[House Report 107-779]
[From the U.S. Government Publishing Office]
107th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 107-779
======================================================================
TERRORISM RISK PROTECTION ACT
_______
November 13, 2002.--Ordered to be printed
_______
Mr. Oxley, from the committee of conference, submitted the following
CONFERENCE REPORT
[To accompany H.R. 3210]
The committee of conference on the disagreeing votes of
the two Houses on the amendment of the Senate to the bill (H.R.
3210), to ensure the continued financial capacity of insurers
to provide coverage for risks from terrorism, having met, after
full and free conference, have agreed to recommend and do
recommend to their respective Houses as follows:
That the House recede from its disagreement to the
amendment of the Senate and agree to the same with an amendment
as follows:
In lieu of the matter proposed to be inserted by the
Senate amendment, insert the following:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Terrorism
Risk Insurance Act of 2002''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title; table of contents.
TITLE I--TERRORISM INSURANCE PROGRAM
Sec. 101. Congressional findings and purpose.
Sec. 102. Definitions.
Sec. 103. Terrorism Insurance Program.
Sec. 104. General authority and administration of claims.
Sec. 105. Preemption and nullification of pre-existing terrorism
exclusions.
Sec. 106. Preservation provisions.
Sec. 107. Litigation management.
Sec. 108. Termination of Program.
TITLE II--TREATMENT OF TERRORIST ASSETS
Sec. 201. Satisfaction of judgments from blocked assets of terrorists,
terrorist organizations, and State sponsors of terrorism.
TITLE III--FEDERAL RESERVE BOARD PROVISIONS
Sec. 301. Certain authority of the Board of Governors of the Federal
Reserve System.
TITLE I--TERRORISM INSURANCE PROGRAM
SEC. 101. CONGRESSIONAL FINDINGS AND PURPOSE.
(a) Findings.--The Congress finds that--
(1) the ability of businesses and individuals to
obtain property and casualty insurance at reasonable
and predictable prices, in order to spread the risk of
both routine and catastrophic loss, is critical to
economic growth, urban development, and the
construction and maintenance of public and private
housing, as well as to the promotion of United States
exports and foreign trade in an increasingly
interconnected world;
(2) property and casualty insurance firms are
important financial institutions, the products of which
allow mutualization of risk and the efficient use of
financial resources and enhance the ability of the
economy to maintain stability, while responding to a
variety of economic, political, environmental, and
other risks with a minimum of disruption;
(3) the ability of the insurance industry to cover
the unprecedented financial risks presented by
potential acts of terrorism in the United States can be
a major factor in the recovery from terrorist attacks,
while maintaining the stability of the economy;
(4) widespread financial market uncertainties have
arisen following the terrorist attacks of September 11,
2001, including the absence of information from which
financial institutions can make statistically valid
estimates of the probability and cost of future
terrorist events, and therefore the size, funding, and
allocation of the risk of loss caused by such acts of
terrorism;
(5) a decision by property and casualty insurers to
deal with such uncertainties, either by terminating
property and casualty coverage for losses arising from
terrorist events, or by radically escalating premium
coverage to compensate for risks of loss that are not
readily predictable, could seriously hamper ongoing and
planned construction, property acquisition, and other
business projects, generate a dramatic increase in
rents, and otherwise suppress economic activity; and
(6) the United States Government should provide
temporary financial compensation to insured parties,
contributing to the stabilization of the United States
economy in a time of national crisis, while the
financial services industry develops the systems,
mechanisms, products, and programs necessary to create
a viable financial services market for private
terrorism risk insurance.
(b) Purpose.--The purpose of this title is to establish a
temporary Federal program that provides for a transparent
system of shared public and private compensation for insured
losses resulting from acts of terrorism, in order to--
(1) protect consumers by addressing market
disruptions and ensure the continued widespread
availability and affordability of property and casualty
insurance for terrorism risk; and
(2) allow for a transitional period for the private
markets to stabilize, resume pricing of such insurance,
and build capacity to absorb any future losses, while
preserving State insurance regulation and consumer
protections.
SEC. 102. DEFINITIONS.
In this title, the following definitions shall apply:
(1) Act of terrorism.--
(A) Certification.--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--
(i) to be an act of terrorism;
(ii) to be a violent act or an act
that is dangerous to--
(I) human life;
(II) property; or
(III) infrastructure;
(iii) to have resulted in damage
within the United States, or outside of
the United States in the case of--
(I) an air carrier or
vessel described in paragraph
(5)(B); or
(II) the premises of a
United States mission; and
(iv) to have been committed by an
individual or individuals acting on
behalf of any foreign person or foreign
interest, 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.
(B) Limitation.--No act shall be certified
by the Secretary as an act of terrorism if--
(i) the act is committed as part of
the course of a war declared by the
Congress, except that this clause shall
not apply with respect to any coverage
for workers' compensation; or
(ii) property and casualty
insurance losses resulting from the
act, in the aggregate, do not exceed
$5,000,000.
(C) Determinations final.--Any
certification of, or determination not to
certify, an act as an act of terrorism under
this paragraph shall be final, and shall not be
subject to judicial review.
(D) Nondelegation.--The Secretary may not
delegate or designate to any other officer,
employee, or person, any determination under
this paragraph of whether, during the effective
period of the Program, an act of terrorism has
occurred.
(2) Affiliate.--The term ``affiliate'' means, with
respect to an insurer, any entity that controls, is
controlled by, or is under common control with the
insurer.
(3) Control.--An entity has ``control'' over
another entity, if--
(A) the entity directly or indirectly or
acting through 1 or more other persons owns,
controls, or has power to vote 25 percent or
more of any class of voting securities of the
other entity;
(B) the entity controls in any manner the
election of a majority of the directors or
trustees of the other entity; or
(C) the Secretary determines, after notice
and opportunity for hearing, that the entity
directly or indirectly exercises a controlling
influence over the management or policies of
the other entity.
(4) Direct earned premium.--The term ``direct
earned premium'' means a direct earned premium for
property and casualty insurance issued by any insurer
for insurance against losses occurring at the locations
described in subparagraphs (A) and (B) of paragraph
(5).
(5) Insured loss.--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 such loss--
(A) occurs within the United States; or
(B) occurs to an air carrier (as defined in
section 40102 of title 49, United States Code),
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 at the premises of
any United States mission.
(6) Insurer.--The term ``insurer'' means any
entity, including any affiliate thereof--
(A) that is--
(i) licensed or admitted to engage
in the business of providing primary or
excess insurance in any State;
(ii) not licensed or admitted as
described in clause (i), if it is an
eligible surplus line carrier listed on
the Quarterly Listing of Alien Insurers
of the NAIC, or any successor thereto;
(iii) approved for the purpose of
offering property and casualty
insurance by a Federal agency in
connection with maritime, energy, or
aviation activity;
(iv) a State residual market
insurance entity or State workers'
compensation fund; or
(v) any other entity described in
section 103(f), to the extent provided
in the rules of the Secretary issued
under section 103(f);
(B) that receives direct earned premiums
for any type of commercial property and
casualty insurance coverage, other than in the
case of entities described in sections 103(d)
and 103(f); and
(C) that meets any other criteria that the
Secretary may reasonably prescribe.
