 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.

Next Steps – Near Term

Treasury plans to follow-up on the interim guidance by drafting regulations, where appropriate. 

We also expect 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.

We also intend to begin right away our 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.

Next Steps - Intermediate Term

As the Secretary announced last week, 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.