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Federal Register / Vol. 86, No. 162 / Wednesday, August 25, 2021 / Proposed Rules
unable to be deployed as capital elsewhere.
To estimate the total cost to the industry, the Commission would need to know:
The estimated rate of nonperformance by PVOs;
The likelihood that passengers would request refunds instead of opting for future cruise credits;
The impact of the prior two items on the cost of financial instruments;
Whether or not companies offering financial instruments would leave the market, or if PVOs could meet the requirements to obtain financial instruments; and Estimated changes to UPR by removing the exclusion of such items as airfare, hotel accommodations, and tour excursions from the definition of UPR, to the extent offered and collected by PVOs.
The Commission believes it has an estimate for historical rates of nonperformance. The Commission is not certain on the likelihood that consumers would request refunds
instead of receiving credits, nor the size of increase the proposed rule would have on premiums and the ability of PVOs to obtain financial instruments.
The lack of data on these items makes it difficult to provide an accurate cost estimate. The Commission seeks public comments on the aforementioned items from interested parties supported by data and additional information.
The Cruise Line International Association CLIA publishes data on significant operational incidents that can be used to estimate past nonperformance by PVOs. Significant operational incidents are defined as delays of more than 24 hours to published itinerary, fatalities occurring to either passengers or crew, and serious injury occurring to either passengers or crew.27
It is difficult to separate out all the significant operational incidents to know for certain which ones would meet the definition of nonperformance under the proposed rule. However, the total number of significant operational Significant incidents
Year 2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

21
27
15
18
21
16
21
16
13
14
13

incidents reported by CLIA sets an upper bound limit for how often instances of nonperformance, as defined by the proposed rule, have occurred in the past.
Between 2009 and 2019, there were 195 significant operational incidents for an average of 17.7 annually. The data for significant operational incidents is reported globally so the number of instances occurring from U.S.
embarkations would be lower. To estimate the number of incidents in the U.S., the ratio of global incidents to global number of passengers was applied to the number of passengers embarking from the U.S. on an annual basis. The estimated number of annual incidents for the U.S. is 8.4.
As previously stated, this estimate serves as an upper bound of how many instances of nonperformance may occur under the proposed rule. U.S. per capita incident rates may vary from the global per capita incident rates. Additionally, CLIA reports that incidents appear to be trending downward.
Global passengers 17,800,000
19,100,000
20,500,000
20,900,000
21,300,000
22,340,000
26,060,000
25,155,000
26,716,000
28,515,000
29,673,000

U.S.
embarkations 8,900,000
9,690,000
9,840,000
10,090,000
9,960,000
11,060,000
10,920,000
11,660,000
12,200,000
12,680,000
13,790,000

Estimated U.S.
incidents 10.5
13.7
7.2
8.7
9.8
7.9
8.8
7.4
5.9
6.2
6.0

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Data on significant incidents compiled from CLIAs Report on Operational Incidents 2009 to 2019. Data on global passengers compiled from CLIAs annual reports. Data on U.S. embarkations compiled from CLIAs Economic Contribution of the International Cruise Industry in the United States publications.

Using significant operational incidents as a proxy for nonperformance, the next step in this analysis is to compare it to how many instances of nonperformance occur under the existing program.
Under its program, the Commission records when PVOs cease their operations. Since September 2000, 16
PVOs covered by the Commissions program have ceased operations and another company declared bankruptcy but successfully restarted operations later.28 There have been 17 PVOs over the last 21 years that ceased operations for an average of 0.81 incidents per year,
where a company either declared bankruptcy or ceased operations.
Significant operational incidents occur much more frequently than incidents where PVOs cease operations or declare bankruptcy. The estimated number of significant operational incidents is 8.4 annually compared to a rate of 0.81 under the Commissions current program. Adding the average incident rate of a company ceasing operations or declaring bankruptcy to the rate of significant operation incidents would equate to a rate of 9.21
incidents per year where a PVOs financial instrument may be impacted
or a 10-fold increase from the current incident rate of nonperformance, when PVOs cease operating. However, this impact is mitigated by the fact that many PVOs on their own terms, including those determined to be small under the SBA guidelines, already provide refunds of prepaid fares to passengers in the case of voyage cancellations. The Commission seeks public comments from interested parties on the above methodology for incidents of nonperformance, other estimates of PVO nonperformance, and the impact the rate of nonperformance would have on surety bond premiums and other
27 See Report on Operational Incidents 2009 to 2019, Cruise Line International Association, https
cruising.org/en/news-and-research/research/2020/
may/report-on-operational-incidents-2009-to-2019.
28 The PVOs that ceased operations are: Premier Cruise Operations Ltd. Premier, New Commodore Cruise Lines Limited New Commodore, Cape
Canaveral Cruise Lines, Inc., MP Ferrymar, Inc., American Classic Voyages Company American Classic, Royal Olympic, Regal Cruises, Ocean Club Cruise Line, Society Expeditions, Scotia Prince, Glacier Bay, Great American Rivers, RiverBarge Excursion Lines, Inc., Majestic America Line, and West Travel, Inc. d/b/a Cruise West, and French
American Lines. Most of these incidents occurred in the 2000s with only one company ceasing operations in the last decade. At least one additional company, Haimark Line Ltd, declared bankruptcy and emerged successfully from it to continue operations.

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