(7) Insurer deductible.--The term ``insurer
deductible'' means--
(A) for the Transition Period, the value of
an insurer's direct earned premiums over the
calendar year immediately preceding the date of
enactment of this Act, multiplied by 1 percent;
(B) for Program Year 1, the value of an
insurer's direct earned premiums over the
calendar year immediately preceding Program
Year 1, multiplied by 7 percent;
(C) for Program Year 2, the value of an
insurer's direct earned premiums over the
calendar year immediately preceding Program
Year 2, multiplied by 10 percent;
(D) for Program Year 3, the value of an
insurer's direct earned premiums over the
calendar year immediately preceding Program
Year 3, multiplied by 15 percent; and
(E) notwithstanding subparagraphs (A)
through (D), for the Transition Period, Program
Year 1, Program Year 2, or Program Year 3, if
an insurer has not had a full year of
operations during the calendar year immediately
preceding such Period or Program Year, such
portion of the direct earned premiums of the
insurer as the Secretary determines
appropriate, subject to appropriate
methodologies established by the Secretary for
measuring such direct earned premiums.
(8) NAIC.--The term ``NAIC'' means the National
Association of Insurance Commissioners.
(9) Person.--The term ``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.
(10) Program.--The term ``Program'' means the
Terrorism Insurance Program established by this title.
(11) Program years.--
(A) Transition period.--The term
``Transition Period'' means the period
beginning on the date of enactment of this Act
and ending on December 31, 2002.
(B) Program year 1.--The term ``Program
Year 1'' means the period beginning on January
1, 2003 and ending on December 31, 2003.
(C) Program year 2.--The term ``Program
Year 2'' means the period beginning on January
1, 2004 and ending on December 31, 2004.
(D) Program year 3.--The term ``Program
Year 3'' means the period beginning on January
1, 2005 and ending on December 31, 2005.
(12) Property and casualty insurance.--The term
``property and casualty insurance''--
(A) means commercial lines of property and
casualty insurance, including excess insurance,
workers' compensation insurance, and surety
insurance; and
(B) does not include--
(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;
(ii) private mortgage insurance (as
that term is defined in section 2 of
theHomeowners Protection Act of 1998
(12 U.S.C. 4901)) or title insurance;
(iii) financial guaranty insurance
issued by monoline financial guaranty
insurance corporations;
(iv) insurance for medical
malpractice;
(v) health or life insurance,
including group life insurance;
(vi) flood insurance provided under
the National Flood Insurance Act of
1968 (42 U.S.C. 4001 et seq.); or
(vii) reinsurance or retrocessional
reinsurance.
(13) Secretary.--The term ``Secretary'' means the
Secretary of the Treasury.
(14) State.--The term ``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.
(15) United states.--The term ``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, 2281).
(16) Rule of construction for dates.--With respect
to any reference to a date in this title, such day
shall be construed--
(A) to begin at 12:01 a.m. on that date;
and
(B) to end at midnight on that date.
SEC. 103. TERRORISM INSURANCE PROGRAM.
(a) Establishment of Program.--
(1) In general.--There is established in the
Department of the Treasury the Terrorism Insurance
Program.
(2) Authority of the secretary.--Notwithstanding
any other provision of State or Federal law, the
Secretary shall administer the Program, and shall pay
the Federal share of compensation for insured losses in
accordance with subsection (e).
(3) Mandatory participation.--Each entity that
meets the definition of an insurer under this title
shall participate in the Program.
(b) Conditions for Federal Payments.--No payment may be
made by the Secretary under this section with respect to an
insured loss that is covered by an insurer, unless--
(1) the person that suffers the insured loss, or a
person acting on behalf of that person, files a claim
with the insurer;
(2) the insurer provides clear and conspicuous
disclosure to the policyholder of the premium charged
for insured losses covered by the Program and the
Federal share of compensation for insured losses under
the Program--
(A) in the case of any policy that is
issued before the date of enactment of this
Act, not later than 90 days after that date of
enactment;
(B) in the case of any policy that is
issued within 90 days of the date of enactment
of this Act, at the time of offer, purchase,
and renewal of the policy; and
(C) in the case of any policy that is
issued more than 90 days after the date of
enactment of this Act, on a separate line item
in the policy, at the time of offer, purchase,
and renewal of the policy;
(3) the insurer processes the claim for the insured
loss in accordance with appropriate business practices,
and any reasonable procedures that the Secretary may
prescribe; and
(4) the insurer submits to the Secretary, in
accordance with such reasonable procedures as the
Secretary may establish--
(A) a claim for payment of the Federal
share of compensation for insured losses under
the Program;
(B) written certification--
(i) of the underlying claim; and
(ii) of all payments made for
insured losses; and
(C) certification of its compliance with
the provisions of this subsection.
(c) Mandatory Availability.--
(1) Initial program periods.--During the period
beginning on the first day of the Transition Period and
ending on the last day of Program Year 2, each entity
that meets the definition of an insurer under section
102--
(A) shall make available, in all of its
property and casualty insurance policies,
coverage for insured losses; and
(B) shall make available property and
casualty insurance coverage for insured losses
that does not differ materially from the terms,
amounts, and other coverage limitations
applicable to losses arising from events other
than acts of terrorism.
(2) Program year 3.--Not later than September 1,
2004, the Secretary shall, based on the factors
referred to in section 108(d)(1), determine whether the
provisions of subparagraphs (A) and (B) of paragraph
(1) should be extended through Program Year 3.
(d) State Residual Market Insurance Entities.--
(1) In general.--The Secretary shall issue
regulations, as soon as practicable after the date of
enactment of this Act, that apply the provisions of
this title to State residual market insurance entities
and State workers' compensation funds.
(2) Treatment of certain entities.--For purposes of
the regulations issued pursuant to paragraph (1)--
(A) a State residual market insurance
entity that does not share its profits and
losses with private sector insurers shall be
treated as a separate insurer; and
(B) a State residual market insurance
entity that shares its profits and losses with
private sector insurers shall not be treated as
a separate insurer, and shall report to each
private sector insurance participant its share
of the insured losses of the entity, which
shall be included in each private sector
insurer's insured losses.
(3) Treatment of participation in certain
entities.--Any insurer that participates in sharing
profits and losses of a State residual market insurance
entity shall include in its calculations of premiums
any premiums distributed to the insurer by the State
residual market insurance entity.
(e) Insured Loss Shared Compensation.--
(1) Federal share.--
(A) In general.--The Federal share of
compensation under the Program to be paid by
the Secretary for insured losses of an insurer
during the Transition Period and each Program
Year shall be equal to 90 percent of that
portion of the amount of such insured losses
that exceeds the applicable insurer deductible
required to be paid during such Transition
Period or such Program Year.
(B) Prohibition on duplicative
compensation.--The Federal share of
compensation for insured losses under the
Program shall be reduced by the amount of
compensation provided by the Federal Government
to any person under any other Federal program
for those insured losses.
