50.5—Definitions.
For purposes of this Part:
(b) Act of terrorism—
(1) In general.
The term act of
terrorism means any act that is certified by
the Secretary, in concurrence with the Secretary
of State and the Attorney General of the United
States:
(iii)
To have resulted in damage within the
United States, or outside of the United States in
the case of:
(A)
An air carrier (as defined in 49 U.S.C.
40102) or a United States flag vessel (or a vessel
based principally in the United States, on which
United States income tax is paid and whose
insurance coverage is subject to regulation in the
United States); or
(iv)
To have been committed by an individual or
individuals as part of an effort to coerce the
civilian population of the United States or to
influence the policy or affect the conduct of the
United States Government by coercion.
(i)
The act is committed as part of the course
of a war declared by the Congress (except with
respect to any coverage for workers'
compensation); or
(ii)
property and casualty losses resulting
from the act, in the aggregate, do not exceed
$5,000,000.
(3) Judicial review precluded.
The Secretary's certification of an act of
terrorism, or determination not to certify an act
as an act of terrorism, is final and is not
subject to judicial review.
(c)
(1)
Affiliate means, with
respect to an insurer, any entity that controls,
is controlled by, or is under common control with
the insurer. An affiliate must itself meet the
definition of insurer to participate in the
Program.
(2)
For purposes of paragraph (c)(1) of this
section, an insurer has control over another
insurer for purposes of the Program if:
(i)
The insurer directly or indirectly or
acting through one or more other persons owns,
controls, or has power to vote 25 percent or more
of any class of voting securities of the other
insurer;
(ii)
The insurer controls in any manner the
election of a majority of the directors or
trustees of the other insurer; or
(iii)
The Secretary determines, after notice
and opportunity for hearing, that an insurer
directly or indirectly exercises a controlling
influence over the management or policies of the
other insurer, even if there is no control as
defined in paragraph (c)(2)(i) or (c)(2)(ii) of
this section.
(3)
An insurer described in paragraph (c)(2)(i)
or (c)(2)(ii) of this section is conclusively
deemed to have control.
(4)
For purposes of a determination of
controlling influence under paragraph (c)(2)(iii)
of this section, if an insurer is not described in
paragraph (c)(2)(i) or (c)(2)(ii) of this section,
the following rebuttable presumptions will
apply:
(i)
If an insurer controls another insurer
under any State law, and at least one of the
factors listed in paragraph (c) (4)(iv) of this
section applies, there is a rebuttable presumption
that the insurer that has control under State law
exercises a controlling influence over the
management or policies of the other insurer for
purposes of paragraph (c)(2)(iii) of this
section.
(ii)
(c)
insurer provides 25 percent or more
of another insurer's capital (in the case of a
stock insurer), policyholder surplus (in the case
of a mutual insurer), or corporate capital (in the
case of other entities that qualify as insurers),
and at least one of the factors listed in
paragraph (c)(4)(iv) of this section applies,
there is a rebuttable presumption that the insurer
providing such capital, policyholder surplus, or
corporate capital exercises a controlling
influence over the management or policies of the
receiving insurer for purposes of paragraph
(c)(2)(iii) of this section.
(iii)
(c)
insurer, at any time during a
Program Year, supplies 25 percent or more of the
underwriting capacity for that year to an insurer
that is a syndicate consisting of a group
including incorporated and individual
unincorporated underwriters, and at least one of
the factors in paragraph (c)(4)(iv) of this
section applies, there is a rebuttable presumption
that the insurer exercises a controlling influence
over the syndicate for purposes of paragraph
(c)(2)(iii) of this section.
(iv)
(c)
agraphs (c)(4)(i) through
(c)(4)(iii) of this section are not applicable,
but two or more of the following factors apply to
an insurer, with respect to another insurer, there
is a rebuttable presumption that the insurer
exercises a controlling influence over the
management or policies of the other insurer for
purposes of paragraph (c)(2)(iii) of this
section:
(B)
The insurer holds more than 35 percent of
the combined debt securities and equity of the
other insurer;
(C)
The insurer is party to an agreement
pursuant to which the insurer possesses a material
economic stake in the other insurer resulting from
a profit-sharing arrangement, use of common names,
facilities or personnel, or the provision of
essential services to the other insurer;
(D)
The insurer is party to an agreement that
enables the insurer to influence a material aspect
of the management or policies of the other
insurer;
(E)
The insurer would have the ability, other
than through the holding of revocable proxies, to
direct the votes of more than 25 percent of the
other insurer's voting stock in the future upon
the occurrence of an event;
(F)
The insurer has the power to direct the
disposition of more than 25 percent of a class of
voting stock of the other insurer in a manner
other than a widely dispersed or public
offering;
(G)
The insurer and/or the insurer's
representative or nominee constitute more than one
member of the other insurer's board of directors;
or
(H)
The insurer or its nominee or an officer of
the insurer serves as the chairman of the board,
chairman of the executive committee, chief
executive officer, chief operating officer, chief
financial officer or in any position with similar
policymaking authority in the other insurer.
