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Federal Register / Vol. 86, No. 109 / Wednesday, June 9, 2021 / Rules and Regulations
rule changes in the November 2020
NPRM designed to clarify how Treasury will apply these terms to effectuate the intent and goals of the Program. Finally, Treasury proposed updating certain references to the TRIP website in the Program Rules to the current website URLs.
II. The Proposed Rule
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The November 2020 NPRM proposed various technical changes to the Program Rules to account for the extension of the Program to December 31, 2027 as provided for in the 2019
Reauthorization Act.11 In addition, the November 2020 NPRM proposed additional substantive changes to the Program Rules by 1 incorporating, through certain definitional changes, Treasurys prior guidance respecting the inclusion of stand-alone cyber liability within the Program; and 2 making certain revisions to definitional language concerning property and casualty insurance losses for purposes of certification of an act of terrorism and insured loss under the Program, which governs various financial mechanics under the Program, including calculation of an insurers claim for the Federal Share of Compensation, the Program Trigger and the Program Cap. In general terms, the proposed changes in the November 2020
NPRM involving property and casualty insurance losses and insured loss were intended to specify that amounts for which the policyholder is responsible whether on account of policy exclusions or deductible or retention amounts will be included within property and casualty insurance losses, but excluded from insured loss for purposes of calculating payment amounts under the Program, as well as for determining whether the Program Trigger and Program Cap have been satisfied.12 The November 2020
NPRM also updates various URL links to the Program website, which contains further explanatory information concerning the Program.
11 In addition to seeking comments concerning the proposed rule, the November 2020 NPRM
sought comments from the public concerning a number of other matters under the Program concerning the certification process and the participation of captive insurers in the Program.
Treasury received a number of comments addressing these issues, which it is continuing to review in connection with potential future proposed rules, reports, or other actions involving the Program.
12 See generally November 2020 NPRM, 85 FR at 7158990.

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III. Summary of Comments and Final Rule Treasury received five comments addressing the proposed rule changes identified in the November 2020
NPRM.13 None of the comments received objected to the proposed technical rule changes in response to the 2019 Reauthorization Act. In addition, none of the comments objected to Treasurys proposed codification of its December 2016 Cyber Guidance or the provisions updating Treasurys website references.14 Those proposed rules, accordingly, are being finalized as proposed.
Some commenters addressed Treasurys proposed rule changes regarding the interpretation of the terms property and casualty insurance losses for purposes of the certification process, and insured loss for purposes of the sharing mechanisms under the Program. Treasurys proposed rules clarified that property and casualty 13 See Comment from Centers for Better Insurance, LLC Dec. 3, 2020 CBI Comments;
Comment from Lloyds of London Jan. 8, 2021
Lloyds Comments; Comment from National Association of Mutual Insurance Companies Jan.
11, 2021 NAMIC Comments; Comment from American Property Casualty Insurance Association Jan. 11, 2021 APCIA Comments; and Comment from the Coalition to Insure Against Terrorism and the Council of Insurance Agents and Brokers Jan.
11, 2021 CIAT/CIAB Comments, all available at https www.regulations.gov/document/TREASTRIP-2020-0022-0001/comment. As noted above, Treasury solicited and received additional comments concerning certification and captive insurer issues, which Treasury will not address in this final rule.
14 See Lloyds Comments at 1 Lloyds is grateful to FIO for issuing its guidance relating to cyber liability lines in 2016, and for now codifying that guidance in the proposed rule.; APCIA Comments at 3 The NPRM proposes to codify Treasurys previous guidance on cyber stand-alone policies. In the NPRM, Treasury confirmed APCIAs understanding of the intent of that previous guidance, i.e., to make clear that any cyber risk reported on Line 17Other Liability on insurers annual state statutory financial statements is considered to be covered by TRIA unless the risk is statutorily excluded. Therefore, APCIA supports Treasurys proposed rulemaking in this regard.;
NAMIC Comments at 2 The NPRM proposes to codify Treasurys previous guidance on stand-alone cyber insurance policies to make clear that any cyber risk reported on Line 17Other Liability on insurers annual state statutory financial reporting statements is considered covered by TRIA unless the risk is statutorily excluded. NAMIC believes this is an appropriate interpretation and has no issue in this regard.; and CIAT/CIAB Comments at 3 In December 2016, Treasury issued guidance relating to whether certain standalone cyber coverage written in a TRIP-eligible line of insurance was within the scope of the TRIA program, such that insurers were obligated to adhere to the make available and disclosure requirements under TRIA
for such coverage. 81 FR 95312. We thank FIO for codifying this previously issued guidance in the current NPRM, as greater clarity on the relationship between cyberterrorism and TRIA is always appreciated, and welcome future clarifying guidance related to cyber insurance, particularly as it relates to the certification of cyber events..

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insurance losses, for certification purposes, would include loss amounts ultimately sustained by the policyholder on account of deductibles, retentions, or other mechanisms; however, an insured loss a term used in relation to payments under the Program rather than the certification process would not include such amounts, because payments in connection with the Program are limited to loss amounts that are actually paid or in some cases to be paid by insurers.15 Treasury explained that the certification analysis looks to the size of the event in question, so it is appropriate to consider all amounts associated with TRIP-eligible policies in connection with that inquiry to determine whether the event is of sufficient size to warrant potential consideration for certification purposes.
By contrast, since the term insured loss measures amounts payable under the Program, and payments under the Program are made only to insurers, Treasury observed that insured loss cannot include losses not paid by insurers to ensure that the financial mechanisms underlying the Program operate as intended.16
One commenter, while not expressing a preference for the elements to be included within the two terms property and casualty insurance losses and insured loss, did suggest that these terms should have the same interpretation for reasons of administrative efficiency.17 This commenter also noted that it might be difficult in some cases to determine the amount of policyholder obligations in connection with a certification inquiry.
Another commenter echoed the preference for equating the meaning of the two terms and suggested that policyholder losses should be included in both calculations, as they are commonly considered to be part of 15 November
2020 NPRM, 85 FR at 7158990.
For example, the Program Cap of $100
billion limits insured losses payable by Treasury and insurers that have met their Program deductible to no more than $100 billion in any single annual period. See TRIA sec. 103e2; 31 CFR Subpart L
Cap on Annual Liability. If amounts paid by policyholders were included within this calculation, insurers could be excused from payment by the Program on account of amounts paid or absorbed by their policyholders, as distinguished from the combined amount of their own payments and Treasury reimbursement of insurer payments. In an extreme case, if policyholders sustained $100 billion in losses associated with certified acts of terrorism in a given year because of their retained obligations, insurers could be excused of any payments under their policies if those policyholder payments operated to exhaust the $100 billion Program Cap of insured losses. Such a result is not consistent with the statutory language of TRIA or the Congressional intent underlying the Program.
17 See APCIA Comments at 1.
16 Id.

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