(2) Cap on annual liability.--
(A) In general.--Notwithstanding paragraph
(1) or any other provision of Federal or State
law, if the aggregate insured losses exceed
$100,000,000,000, during the period beginning
on the first day of the Transition Period and
ending on the last day of Program Year 1, or
during Program Year 2 or Program Year 3 (until
such time as the Congress may act otherwise
with respect to such losses)--
(i) the Secretary shall not make
any payment under this title for any
portion of the amount of such losses
that exceeds $100,000,000,000; and
(ii) no insurer that has met its
insurer deductible shall be liable for
the payment of any portion of that
amount that exceeds $100,000,000,000.
(B) Insurer share.--For purposes of
subparagraph (A), the Secretary shall determine
the pro rata share of insured losses to be paid
by each insurer that incurs insured losses
under the Program.
(3) Notice to congress.--The Secretary shall notify
the Congress if estimated or actual aggregate insured
losses exceed $100,000,000,000 during the period
beginning on the first day of the Transition Period and
ending on the last day of Program Year 1, or during
Program Year 2 or Program Year 3, and the Congress
shall determine the procedures for and the source of
any payments for such excess insured losses.
(4) Final netting.--The Secretary shall have sole
discretion to determine the time at which claims
relating to any insured loss or act of terrorism shall
become final.
(5) Determinations final.--Any determination of the
Secretary under this subsection shall be final, unless
expressly provided, and shall not be subject to
judicial review.
(6) Insurance marketplace aggregate retention
amount.--For purposes of paragraph (7), the insurance
marketplace aggregate retention amount shall be--
(A) for the period beginning on the first
day of the Transition Period and ending on the
last day of Program Year 1, the lesser of--
(i) $10,000,000,000; and
(ii) the aggregate amount, for all
insurers, of insured losses during such
period;
(B) for Program Year 2, the lesser of--
(i) $12,500,000,000; and
(ii) the aggregate amount, for all
insurers, of insured losses during such
Program Year; and
(C) for Program Year 3, the lesser of--
(i) $15,000,000,000; and
(ii) the aggregate amount, for all
insurers, of insured losses during such
Program Year.
(7) Recoupment of federal share.--
(A) Mandatory recoupment amount.--For
purposes of this paragraph, the mandatory
recoupment amount for each of the periods
referred to in subparagraphs (A), (B), and (C)
of paragraph (6) shall be the difference
between--
(i) the insurance marketplace
aggregate retention amount under
paragraph (6) for such period; and
(ii) the aggregate amount, for all
insurers, of insured losses during such
period that are not compensated by the
Federal Government because such
losses--
(I) are within the insurer
deductible for the insurer
subject to the losses; or
(II) are within the portion
of losses of the insurer that
exceed the insurer deductible,
but are not compensated
pursuant to paragraph (1).
(B) No mandatory recoupment if
uncompensated losses exceed insurance
marketplace retention.--Notwithstanding
subparagraph (A), if the aggregate amount of
uncompensated insured losses referred to in
clause (ii) of such subparagraph for any period
referred to in subparagraph (A), (B), or (C) of
paragraph (6) is greater than the insurance
marketplace aggregate retention amount under
paragraph (6) for such period, the mandatory
recoupment amount shall be $0.
(C) Mandatory establishment of surcharges
to recoup mandatory recoupment amount.--The
Secretary shall collect, for repayment of the
Federal financial assistance provided in
connection with all acts of terrorism (or acts
of war, in the case of workers compensation)
occurring during any of the periods referred to
in subparagraph (A), (B), or (C) of paragraph
(6), terrorism loss risk-spreading premiums in
an amount equal to any mandatory recoupment
amount for such period.
(D) Discretionary recoupment of remainder
of financial assistance.--To the extent that
the amount of Federal financial assistance
provided exceeds any mandatory recoupment
amount, the Secretary may recoup, through
terrorism loss risk-spreading premiums, such
additional amounts that the Secretary believes
can be recouped, based on--
(i) the ultimate costs to taxpayers
of no additional recoupment;
(ii) the economic conditions in the
commercial marketplace, including the
capitalization, profitability, and
investment returns of the insurance
industry and the current cycle of the
insurance markets;
(iii) the affordability of
commercial insurance for small- and
medium-sized businesses; and
(iv) such other factors as the
Secretary considers appropriate.
(8) Policy surcharge for terrorism loss risk-
spreading premiums.--
(A) Policyholder premium.--Any amount
established by the Secretary as a terrorism
loss risk-spreading premium shall--
(i) be imposed as a policyholder
premium surcharge on property and
casualty insurance policies in force
after the date of such establishment;
(ii) begin with such period of
coverage during the year as the
Secretary determines appropriate; and
(iii) be based on a percentage of
the premium amount charged for property
and casualty insurance coverage under
the policy.
(B) Collection.--The Secretary shall
provide for insurers to collect terrorism loss
risk-spreading premiums and remit such amounts
collected to the Secretary.
(C) Percentage limitation.--A terrorism
loss risk-spreading premium (including any
additional amount included in such premium on a
discretionary basis pursuant to paragraph
(7)(D)) may not exceed, on an annual basis, the
amount equal to 3 percent of the premium
charged for property and casualty insurance
coverage under the policy.
(D) Adjustment for urban and smaller
commercial and rural areas and different lines
of insurance.--
(i) Adjustments.--In determining
the method and manner of imposing
terrorism loss risk-spreading premiums,
including the amount of such premiums,
the Secretary shall take into
consideration--
(I) the economic impact on
commercial centers of urban
areas, including the effect on
commercial rents and commercial
insurance premiums,
particularly rents and premiums
charged to small businesses,
and the availability of lease
space and commercial insurance
within urban areas;
(II) the risk factors
related to rural areas and
smaller commercial centers,
including the potential
exposure to loss and the likely
magnitude of such loss, as well
as any resulting cross-
subsidization that might
result; and
(III) the various exposures
to terrorism risk for different
lines of insurance.
(ii) Recoupment of adjustments.--
Any mandatory recoupment amounts not
collected by the Secretary because of
adjustments under this subparagraph
shall be recouped through additional
terrorism loss risk-spreading premiums.
(E) Timing of premiums.--The Secretary may
adjust the timing of terrorism loss risk-
spreading premiums to provide for equivalent
application of the provisions of this title to
policies that are not based on a calendar year,
or to apply such provisions on a daily,
monthly, or quarterly basis, as appropriate.
(f) Captive Insurers and Other Self-Insurance
Arrangements.--The Secretary may, in consultation with the NAIC
or the appropriate State regulatory authority, apply the
provisions of this title, as appropriate, to other classes or
types of captive insurers and other self-insurance arrangements
by municipalities and other entities (such as workers'
compensation self-insurance programs and State workers'
compensation reinsurance pools), but only if such application
is determined before the occurrence of an act of terrorism in
which such an entity incurs an insured loss and all of the
provisions of this title are applied comparably to such
entities.
(g) Reinsurance to Cover Exposure.--
(1) Obtaining coverage.--This title may not be
construed to limit or prevent insurers from obtaining
reinsurance coverage for insurer deductibles or insured
losses retained by insurers pursuant to this section,
nor shall the obtaining of such coverage affect the
calculation of such deductibles or retentions.