(5)
An insurer that is not described in
paragraph (c)(2)(i) or (c)(2)(ii) of this section
may request a hearing in which the insurer may
rebut a presumption of controlling influence under
paragraph (c)(4)(i) through (c)(4)(iv) of this
section or otherwise request a determination of
controlling influence by presenting and supporting
its position through written submissions to
Treasury, and in Treasury's discretion, through
informal oral presentations, in accordance with
the procedure in § 50.8.
(6)
See § 50.55 of this part for determination
of an insurer's affiliates for purposes of subpart
F.
(d)
Aggregate Federal share of
compensation means the aggregate amount paid
by Treasury for the Federal share of compensation
for insured losses in a Program Year.
(e)
Assessment period means a
period, established by Treasury, during which
policyholders of property and casualty insurance
policies must pay, and insurers must collect, the
Federal Terrorism Policy Surcharge for remittance
to Treasury.
(f)
Direct earned premium means
direct earned premium for all commercial property
and casualty insurance issued by any insurer for
insurance against all losses, including losses
from an act of terrorism, occurring at the
locations described in section 102(5 )(A) and (B)
of the Act.
(1)
State licensed or admitted
insurers. For a State licensed or admitted
insurer that reports to the NAIC, direct earned
premium is the premium information for commercial
property and casualty insurance reported by the
insurer on column 2 of the NAIC Exhibit of
Premiums and Losses of the NAIC Annual Statement
(commonly known as Statutory Page 14). (See definition of property and casualty
insurance.)
(i)
Premium information as reported to the NAIC
should be included in the calculation of direct
earned premiums for purposes of the Program only
to the extent it reflects premiums for commercial
property and casualty insurance issued by the
insurer against losses occurring at the locations
described in section 102(5 )(A) and (B) of the
Act.
(ii)
Premiums for personal property and
casualty insurance (insurance primarily designed
to cover personal, family or household risk
exposures, with the exception of insurance written
to insure 1 to 4 family rental dwellings owned for
the business purpose of generating income for the
property owner), or premiums for any other
insurance coverage that does not meet the
definition of commercial property and casualty
insurance, should be excluded in the calculation
of direct earned premiums for purposes of the
Program.
(iii)
Personal property and casualty insurance
coverage that includes incidental coverage for
commercial purposes is primarily personal
coverage, and therefore premiums may be fully
excluded by an insurer from the calculation of
direct earned premium. For purposes of the
Program, commercial coverage is incidental if less
than 25 percent of the total direct earned premium
is attributable to commercial coverage. Commercial
property and casualty insurance against losses
occurring at locations other than the locations
described in section 102(5 )(A) and (B) of the Act,
or other insurance coverage that
does not meet the definition of commercial
property and casualty insurance, but that includes
incidental coverage for commercial risk exposures
at such locations, is primarily not commercial
property and casualty insurance, and therefore
premiums for such insurance may also be fully
excluded by an insurer from the calculation of
direct earned premium. For purposes of this
section, commercial property and casualty
insurance for losses occurring at the locations
described in section 102(5 )(A) and (B) of the Act
is incidental if less than 25 percent of the total
direct earned premium for the insurance policy is
attributable to coverage at such locations. Also
for purposes of this section, coverage for
commercial risk exposures is incidental if it is
combined with coverages that otherwise do not meet
the definition of commercial property and casualty
insurance and less than 25 percent of the total
direct earned premium for the insurance policy is
attributable to the coverage for commercial risk
exposures.
(iv)
If a property and casualty insurance
policy covers both commercial and personal risk
exposures, insurers may allocate the premiums in
accordance with the proportion of risk between
commercial and personal components in order to
ascertain direct earned premium. If a policy
includes insurance coverage that meets the
definition of commercial property and casualty
insurance for losses occurring at the locations
described in section 102(5 )(A) and (B) of the Act,
but also includes other coverage, insurers may
allocate the premiums in accordance with the
proportion of risk attributable to the components
in order to ascertain direct earned premium.
(2)
Insurers that do not report to
NAIC. An insurer that does not report to the
NAIC, but that is licensed or admitted by any
State (such as certain farm or county mutual
insurers), should use the guidance provided in
paragraph (f)(1) of this section to assist in
ascertaining its direct earned premium.
