In addition, the proposed rules identify record-keeping and audit requirements associated with the TRIP program.

Comments on the proposed rules must be filed with Treasury by the end of this month.

Industry representatives said generally they are studying the proposed rules.

Peter Bisbecos, director of legal and regulatory affairs for the Indianapolis-based National Association of Mutual Insurance Companies, said the proposal seems to be a fundamental first step in the claims process. Treasury, he said, seems to be taking a reasonable approach, but NAMIC needs to discuss the proposed rules with its members.

One issue that NAMIC wants to discuss with its members involves the deadlines for filing notices, Mr. Bisbecos said.

Carl Parks, senior vice president of government relations with the Des Plaines, Ill.-based National Association of Independent Insurers, said NAII is pleased that the proposed rules have finally been released and that Treasury has attempted to follow normal company practices.

He said that NAII looks forward to working with Treasury to implement the provisions effectively and efficiently.

Gary Karr, a representative of the Washington-based American Insurance Association, said that AIA is discussing the proposed rules with its member companies.

AIA, he said, has a good working relationship with Treasury but is still evaluated the rules substantively.

Under the proposed rules, Treasury is amending the definition of "insured loss" so that loss adjustment expenses allocable to a specific underlying loss will be payable as part of an insured loss.

Treasury said it has not included losses in excess of policy limits (XPL) as insured losses, but it is seeking comments on why XPL losses should be included as insured losses.

Treasury adds that since the Terrorism Risk Insurance Act specifically excludes punitive or exemplary damages from the program, these are also not included under the definition of "insured loss."

The rules say that Treasury's share of compensation will be reduced by recoveries for salvage and subrogation.

In addition, Treasury said, insurers may have other sources for recovery, such as reinsurance agreements. Should the amount of an insurer's federal share of compensation and the recoveries from other sources exceed the aggregate amount of its insured losses, Treasury said, then any excess must be returned to Treasury.

Regarding notices, Treasury said it is proposing an early notification requirement when an insurer obtains information indicating that its insured losses will exceed 50 percent of its deductible.

At that time, Treasury said, the insurer should submit estimates of aggregate losses for the year, its deductible and the federal share of aggregate losses.

This information, Treasury said, will assist in anticipating funding and operational requirements.

When an insurer seeks reimbursement from Treasury, it must file an Initial Certification of Loss when its losses first exceed its deductible.

Ongoing losses, Treasury said, must be reported on a supplemental form.

As for audits and records, Treasury said that insurers will be required to retain all records and files pertaining to the handling and settlement of claims, including electronic records.

These records, Treasury said, should be kept for at least three years following the conclusion of the policy year for premium information and for at least five years following the initial adjustment of each individual claim.