(2) Limitation on financial assistance.--The amount
of financial assistance provided pursuant to this
section shall not be reduced by reinsurance paid or
payable to an insurer from other sources, except that
recoveries from such other sources, taken together with
financial assistance for the Transition Period or a
Program Year provided pursuant to this section, may not
exceed the aggregate amount of the insurer's insured
losses for such period. If such recoveries and
financial assistance for the Transition Period or a
Program Year exceed such aggregate amount of insured
losses for that period and there is no agreement
between the insurer and any reinsurer to the contrary,
an amount in excess of such aggregate insured losses
shall be returned to the Secretary.
(h) Group Life Insurance Study.--
(1) Study.--The Secretary shall study, on an
expedited basis, whether adequate and affordable
catastrophe reinsurance for acts of terrorism is
available to life insurers in the United States that
issue group life insurance, and the extent to which the
threat of terrorism is reducing the availability of
group life insurance coverage for consumers in the
United States.
(2) Conditional Coverage.--To the extent that the
Secretary determines that such coverage is not or will
not be reasonably available to both such insurers and
consumers, the Secretary shall, in consultation with
the NAIC--
(A) apply the provisions of this title, as
appropriate, to providers of group life
insurance; and
(B) provide such restrictions, limitations,
or conditions with respect to any financial
assistance provided that the Secretary deems
appropriate, based on the study under paragraph
(1).
(i) Study and Report.--
(1) Study.--The Secretary, after consultation with
the NAIC, representatives of the insurance industry,
and other experts in the insurance field, shall conduct
a study of the potential effects of acts of terrorism
on the availability of life insurance and other lines
of insurance coverage, including personal lines.
(2) Report.--Not later than 9 months after the date
of enactment of this Act, the Secretary shall submit a
report to the Congress on the results of the study
conducted under paragraph (1).
SEC. 104. GENERAL AUTHORITY AND ADMINISTRATION OF CLAIMS.
(a) General Authority.--The Secretary shall have the powers
and authorities necessary to carry out the Program, including
authority--
(1) to investigate and audit all claims under the
Program; and
(2) to prescribe regulations and procedures to
effectively administer and implement the Program, and
to ensure that all insurers and self-insured entities
that participate in the Program are treated comparably
under the Program.
(b) Interim Rules and Procedures.--The Secretary may issue
interim final rules or procedures specifying the manner in
which--
(1) insurers may file and certify claims under the
Program;
(2) the Federal share of compensation for insured
losses will be paid under the Program, including
payments based on estimates of or actual insured
losses;
(3) the Secretary may, at any time, seek repayment
from or reimburse any insurer, based on estimates of
insured losses under the Program, to effectuate the
insured loss sharing provisions in section 103; and
(4) the Secretary will determine any final netting
of payments under the Program, including payments owed
to the Federal Government from any insurer and any
Federal share of compensation for insured losses owed
to any insurer, to effectuate the insured loss sharing
provisions in section 103.
(c) Consultation.--The Secretary shall consult with the
NAIC, as the Secretary determines appropriate, concerning the
Program.
(d) Contracts for Services.--The Secretary may employ
persons or contract for services as may be necessary to
implement the Program.
(e) Civil Penalties.--
(1) In general.--The Secretary may assess a civil
monetary penalty in an amount not exceeding the amount
under paragraph (2) against any insurer that the
Secretary determines, on the record after opportunity
for a hearing--
(A) has failed to charge, collect, or remit
terrorism loss risk-spreading premiums under
section 103(e) in accordance with the
requirements of, or regulations issued under,
this title;
(B) has intentionally provided to the
Secretary erroneous information regarding
premium or loss amounts;
(C) submits to the Secretary fraudulent
claims under the Program for insured losses;
(D) has failed to provide the disclosures
required under subsection (f); or
(E) has otherwise failed to comply with the
provisions of, or the regulations issued under,
this title.
(2) Amount.--The amount under this paragraph is the
greater of $1,000,000 and, in the case of any failure
to pay, charge, collect, or remit amounts in accordance
with this title or the regulations issued under this
title, such amount in dispute.
(3) Recovery of amount in dispute.--A penalty under
this subsection for any failure to pay, charge,
collect, or remit amounts in accordance with this title
or the regulations under this title shall be in
addition to any such amounts recovered by the
Secretary.
(f) Submission of Premium Information.--
(1) In general.--The Secretary shall annually
compile information on the terrorism risk insurance
premium rates of insurers for the preceding year.
(2) Access to information.--To the extent that such
information is not otherwise available to the
Secretary, the Secretary may require each insurer to
submit to the NAIC terrorism risk insurance premium
rates, as necessary to carry out paragraph (1), and the
NAIC shall make such information available to the
Secretary.
(3) Availability to congress.--The Secretary shall
make information compiled under this subsection
available to the Congress, upon request.
(g) Funding.--
(1) Federal payments.--There are hereby
appropriated, out of funds in the Treasury not
otherwise appropriated, such sums as may be necessary
to pay the Federal share of compensation for insured
losses under the Program.
(2) Administrative expenses.--There are hereby
appropriated, out of funds in the Treasury not
otherwise appropriated, such sums as may be necessary
to pay reasonable costs of administering the Program.
SEC. 105. PREEMPTION AND NULLIFICATION OF PRE-EXISTING TERRORISM
EXCLUSIONS.
(a) General Nullification.--Any terrorism exclusion in a
contract for property and casualty insurance that is in force
on the date of enactment of this Act shall be void to the
extent that it excludes losses that would otherwise be insured
losses.
(b) General Preemption.--Any State approval of any
terrorism exclusion from a contract for property and casualty
insurance that is in force on the date of enactment of this
Act, shall be void to the extent that it excludes losses that
would otherwise be insured losses.
(c) Reinstatement of Terrorism Exclusions.--Notwithstanding
subsections (a) and (b) or any provision of State law, an
insurer may reinstate a preexisting provision in a contract for
property and casualty insurance that is in force on the date of
enactment of this Act and that excludes coverage for an act of
terrorism only--
(1) if the insurer has received a written statement
from the insured that affirmatively authorizes such
reinstatement; or
(2) if--
(A) the insured fails to pay any increased
premium charged by the insurer for providing
such terrorism coverage; and
(B) the insurer provided notice, at least
30 days before any such reinstatement, of--
(i) the increased premium for such
terrorism coverage; and
(ii) the rights of the insured with
respect to such coverage, including any
date upon which the exclusion would be
reinstated if no payment is received.
SEC. 106. PRESERVATION PROVISIONS.
(a) State Law.--Nothing in this title shall affect the
jurisdiction or regulatory authority of the insurance
commissioner (or any agency or office performing like
functions) of any State over any insurer or other person--
(1) except as specifically provided in this title;
and
(2) except that--
(A) the definition of the term ``act of
terrorism'' in section 102 shall be the
exclusive definition of that term for purposes
of compensation for insured losses under this
title, and shall preempt any provision of State
law that is inconsistent with that definition,
to the extent that such provision of law would
otherwise apply to any type of insurance
covered by this title;
(B) during the period beginning on the date
of enactment of this Act and ending on December
31, 2003, rates and forms for terrorism risk
insurance covered by this title and filed with
any State shall not be subject to prior
approval or a waiting period under any law of a
State that would otherwise be applicable,
except that nothing in this title affects the
ability of any State to invalidate a rate as
excessive, inadequate, or unfairly
discriminatory, and, with respect to forms,
where a State has prior approval authority, it
shall apply to allow subsequent review of such
forms; and
(C) during the period beginning on the date
of enactment of this Act and for so long as the
Program is in effect, as provided in section
108, including authority in subsection 108(b),
books and records of any insurer that are
relevant to the Program shall be provided, or
caused to be provided, to the Secretary, upon
request by the Secretary, notwithstanding any
provision of the laws of any State prohibiting
or limiting such access.