(i)
Direct earned premium may be ascertained by
adjusting data maintained by such insurer or
reported by such insurer to its State regulator to
reflect a breakdown of premiums for commercial and
personal property and casualty exposure risk as
described in paragraph (f)(1) of this section and,
if necessary, re-stated to reflect the accrual
method of determining direct earned premium versus
direct premium.
(ii)
Such an insurer should consider other
types of payments that compensate the insurer for
risk of loss (contributions, assessments, etc.) as
part of its direct earned premium.
(3)
Certain eligible surplus line
carrier insurers. An eligible surplus line
carrier insurer listed on the NAIC Quarterly
Listing of Alien Insurers must ascertain its
direct earned premium as follows:
(i)
For policies that were in-force as of
November 26, 2002, or entered into prior to
January 1, 2003, direct earned premiums are to be
determined with reference to the definition of
property and casualty insurance and the locations
described in section 102(5 )(A) and (B) of the Act
by allocating the appropriate portion of premium
income for losses for property and casualty
insurance at such locations. The same allocation
methodologies contained within the NAIC's
“Allocation of Surplus Lines and Independently
Procured Insurance Premium Tax on Multi-State
Risks Model Regulation” for allocating premium
between coverage for property and casualty
insurance for losses occurring at the locations
described in section 102(5 )(A) and (B) of the Act
and all other coverage, to ascertain the
appropriate percentage of premium income to be
included in direct earned premium, may be
used.
(ii)
For policies issued after January 1, 2003,
premium for insurance that meets the definition of
property and casualty insurance for losses
occurring at the locations described in section
102(5 )(A) and (B) of the Act, must be priced
separately by such eligible surplus line
carriers.
(4) Federally approved insurers.
A federally approved insurer under section
102(6 )(A)(iii) of the Act should use a methodology
similar to that specified for eligible surplus
line carrier insurers in paragraph (f)(3) of this
section to calculate its direct earned premium.
Such calculation should be adjusted to reflect the limitations on scope of
insurance coverage under the Program (i.e., to the
extent of federal approval of commercial property
and casualty insurance in connection with
maritime, energy or aviation activities).
(g)
Direct written premium means
the premium information for commercial property
and casualty insurance as defined in paragraph (u)
of this section that is included by an insurer in
column 1 of the Exhibit of Premiums and Losses of
the NAIC Annual Statement or in an equivalent
reporting requirement. The Federal Terrorism
Policy Surcharge is not included in amounts
reported as direct written premium.
(h)
Discretionary recoupment
amount means such amount of the aggregate
Federal share of compensation in excess of the
mandatory recoupment amount that the Secretary has
determined will be recouped pursuant to section
103(e)(7)(D) of the Act.
(i)
Federal Terrorism Policy
Surcharge means the amount established by
Treasury under section 103(e)(8) of the Act which
is imposed as a policy surcharge on property and
casualty insurance policies, expressed as a
percentage of the written premium.
(j)
Insurance marketplace aggregate
retention amount means an amount for a Program
Year as set forth in section 103(e)(6) of the Act.
For any Program Year beginning with 2008 through
2014, such amount is the lesser of $27,500,000,000
and the aggregate amount, for all insurers, of
insured losses from Program Trigger Events during
the Program Year.
(k) Insured loss.
(1)
The term
insured loss means any loss resulting from an act
of terrorism (including an act of war, in the case
of workers' compensation) that is covered by
primary or excess property and casualty insurance
issued by an insurer if the loss:
(ii)
Occurs to an air carrier (as defined in 49
U.S.C. 40102 ), to a United States flag vessel (or
a vessel based principally in the United States,
on which United States income tax is paid and
whose insurance coverage is subject to regulation
in the United States), regardless of where the
loss occurs; or
(2)
(i)
A loss that occurs to an air carrier (as
defined in 49 U.S.C. 40102 ), to a United States
flag vessel, or a vessel based principally in the
United States, on which United States income tax
is paid and whose insurance coverage is subject to
regulation in the United States, is not an insured
loss under section 102(5 )(B) of the Act unless it
is incurred by the air carrier or vessel outside
the United States.
(ii)
An insured loss to an air carrier or
vessel outside the United States under section
102(5 )(B) of the Act does not include losses
covered by third party insurance contracts that
are separate from the insurance coverage provided
to the air carrier or vessel.
(3)
The term insured loss includes reasonable
loss adjustment expenses, incurred by an insurer
in connection with insured losses, that are
allocated and identified by claim file in insurer
records, including expenses incurred in the
investigation, adjustment and defense of claims,
but excluding staff salaries, overhead, and other
insurer expenses that would have been incurred
notwithstanding the insured loss.
