Earlier this week the Treasury Department issued a Notice of Propose Rule Making for a rule (subpart J of 31 CFR part 50) implementing the Terrorism Risk Insurance Act (TRIA) of 2002 requirement for establishing procedures for the $100 Billion cap on insurance payments made as the result of a terrorist attack. 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. Comments on the NPRM (Docket # TREAS-TRIP-2008-0017) must be submitted by October 30th, 2008.
The TRIA established an annual $100 Billion cap on insurance payments as a result a result of a terrorist attack or series of such attacks. Those insurance payments would be made by insurance companies and the US Treasury. In order to ensure an equitable payment of claims within that limit the TRIA required the Treasury Department to establish these rules to:
· Notify Congress within 15 days of a terrorist attack if the estimated claims will exceed an aggregate value of $100 Billion.
· Determine the pro rata share that each insurance company will pay on their customer’s claims.
· Determine how the pro rata share will be paid out
· Give the Treasury Department the authority to require insurance companies provide data on prospective claims.
· Make appropriate adjustments to the formula for determining the pro rata share to ensure that payments will not exceed the $100 Billion cap.
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.
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