(b) Existing Reinsurance Agreements.--Nothing in this title
shall be construed to alter, amend, or expand the terms of
coverage under any reinsurance agreement in effect on the date
of enactment of this Act. The terms and conditions of such an
agreement shall be determined by the language of that
agreement.
SEC. 107. LITIGATION MANAGEMENT.
(a) Procedures and Damages.--
(1) In general.--If the Secretary makes a
determination pursuant to section 102 that an act of
terrorism has occurred, there shall exist a
Federalcause of action for property damage, personal injury, or death
arising out of or resulting from such act of terrorism, which shall be
the exclusive cause of action and remedy for claims for property
damage, personal injury, or death arising out of or relating to such
act of terrorism, except as provided in subsection (b).
(2) Preemption of state actions.--All State causes
of action of any kind for property damage, personal
injury, or death arising out of or resulting from an
act of terrorism that are otherwise available under
State law are hereby preempted, except as provided in
subsection (b).
(3) Substantive law.--The substantive law for
decision in any such action described in paragraph (1)
shall be derived from the law, including choice of law
principles, of the State in which such act of terrorism
occurred, unless such law is otherwise inconsistent
with or preempted by Federal law.
(4) Jurisdiction.--For each determination described
in paragraph (1), not later than 90 days after the
occurrence of an act of terrorism, the Judicial Panel
on Multidistrict Litigation shall designate 1 district
court or, if necessary, multiple district courts of the
United States that shall have original and exclusive
jurisdiction over all actions for any claim (including
any claim for loss of property, personal injury, or
death) relating to or arising out of an act of
terrorism subject to this section. The Judicial Panel
on Multidistrict Litigation shall select and assign the
district court or courts based on the convenience of
the parties and the just and efficient conduct of the
proceedings. For purposes of personal jurisdiction, the
district court or courts designated by the Judicial
Panel on Multidistrict Litigation shall be deemed to
sit in all judicial districts in the United States.
(5) Punitive damages.--Any amounts awarded in an
action under paragraph (1) that are attributable to
punitive damages shall not count as insured losses for
purposes of this title.
(b) Exclusion.--Nothing in this section shall in any way
limit the liability of any government, an organization, or
person who knowingly participates in, conspires to commit, aids
and abets, or commits any act of terrorism with respect to
which a determination described in subsection (a)(1) was made.
(c) Right of Subrogation.--The United States shall have the
right of subrogation with respect to any payment or claim paid
by the United States under this title.
(d) Relationship to Other Law.--Nothing in this section
shall be construed to affect--
(1) any party's contractual right to arbitrate a
dispute; or
(2) any provision of the Air Transportation Safety
and System Stabilization Act (Public Law 107-42; 49
U.S.C. 40101 note.).
(e) Effective Period.--This section shall apply only to
actions described in subsection (a)(1) that arise out of or
result from acts of terrorism that occur or occurred during the
effective period of the Program.
SEC. 108. TERMINATION OF PROGRAM.
(a) Termination of Program.--The Program shall terminate on
December 31, 2005.
(b) Continuing Authority To Pay or Adjust Compensation.--
Following the termination of the Program, the Secretary may
take such actions as may be necessary to ensure payment,
recoupment, reimbursement, or adjustment of compensation for
insured losses arising out of any act of terrorism occurring
during the period in which the Program was in effect under this
title, in accordance with the provisions of section 103 and
regulations promulgated thereunder.
(c) Repeal; Savings Clause.--This title is repealed on the
final termination date of the Program under subsection (a),
except that such repeal shall not be construed--
(1) to prevent the Secretary from taking, or
causing to be taken, such actions under subsection (b)
of this section, paragraph (4), (5), (6), (7), or (8)
of section 103(e), or subsection (a)(1), (c), (d), or
(e) of section 104, as in effect on the day before the
date of such repeal, or applicable regulations
promulgated thereunder, during any period in which the
authority of the Secretary under subsection (b) of this
section is in effect; or
(2) to prevent the availability of funding under
section 104(g) during any period in which the authority
of the Secretary under subsection (b) of this section
is in effect.
(d) Study and Report on the Program.--
(1) Study.--The Secretary, in consultation with the
NAIC, representatives of the insurance industry and of
policy holders, other experts in the insurance field,
and other experts as needed, shall assess the
effectiveness of the Program and the likely capacity of
the property and casualty insurance industry to offer
insurance for terrorism risk after termination of the
Program, and the availability and affordability of such
insurance for various policyholders, including
railroads, trucking, and public transit.
(2) Report.--The Secretary shall submit a report to
the Congress on the results of the study conducted
under paragraph (1) not later than June 30, 2005.
TITLE II--TREATMENT OF TERRORIST ASSETS
SEC. 201. SATISFACTION OF JUDGMENTS FROM BLOCKED ASSETS OF TERRORISTS,
TERRORIST ORGANIZATIONS, AND STATE SPONSORS OF
TERRORISM.
(a) In General.--Notwithstanding any other provision of
law, and except as provided in subsection (b), in every case in
which a person has obtained a judgment against a terrorist
party on a claim based upon an act of terrorism, or for which a
terrorist party is not immune under section 1605(a)(7) of title
28, United States Code, the blocked assets of that terrorist
party (including the blocked assets of any agency or
instrumentality of that terrorist party) shall be subject to
execution or attachment in aid of execution in order to satisfy
such judgment tothe extent of any compensatory damages for
which such terrorist party has been adjudged liable.
(b) Presidential Waiver.--
(1) In general.--Subject to paragraph (2), upon
determining on an asset-by-asset basis that a waiver is
necessary in the national security interest, the
President may waive the requirements of subsection (a)
in connection with (and prior to the enforcement of)
any judicial order directing attachment in aid of
execution or execution against any property subject to
the Vienna Convention on Diplomatic Relations or the
Vienna Convention on Consular Relations.
(2) Exception.--A waiver under this subsection
shall not apply to--
(A) property subject to the Vienna
Convention on Diplomatic Relations or the
Vienna Convention on Consular Relations that
has been used by the United States for any
nondiplomatic purpose (including use as rental
property), or the proceeds of such use; or
(B) the proceeds of any sale or transfer
for value to a third party of any asset subject
to the Vienna Convention on Diplomatic
Relations or the Vienna Convention on Consular
Relations.