(i)
Punitive or exemplary damages awarded or
paid in connection with the Federal cause of
action specified in section 107(a)(1) of the Act.
The term “punitive or exemplary damages” means
damages that are not compensatory but are an award
of money made to a claimant solely to punish or
deter; or
(l)
Insurer means any entity,
including any affiliate of the entity, that meets
the following requirements:
(A)
It is licensed or admitted to engage in the
business of providing primary or excess insurance
in any State, (including, but not limited to,
State licensed captive insurance companies, State
licensed or admitted risk retention groups, and
State licensed or admitted farm and county
mutuals), and, if a joint
underwriting association, pooling arrangement, or
other similar entity, then the entity must:
(1) Have gone through a process
of being licensed or admitted to engage in the
business of providing primary or excess insurance
that is administered by the State's insurance
regulator, which process generally applies to
insurance companies or is similar in scope and
content to the process applicable to insurance
companies;
(2) Be generally subject to State
insurance regulation, including financial
reporting requirements, applicable to insurance
companies within the State; and
(3) Be managed independently from
other insurers participating in the Program;
(B)
It is not licensed or admitted to engage in
the business of providing primary or excess
insurance in any State, but is an eligible surplus
line carrier listed on the Quarterly Listing of
Alien Insurers of the NAIC, or any successor to
the NAIC;
(C)
It is approved or accepted for the purpose
of offering property and casualty insurance by a
Federal agency in connection with maritime,
energy, or aviation activity, but only to the
extent of such federal approval of commercial
property and casualty insurance coverage offered
by the insurer in connection with maritime,
energy, or aviation activity;
(E)
As determined by the Secretary, it falls
within any other class or type of captive insurer
or other self-insurance arrangement by a
municipality or other entity, to the extent
provided in Treasury regulations issued under
section 103(f) of the Act.
(ii)
If an entity falls within more than one
category described in paragraph (f)(1)(i) of this
section, the entity is considered to fall within
the first category within which it falls for
purposes of the Program.
(2)
The entity must receive direct earned
premiums for any type of commercial property and
casualty insurance coverage, except in the case
of:
(i)
State residual market insurance entities
and State workers' compensation funds, to the
extent provided in Treasury regulations; and
(ii)
Other classes or types of captive insurers
and other self-insurance arrangements by
municipalities and other entities, if such
entities are included in the Program by Treasury
under regulations in this Part.
(1)
For an insurer that has had a full year of
operations during the calendar year immediately
preceding the applicable Program Year:
(i)
For the Transition Period (November 26,
2002 through December 31, 2002), the value of an
insurer's direct earned premiums over calendar
2001, multiplied by 1 percent;
(ii)
For Program Year 1 (January 1, 2003
through December 31, 2003), the value of an
insurer's direct earned premiums over calendar
year 2002, multiplied by 7 percent;
(iii)
For Program Year 2 (January 1, 2004
through December 31, 2004), the value of an
insurer's direct earned premiums over calendar
year 2003, multiplied by 10 percent;
(iv)
For Program Year 3 (January 1, 2005
through December 31, 2005), the value of an
insurer's direct earned premiums over calendar
year 2004, multiplied by 15 percent;
(v)
For Program Year 4 (January 1, 2006 through
December 31, 2006), the value of an insurer's
direct earned premiums over calendar year 2005,
multiplied by 17.5 percent;
(vi)
For Program Year 5 (January 1, 2007
through December 31, 2007), or any Program Year
thereafter, the value of an insurer's direct
earned premiums over the calendar year immediately
preceding that Program Year, multiplied by 20
percent; and
(2)
For an insurer that has not had a full year
of operations during the calendar year immediately
preceding the applicable Program Year, the insurer
deductible will be based on data for direct earned
premiums for the applicable Program Year
multiplied by the specified percentage for the
insurer deductible for the applicable Program
Year. If the insurer does not have a full year of
operations during the applicable Program Year, the
direct earned premiums for the
applicable Program Year will be annualized to
determine the insurer deductible.
(n)
Mandatory recoupment amount
means the difference between the insurance
marketplace aggregate retention amount for a
Program Year and the uncompensated insured losses
during such Program Year. The mandatory recoupment
amount shall be zero, however, if the amount of
such uncompensated insured losses is greater than
the insurance marketplace aggregate retention
amount.
(p)
Person means any individual,
business or nonprofit entity (including those
organized in the form of a partnership, limited
liability company, corporation, or association),
trust or estate, or a State or political
subdivision of a State or other governmental
unit.
