[House Report 110-318]
[From the U.S. Government Publishing Office]
110th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 110-318
======================================================================
TERRORISM RISK INSURANCE REVISION AND EXTENSION ACT OF 2007
_______
September 6, 2007.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Frank of Massachusetts, from the Committee on Financial Services,
submitted the following
R E P O R T
together with
ADDITIONAL AND DISSENTING VIEWS
[To accompany H.R. 2761]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 2761) to extend the Terrorism Insurance Program
of the Department of the Treasury, and for other purposes,
having considered the same, reports favorably thereon with an
amendment and recommends that the bill as amended do pass.
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
CONTENTS
Page
Amendment........................................................ 2
Purpose and Summary.............................................. 19
Background and Need for Legislation.............................. 19
Hearings......................................................... 23
Committee Consideration.......................................... 25
Committee Votes.................................................. 25
Committee Oversight Findings..................................... 31
Performance Goals and Objectives................................. 31
New Budget Authority, Entitlement Authority, and Tax Expenditures 32
Committee Cost Estimate.......................................... 32
Congressional Budget Office Estimate............................. 32
Federal Mandates Statement....................................... 42
Advisory Committee Statement..................................... 42
Constitutional Authority Statement............................... 42
Applicability to Legislative Branch.............................. 42
Earmark Identification........................................... 42
Exchange of Committee Correspondence............................. 43
Section-by-Section Analysis of the Legislation................... 44
Changes in Existing Law Made by the Bill, as Reported............ 49
Additional and Dissenting Views.................................. 88
Amendment
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Terrorism Risk Insurance Revision and
Extension Act of 2007''.
SEC. 2. TERMINATION OF PROGRAM.
Subsection (a) of section 108 of the Terrorism Risk Insurance Act of
2002 (15 U.S.C. 6701 note) is amended by striking ``December 31, 2007''
and inserting ``December 31, 2022''.
SEC. 3. REVISION OF TERRORISM INSURANCE PROGRAM.
(a) In General.--The Terrorism Risk Insurance Act of 2002 is
amended--
(1) by striking sections 101, 102, and 103 and inserting the
following new sections:
``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;
``(6) the United States Government should coordinate with
insurers to provide financial compensation to insured parties
for losses from acts of terrorism, contributing to the
stabilization of the United States economy in a time of
national crisis, and periodically assess the ability of the
financial services industry to develop the systems, mechanisms,
products, and programs necessary to create a viable financial
services market for private terrorism risk insurance that will
lessen the financial participation of the United States
Government;
``(7) in addition to a terrorist attack on the United States
using conventional means or weapons, there is and continues to
be a potential threat of a terrorist attack involving the use
of unconventional means or weapons, such as nuclear,
biological, chemical, or radiological agents;
``(8) as nuclear, biological, chemical, or radiological acts
of terrorism (known as NBCR terrorism) present a threat of loss
of life, injury, disease, and property damage potentially
unparalleled in scope and complexity by any prior event,
natural or man-made, the Federal Government's responsibility in
providing for and preserving national economic security calls
for a strong Federal role in ensuring financial compensation
and economic recovery in the event of such an attack;
``(9) a report issued by the Government Accountability Office
in September 2006 concluded that `any purely market-driven
expansion of coverage' for NBCR terrorism risk is `highly
unlikely in the foreseeable future', and the September 2006
report from the President's Working Group on Financial Markets
concluded that reinsurance for NBCR terrorist events is
virtually unavailable and that `[g]iven the general reluctance
of insurance companies to provide coverage for these types of
risks, there may be little potential for future market
development';
``(10) group life insurance companies are important financial
institutions whose products make life insurance coverage
affordable for millions of Americans and often serve as their
only life insurance benefit;
``(11) the group life insurance industry, in the event of a
severe act of terrorism, is vulnerable to insolvency because
high concentrations of covered employees work in the same
locations, because primary group life insurers do not exclude
conventional and NBCR terrorism risks while most catastrophic
reinsurance does exclude such terrorism risks, and because a
large-scale loss of life would fall outside of actuarial
expectations of death; and
``(12) 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 and group life insurance for
all types of terrorism risk, including conventional terrorism
risk and nuclear, biological, chemical, and radiological
terrorism risk;
``(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 (unless otherwise
preempted by this Act); and
``(3) provide finite liability limits for terrorism insurance
losses for insurers and the United States Government.
``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, the Secretary
of Homeland Security, 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 (9)(B); or
``(II) the premises of a United
States mission; and
``(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.
``(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 and
group life insurance losses resulting from the
act, in the aggregate, do not exceed
$5,000,000.
``(C) Certification of act of nbcr terrorism.--Upon
certification of an act of terrorism, the Secretary, in
concurrence with the Secretary of State, the Secretary
of Homeland Security, and the Attorney General of the
United States, shall determine whether the act of
terrorism meets the definition of NBCR terrorism in
this section. If such determination is that the act
does meet such definition, the Secretary shall further
certify such act of terrorism as an act of NBCR
terrorism.
``(D) Determinations final.--Any certification of, or
determination not to certify, an act as an act of
terrorism or as an act of NBCR terrorism under this
paragraph shall be final, and shall not be subject to
judicial review.
``(E) 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, including an act of NBCR 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) Amount at risk.--The term `amount at risk' means face
amount less statutory policy reserves for group life insurance
issued by any insurer for insurance against losses occurring at
the locations described in subparagraph (A) of paragraph (9).
``(4) 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; except that
for purposes of any proceeding under this subparagraph,
there shall be a presumption that any entity which
directly or indirectly owns, controls, or has power to
vote less than 5 percent of any class of voting
securities of another entity does not have control over
that entity.