(c) Special Rule for Cases Against Iran.--Section 2002 of
the Victims of Trafficking and Violence Protection Act of 2000
(Public Law 106-386; 114 Stat. 1542), as amended by section 686
of Public Law 107-228, is further amended--
(1) in subsection (a)(2)(A)(ii), by striking ``July
27, 2000, or January 16, 2002'' and inserting ``July
27, 2000, any other date before October 28, 2000, or
January 16, 2002'';
(2) in subsection (b)(2)(B), by inserting after
``the date of enactment of this Act'' the following:
``(less amounts therein as to which the United States
has an interest in subrogation pursuant to subsection
(c) arising prior to the date of entry of the judgment
or judgments to be satisfied in whole or in part
hereunder)'';
(3) by redesignating subsections (d), (e), and (f)
as subsections (e), (f), and (g), respectively; and
(4) by inserting after subsection (c) the following
new subsection (d):
``(d) Distribution of Account Balances and Proceeds
Inadequate To Satisfy Full Amount of Compensatory Awards
Against Iran.--
``(1) Prior judgments.--
``(A) In general.--In the event that the
Secretary determines that 90 percent of the
amounts available to be paid under subsection
(b)(2) are inadequate to pay the total amount
of compensatory damages awarded in judgments
issued as of the date of the enactment of this
subsection in cases identified in subsection
(a)(2)(A) with respect to Iran, the Secretary
shall, not later than 60 days after such date,
make payment from such amounts available to be
paid under subsection (b)(2) to each party to
which such a judgment has been issued in an
amount equal to a share, calculated under
subparagraph (B), of 90 percent of the amounts
available to be paid under subsection (b)(2)
that have not been subrogated to the United
States under this Act as of the date of
enactment of this subsection.
``(B) Calculation of payments.--The share
that is payable to a person under subparagraph
(A), including any person issued a final
judgment as of the date of enactment of this
subsection in a suit filed on a date added by
the amendment made by section 686 of Public Law
107-228, shall be equal to the proportion that
the amount of unpaid compensatory damages
awarded in a final judgment issued to that
person bears to the total amount of all unpaid
compensatory damages awarded to all persons to
whom such judgments have been issued as of the
date of enactment of this subsection in cases
identified in subsection (a)(2)(A) with respect
to Iran.
``(2) Subsequent judgment.--
``(A) In general.--The Secretary shall pay
to any person awarded a final judgment after
the date of enactment of this subsection, in
the case filed on January 16, 2002, and
identified in subsection (a)(2)(A) with respect
to Iran, an amount equal to a share, calculated
under subparagraph (B), of the balance of the
amounts available to be paid under subsection
(b)(2) that remain following the disbursement
of all payments as provided by paragraph (1).
The Secretary shall make such payment not later
than 30 days after such judgment is awarded.
``(B) Calculation of payments.--To the
extent that funds are available, the amount
paid under subparagraph (A) to such person
shall be the amount the person would have been
paid under paragraph (1) if the person had been
awarded the judgment prior to the date of
enactment of this subsection.
``(3) Additional payments.--
``(A) In general.--Not later than 30 days
after the disbursement of all payments under
paragraphs (1) and (2), the Secretary shall
make an additional payment to each person who
received a payment under paragraph (1) or (2)
in an amount equal to a share, calculated under
subparagraph (B), of the balance of the amounts
available to be paid under subsection (b)(2)
that remain following the disbursement of all
payments as provided by paragraphs (1) and (2).
``(B) Calculation of payments.--The share
payable under subparagraph (A) to each such
person shall be equal to the proportion that
the amount of compensatory damages awarded that
person bears to the total amount of all
compensatory damages awarded to all persons who
received a payment under paragraph (1) or (2).
``(4) Statutory construction.--Nothing in this
subsection shall bar, or require delay in, enforcement
of any judgment to which this subsection applies under
any procedure or against assets otherwise available
under this section or under any other provision of law.
``(5) Certain rights and claims not relinquished.--
Any person receiving less than the full amount of
compensatory damages awarded to that party in a
judgment to which this subsection applies shall not be
required to make the election set forth in subsection
(a)(2)(B) or, with respect to subsection (a)(2)(D), the
election relating to relinquishment of any right to
execute or attach property that is subject to section
1610(f)(1)(A) of title 28, United States Code, except
that such person shall be required to relinquish rights
set forth--
``(A) in subsection (a)(2)(C); and
``(B) in subsection (a)(2)(D) with respect
to enforcement against property that is at
issue in claims against the United States
before an international tribunal or that is the
subject of awards by such tribunal.
``(6) Guidelines for establishing claims of a right
to payment.--The Secretary may promulgate reasonable
guidelines through which any person claiming a right to
payment under this section may inform the Secretary of
the basis for such claim, including by submitting a
certified copy of the final judgment under which such
right is claimed and by providing commercially
reasonable payment instructions. The Secretary shall
take all reasonable steps necessary to ensure, to the
maximum extent practicable, that such guidelines shall
not operate to delay or interfere with payment under
this section.''.
(d) Definitions.--In this section, the following
definitions shall apply:
(1) Act of terrorism.--The term ``act of
terrorism'' means--
(A) any act or event certified under
section 102(1); or
(B) to the extent not covered by
subparagraph (A), any terrorist activity (as
defined in section 212(a)(3)(B)(iii) of the
Immigration and Nationality Act (8 U.S.C.
1182(a)(3)(B)(iii))).
(2) Blocked asset.--The term ``blocked asset''
means--
(A) any asset seized or frozen by the
United States under section 5(b) of the Trading
With the Enemy Act (50 U.S.C. App. 5(b)) or
under sections 202 and 203 of the International
Emergency Economic Powers Act (50 U.S.C. 1701;
1702); and
(B) does not include property that--
(i) is subject to a license issued
by the United States Government for
final payment, transfer, or disposition
by or to a person subject to the
jurisdiction of the United States in
connection with a transaction for which
the issuance of such license has been
specifically required by statute other
than the International Emergency
Economic Powers Act (50 U.S.C. 1701 et
seq.) or the United Nations
Participation Act of 1945 (22 U.S.C.
287 et seq.); or
(ii) in the case of property
subject to the Vienna Convention on
Diplomatic Relations or the Vienna
Convention on Consular Relations, or
that enjoys equivalent privileges and
immunities under the law of the United
States, is being used exclusively for
diplomatic or consular purposes.
(3) Certain property.--The term ``property subject
to the Vienna Convention on Diplomatic Relations or the
Vienna Convention on Consular Relations'' and the term
``asset subject to the Vienna Convention on Diplomatic
Relations or the Vienna Convention on Consular
Relations'' mean any property or asset, respectively,
the attachment in aid of execution or execution of
which would result in a violation of an obligation of
the United States under the Vienna Convention on
Diplomatic Relations or the Vienna Convention on
Consular Relations, as the case may be.
(4) Terrorist party.--The term ``terrorist party''
means a terrorist, a terrorist organization (as defined
in section 212(a)(3)(B)(vi) of the Immigration and
Nationality Act (8 U.S.C. 1182(a)(3)(B)(vi))), or a
foreign state designated as a state sponsor of
terrorism under section 6(j) of the Export
Administration Act of 1979 (50 U.S.C. App. 2405(j)) or
section 620A of the Foreign Assistance Act of 1961 (22
U.S.C. 2371).
TITLE III--FEDERAL RESERVE BOARD PROVISIONS
SEC. 301. CERTAIN AUTHORITY OF THE BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM.
Section 11 of the Federal Reserve Act (12 U.S.C. 248) is
amended by adding at the end the following new subsection:
``(r)(1) Any action that this Act provides may be taken
only upon the affirmative vote of 5 members of the Board may be
taken upon the unanimous vote of all members then in office if
there are fewer than 5 members in office at the time of the
action.