(q)
Professional liability
insurance means insurance coverage for
liability arising out of the performance of
professional or business duties related to a
specific occupation, with coverage being tailored
to the needs of the specific occupation. Examples
include abstracters, accountants, insurance
adjusters, architects, engineers, insurance agents
and brokers, lawyers, real estate agents,
stockbrokers and veterinarians. For purposes of
this definition, professional liability insurance
does not include directors and officers liability
insurance.
(s)
Program Trigger event means a
certified act of terrorism that occurs after March
31, 2006, for which the aggregate industry insured
losses resulting from such act exceed $50,000,000
with respect to such insured losses occurring in
2006 or $100,000,000 with respect to such insured
losses occurring in 2007 and any Program Year
thereafter.
(t)
Program Years means the
Transition Period (November 26, 2002 through
December 31, 2002), Program Year 1 (January 1,
2003 through December 31, 2003), Program Year 2
(January 1, 2004 though December 31, 2004),
Program Year 3 (January 1, 2005 through December
31, 2005), Program Year 4 (January 1, 2006 through
December 31, 2006), Program Year 5 (January 1,
2007 through December 31, 2007), and any Program
Year thereafter (calendar years 2008 through
2014).
(u)
Property and casualty
insurance means commercial lines of property
and casualty insurance, including excess
insurance, workers' compensation insurance, and
directors and officers liability insurance,
and:
(1)
Means commercial lines within only the
following lines of insurance from the NAIC's
Exhibit of Premiums and Losses (commonly known as
Statutory Page 14): Line 1—Fire; Line 2.1—Allied
Lines; Line 5.1—Commercial Multiple Peril
(non-liability portion); Line 5.2—Commercial
Multiple Peril (liability portion); Line 8—Ocean
Marine; Line 9—Inland Marine; Line 16—Workers'
Compensation; Line 17—Other Liability; Line
18—Products Liability; Line 22—Aircraft (all
perils); and Line 27—Boiler and Machinery; and
(i)
Federal crop insurance issued or reinsured
under the Federal Crop Insurance Act (7 U.S.C.
1501
et seq. ), or any other type of
crop or livestock insurance that is privately
issued or reinsured (including crop insurance
reported under either Line 2.1—Allied Lines or
Line 2.2—Multiple Peril (Crop) of the NAIC's
Exhibit of Premiums and Losses (commonly known as
Statutory Page 14);
(ii)
Private mortgage insurance (as defined in
section 2 of the Homeowners Protection Act of
1988) (12 U.S.C. 4901) or title insurance;
(vi)
Flood insurance provided under the
National Flood Insurance Act of 1968 (42 U.S.C.
4001
et seq.) or earthquake
insurance reported under Line 12 of the NAIC's
Exhibit of Premiums and Losses (commonly known as
Statutory Page 14);
(viii)
Commercial automobile insurance,
including insurance reported under Lines 19.3
(Commercial Auto No- Fault
(personal injury protection)), 19.4 (Other
Commercial Auto Liability) and 21.2 (Commercial
Auto Physical Damage) of the NAIC's Exhibit of
Premiums and Losses (commonly known as Statutory
Page 14);
(ix)
Burglary and theft insurance, including
insurance reported under Line 26 (Burglary and
Theft) of the NAIC's Exhibit of Premiums and
Losses (commonly known as Statutory Page 14);
(x)
Surety insurance, including insurance
reported under Line 24 (Surety) of the NAIC's
Exhibit of Premiums and Losses (commonly known as
Statutory Page 14);
(xii)
Farmowners multiple peril insurance,
including insurance reported under Line 3
(Farmowners Multiple Peril) of the NAIC's Exhibit
of Premiums and Losses (commonly known as
Statutory Page 14).
(w)
State means any State of the
United States, the District of Columbia, the
Commonwealth of Puerto Rico, the Commonwealth of
the Northern Mariana Islands, American Samoa,
Guam, each of the United States Virgin Islands,
and any territory or possession of the United
States.
(x)
(i)
3]Surcharge means the Federal
Terrorism Policy Surcharge as defined in paragraph
(i) of this section.
(y)
Surcharge effective date
means the date established by Treasury that begins
the assessment period.
(aa)
Uncompensated insured
losses —means the aggregate amount of insured
losses, from Program Trigger Events, of all
insurers in a Program Year that is not compensated
by the Federal Government because such losses:
(2)
Are within the portions of losses in excess
of insurer deductibles that are not compensated
through payments made as a result of claims for
the Federal share of compensation.
(bb)
United States means the
several States, and includes the territorial sea
and the continental shelf of the United States, as
those terms are defined in the Violent Crime
Control and Law Enforcement Act of 1994 (18 U.S.C.
2280 and 2281 ).