``(2)(A) Any action that the Board is otherwise authorized
to take under section 13(3) may be taken upon the unanimous
vote of all available members then in office, if--
``(i) at least 2 members are available and all
available members participate in the action;
``(ii) the available members unanimously determine
that--
``(I) unusual and exigent circumstances
exist and the borrower is unable to secure
adequate credit accommodations from other
sources;
``(II) action on the matter is necessary to
prevent, correct, or mitigate serious harm to
the economy or the stability of the financial
system of the United States;
``(III) despite the use of all means
available (including all available telephonic,
telegraphic, and other electronic means), the
other members of the Board have not been able
to be contacted on the matter; and
``(IV) action on the matter is required
before the number of Board members otherwise
required to vote on the matter can be contacted
through any available means (including all
available telephonic, telegraphic, and other
electronic means); and
``(iii) any credit extended by a Federal reserve
bank pursuant to such action is payable upon demand of
the Board.
``(B) The available members of the Board shall document in
writing the determinations required by subparagraph (A)(ii),
and such written findings shall be included in the record of
the action and in the official minutes of the Board, and copies
of such record shall be provided as soon as practicable to the
members of the Board who were not available to participate in
the action and to the Chairman of the Committee on Banking,
Housing, and Urban Affairs of the Senate and to the Chairman of
the Committee on Financial Services of the House of
Representatives.''.
And the Senate agree to the same.
From the Committee on Financial Services, for
consideration of the House bill and the Senate
amendment thereto, and modifications committed
to conference:
Michael G. Oxley,
Richard H. Baker,
Robert W. Ney,
Sue W. Kelly,
Christopher Shays,
Vito Fossella,
Michael Ferguson,
John J. LaFalce,
Paul E. Kanjorski,
Ken Bentsen,
James H. Maloney,
Darlene Hooley,
From the Committee on the Judiciary, for
consideration of sec. 15 the House bill and
secs. 10 and 11 of the Senate amendment
thereto, and modifications committed to
conference:
John Conyers, Jr.,
Managers on the Part of the House.
Paul Sarbanes,
Christopher J. Dodd,
Jack Reed,
Charles Schumer,
Managers on the Part of the Senate.
JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE
The managers on the part of the House and the Senate at
the conference on the disagreeing votes of the two Houses on
the amendment of the Senate to the bill (H.R. 3210) to ensure
the continued financial capacity of insurers to provide
coverage for risks from terrorism, submit the following joint
statement to the House and the Senate in explanation of the
effect of the action agreed upon by the managers and
recommended in the accompanying conference report.
The Senate amendment struck all of the House bill after
the enacting clause and inserted a substitute text.
The House recedes from its disagreement to the amendment
of the Senate with an amendment that is a substitute for the
House bill and the Senate amendment.
The Conference Report includes the following provisions:
Section 1. Short title; table of contents
The short title of this legislation is ``Terrorism Risk
Insurance Act of 2002.''
TITLE I--TERRORISM INSURANCE PROGRAM
Section 101. Congressional findings and purpose
Following the widespread financial market uncertainties
due to the terrorist attacks of September 11, 2001, Congress
determined that there was a need for a temporary Federal
program to establish a system of shared public/private
compensation for insured losses resulting from acts of
terrorism to protect consumers and create a transitional period
for the private insurance markets to stabilize.
Section 102. Definitions
Section 102 defines terms necessary for implementation of
this legislation. The Federal backstop is triggered when the
Secretary of the Treasury, in concurrence with the Secretary of
State and the Attorney General, certifies that an event meets
the definition of an act of terrorism. The legislation only
applies to U.S. risks, including domestic air carriers and flag
vessels, U.S. territorial seas and continental shelf, and U.S.
missions. The legislation applies only to acts that are
committed by an individual or individuals acting on behalf of a
foreign person or foreign interest.
The terms ``affiliate'' and ``control'' are meant to
ensure that affiliated insurers are treated as a consolidated
entity for calculating direct earned premiums. The term
``insured loss'' includes losses resulting from an act of
terrorism (and from an act of war in the case of workers
compensation). Each insurer will be responsible for paying out
a prescribed amount of insured losses, the ``insurer
deductible,'' before Federal assistance becomes available. This
deductible is based on a percentage of direct earned premiums
from the previous calendar year. Insurers' deductibles are 1%
during a transition period for the remainder of 2002, 7% in
2003, 10% in 2004, and 15% in 2005. Except as otherwise
specifically provided, the Conferees intend the legislation to
apply only to primary and excess commercial property and
casualty insurance (including cyber-terrorism and business
interruption coverage).
Section 103. Terrorism Insurance Program
The Terrorism Insurance Program is established in the
Department of the Treasury under which the Federal government
will share the risk of loss from future terrorist attacks with
the commercial property and causality insurance marketplace,
for a temporary period of time. The Secretary of the Treasury
(hereafter ``Secretary'') shall administer theProgram and pay
the Federal share of compensation for insured losses. The Federal
government pays 90% of insured losses in excess of an insurer's
deductible while the insurer pays 10%. Insurers may reinsure their
insurer deductibles and 10% co-shares. Losses covered by the Program
will be capped at $100 billion per year; above this amount, Congress is
to determine the procedures for and the source of any payments.
Before receiving Federal assistance under this Act, an
insurer must certify its claim for payment of insured losses,
that a policyholder (or person acting on the policyholder's
behalf) has filed a claim for such loss, and the insurer's
compliance with the Act. The Secretary may not reimburse an
insurer for such losses unless the insurer has provided clear
and conspicuous disclosure to the policyholder of the premium
charged for terrorism coverage and the Federal share of
compensation. This disclosure to the policyholder must occur at
the time of offer, purchase, and renewal of the policy for
policies issued after the date of enactment, and must be made
on a separate line item in the policy with respect to policies
issued more than 90 days after enactment. For policies issued
before the date of enactment, the disclosure must be made
within 90 days of such date. The Conferees intend this
disclosure to enhance the competitiveness of the marketplace by
better enabling consumers to comparison shop for terrorism
insurance coverage, and to make policyholders better aware that
the Federal government will be sharing the costs of such
coverage with the insurers, thereby reducing the insurers's
exposure. Insurers must submit premium and claims information
to the Secretary who may investigate and audit all claims under
the Program.
Each entity meeting the definition of insurer under this
legislation is required to participate in the Program. During
the first two years of the Program each such insurer must make
available in all of its property and casualty insurance polices
coverage for insured losses, and shall make such coverage
available on terms that do not differ materially from the
terms, amounts, and other coverage limitations applicable to
losses arising from events other than acts of terrorism. The
Secretary has discretion to extend this requirement to the
third year of the Program, to preserve this important option
for policyholders.
Section 103 provides for insurance marketplace retentions
of $10 billion in Program year 1 (including any remainder of
2002), $12.5 billion in Program year 2, and $15 billion in
Program year 3. Federal assistance within the retention above
in insurer deductibles and 10% co-shares must be recouped while
additional amounts of Federal assistance may be recouped based
on economic factors in the judgment of the Secretary. Mandatory
recoupment within the insurance marketplace retention is
through terrorism loss risk-spreading premiums (surcharges)
paid by all commercial property and casualty policyholders
based on premium rates with any year's surcharge (mandatory and
discretionary combined) capped at 3% of the premium charged for
property and casualty insurance coverage under the policy in
each such year. The Secretary has discretion over the timing of
recoupment, and to adjust amounts for urban, smaller
commercial, and rural areas, as well as for different lines of
insurance, so long as themandatory amounts are ultimately
recouped. The Secretary may assess civil penalties on insurers for
submission of false or misleading information or failure to repay the
Secretary for any amount required to be repaid, or for other failure to
comply with the provisions of this title.
This section directs the Secretary to apply the
provisions of the legislation to State residual market
insurance entities and State workers compensation funds. The
Secretary is directed to either treat State residual market
insurance entities as separate insurers, or to calculate the
premiums, losses, and Federal backstop based on each insurer's
share of the entity, imputing such amounts as part of their
total business. This calculation would apply to all insurers
that participate in such entities, regardless of whether they
otherwise provide commercial property and casualty insurance as
set forth in the legislation. This section further gives the
Secretary discretion to apply the legislation to various
classes of captives and self-insurance programs (such as
workers' compensation self-insurance programs and State
workers' compensation reinsurance pools).
The Secretary is also directed to conduct an expedited
study to determine whether adequate and affordable catastrophe
reinsurance for acts of terrorism is available to group life
insurers and whether the threat of terrorism is reducing the
availability of group life insurance for consumers. Should the
Secretary determine that terrorism coverage is not or will not
be reasonably available to insurers and consumers, the
Secretary would be required to include group life insurance in
the Terrorism Insurance Program. In so doing, the Secretary
would have discretion to determine the most appropriate way to
include group life insurance in the Program.
The Secretary, after consultation with the NAIC, is to
conduct a study of the potential effects of acts of terrorism
on the availability of life insurance generally and other lines
of insurance coverage, including personal lines, to be
submitted to Congress not later than 9 months from the date of
enactment.
Section 104. General authority and administration of claims
The Secretary shall have the powers and authorities
necessary to carry out the Program. The Secretary shall
annually compile information on the terrorism risk insurance
premium rates of insurers for the preceding year. To the extent
that such information is not otherwise available, the Secretary
may require insurers to submit their terrorism risk insurance
premium rates to the NAIC, which shall make such information
available to the Secretary.
Section 105. Preemption and nullification of pre-existing terrorism
exclusions
This section voids any commercial property and casualty
terrorism insurance exclusion that is in force on the date of
the enactment of this Act to the extent that it excludes that
in force on the date of the enactment of this Act to the extent
that it excludes losses that would otherwise be insured losses.
Any Sate approval of any commercial property and casualty
terrorism insurance exclusion in force on the date of enactment
is also void to the extent that it excludes losses that would
otherwise be insured losses.
This provision is intended to create immediate terrorism
coverage for commercial property and casualty policyholders
upon enactment for a short window of time, while allowing
insurers to immediately send notices of the increased premium
for such coverage and giving policyholders the option within 30
days of such notice to pay such increased premium or allow
reinstatement of any preexisting terrorism exclusion.
Section 106. Preservation provisions
This section preserves State regulatory authority except
as specifically provided in this legislation. A uniform
definition of a terrorist act is established in this
legislation. Until the end of 2003, States would be required to
allow rate and form changes to take effect immediately but
would retain authority to disapprove any rates as excessive,
inadequate, or unfairly discriminatory and where a State has
prior approval authority for forms, subsequent review of such
forms is permitted. During the period in which the Secretary's
authority to carry out the Program is in effect, the Secretary
would have access to any books and records of insurers that are
relevant to the Program.
Section 107. Litigation management
The Conferees agreed to a provision on litigation
management.
Section 108. Termination of program
This section provides a three-year program (with a
transition period for the balance of 2002) that terminates on
December 31, 2005. The Secretary shall conduct a study and
report to Congress no later than June 30, 2005 on the
effectiveness of the Program and the likely capacity of the
property and casualty insurance industry to offer insurance for
terrorism risk after termination of the Program, and the
availability and affordability of such insurance for various
policyholders, including railroads, trucking, and public
transit.
TITLE II--TREATMENT OF TERRORIST ASSETS
Section 201. Satisfaction of judgments from blocked assets of
terrorists, terrorist organizations, and state sponsors of
terrorism
The purpose of Section 201 is to deal comprehensively
with the problem of enforcement of judgments rendered on behalf
of victims of terrorism in any court of competent jurisdiction
by enabling them to satisfy such judgments through the
attachment of blocked assets of terrorist parties. It is the
intent of the Conferees that Section 201 establish that such
judgments are to be enforced. Section 201 builds upon and
extends the principles in section 1610(f)(1) of the Foreign
Sovereign Immunities Act (28 U.S.C. Sec. 1610(f)(1)),
authorizes the enforcement of judgments against terrorist
organizations and eliminates the effect of any Presidential
waiver issued prior to the date of enactment purporting to bar
or restrict enforcement of such judgments, thereby making clear
that all such judgments are enforceable against any assets or
property under any authorities referenced in Section
1610(f)(1).
Section 201(c) establishes a special rule for cases
against Iran. In Section 2002 of the Victims of Trafficking and
Violence Protection Act of 2000 (2000 Act), Congress directed
that specified claimants against Iran under Section 1605(a)(7)
of the Foreign Sovereign Immunities Act receive payment in
satisfaction of judgments. Unfortunately, several victims and
families of victims who brought suit against Iran, were left
out of the 2000 Act. The Conferees have sought to correct this
injustice.
In order to accommodate additional dates within the
equitable formula for payment of remaining amounts in the
accounts and rental proceeds, the Conferees added to Section
(c) an adjustment to the proportional formula for payment to
qualifying claimants.
In Section 201(d), the Conferees broadened the definition
of ``act of terrorism'' for purposes of that section; defined
the term ``blocked assets''; and clarified the term ``terrorist
organization'' to mean any entity included in the definition
provided in Section 212(a)(3)(B)(vi) of the Immigration and
Nationality Act, (8 U.S.C. Sec. 1182(a)(3)(B)(vi)). This
provision is intended to reach terrorist organizations.
TITLE III--FEDERAL RESERVE BOARD PROVISIONS
Section 301. Certain authority of the Board of Governors of the Federal
Reserve System
The Conferees agreed to certain changes to Section 11 of
the Federal Reserve Act.
From the Committee on Financial Services, for
consideration of the House bill and the Senate
amendment thereto, and modifications committed
to conference:
Michael G. Oxley,
Richard H. Baker,
Robert W. Ney,
Sue W. Kelly,
Christopher Shays,
Vito Fossella,
Michael Ferguson,
John J. LaFalce,
Paul E. Kanjorski,
Ken Bentsen,
James H. Maloney,
Darlene Hooley,
From the Committee on the Judiciary, for
consideration of sec. 15 the House bill and
secs. 10 and 11 of the Senate amendment
thereto, and modifications committed to
conference:
John Conyers, Jr.,
Managers on the Part of the House.
Paul Sarbanes,
Christopher J. Dodd,
Jack Reed,
Charles Schumer,
Managers on the Part of the Senate.