``(5) Covered lines.--The term `covered lines' means property
and casualty insurance and group life insurance, as defined in
this section.
``(6) 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 subparagraph (A)
of paragraph (9).
``(7) Excess insured loss.--The term `excess insured loss'
means, with respect to a Program Year, any portion of the
amount of insured losses during such Program Year that exceeds
the cap on annual liability under section 103(e)(2)(A).
``(8) Group life insurance.--The term `group life insurance'
means an insurance contract that provides life insurance
coverage, including term life insurance coverage, universal
life insurance coverage, variable universal life insurance
coverage, and accidental death coverage, or a combination
thereof, for a number of individuals under a single contract,
on the basis of a group selection of risks, but does not
include `Corporate Owned Life Insurance' or `Business Owned
Life Insurance,' each as defined under the Internal Revenue
Code of 1986, or any similar product, or group life reinsurance
or retrocessional reinsurance.
``(9) Insured loss.--
``(A) In general.--Except as provided in subparagraph
(B), 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, or
group life insurance to the extent of the amount at
risk, issued by an insurer, if such loss--
``(i) occurs within the United States; or
``(ii) 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.
``(B) Limitation for group life insurance.--Such term
shall not include any losses of an insurer resulting
from coverage of any single certificate holder under
any group life insurance coverages of the insurer to
the extent such losses are not compensated under the
Program by reason of section 103(e)(1)(D).
``(10) 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, or group life 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, or, in the case of group life insurance, that
receives direct premiums, 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.
``(11) 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;
``(E) for Program Year 4, the value of an insurer's
direct earned premiums over the calendar year
immediately preceding Program Year 4, multiplied by
17.5 percent;
``(F) for Program Year 5, the value of an insurer's
direct earned premiums over the calendar year
immediately preceding Program Year 5, multiplied by 20
percent;
``(G) for each additional Program Year--
``(i) with respect to property and casualty
insurance, the value of an insurer's direct
earned premiums over the calendar year
immediately preceding such Program Year,
multiplied by 20 percent; and
``(ii) with respect to group life insurance,
the value of an insurer's amount at risk over
the calendar year immediately preceding such
Program Year, multiplied by 0.0351 percent;
``(H) notwithstanding subparagraphs (A) through (G),
for the Transition Period or any Program Year, 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 with respect to property and casualty
insurance, and such portion of the amounts at risk with
respect to group life insurance, of the insurer as the
Secretary determines appropriate, subject to
appropriate methodologies established by the Secretary
for measuring such direct earned premiums and amounts
at risk;
``(I) notwithstanding subparagraphs (A) through (H)
and (J), in the case of any act of NBCR terrorism, for
any additional Program Year--
``(i) with respect to property and casualty
insurance, the value of an insurer's direct
earned premiums over the calendar year
immediately preceding such Program Year,
multiplied by a percentage, which--
``(I) for the second additional
Program Year, shall be 3.5 percent; and
``(II) for each succeeding Program
Year thereafter, shall be 50 basis
points greater than the percentage
applicable to the preceding additional
Program Year; and
``(ii) with respect to group life insurance,
the value of an insurer's amount at risk over
the calendar year immediately preceding such
Program Year, multiplied by a percentage,
which--
``(I) for the first additional
Program Year, shall be 0.00614 percent;
and
``(II) for each succeeding Program
Year thereafter, shall be 0.088 basis
point greater than the percentage
applicable to the preceding additional
Program Year; and
``(J) notwithstanding subparagraph (G)(i), if
aggregate industry insured losses resulting from a
certified act of terrorism exceed $1,000,000,000, for
any insurer that sustains insured losses resulting from
such act of terrorism, the value of such insurer's
direct earned premiums over the calendar year
immediately preceding the Program Year, multiplied by a
percentage, which--
``(i) for the first additional Program Year
shall be 5 percent;
``(ii) for each additional Program Year
thereafter, shall be 50 basis points greater
than the percentage applicable to the preceding
additional Program Year, except that if an act
of terrorism occurs during any additional
Program Year that results in aggregate industry
insured losses exceeding $1,000,000,000, the
percentage for the succeeding additional
Program Year shall be 5 percent and the
increase under this clause shall apply to
additional Program Years thereafter;
except that for purposes of determining under this
subparagraph whether aggregate industry insured losses
exceed $1,000,000,000, the Secretary may combine
insured losses resulting from two or more certified
acts of terrorism occurring during such Program Year in
the same geographic area (with such area determined by
the Secretary), in which case such insurer shall be
permitted to combine insured losses resulting from such
acts of terrorism for purposes of satisfying its
insurer deductible under this subparagraph; and except
that the insurer deductible under this subparagraph
shall apply only with respect to compensation of
insured losses resulting from such certified act, or
combined certified acts, and that for purposes of
compensation of any other insured losses occurring in
the same Program Year, the insurer deductible
determined under subparagraph (G)(i) or (I) shall
apply.
``(12) NAIC.--The term `NAIC' means the National Association
of Insurance Commissioners.
``(13) NBCR terrorism.--The term `NBCR terrorism' means an
act of terrorism that involves nuclear, biological, chemical,
or radiological reactions, releases, or contaminations, to the
extent any insured losses result from any such reactions,
releases, or contaminations.
``(14) 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.
``(15) Program.--The term `Program' means the Terrorism
Insurance Program established by this title.
``(16) 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.
``(E) Program year 4.--The term `Program Year 4'
means the period beginning on January 1, 2006 and
ending on December 31, 2006.
``(F) Program year 5.--The term `Program Year 5'
means the period beginning on January 1, 2007 and
ending on December 31, 2007.
``(G) Additional program year.--The term `additional
Program Year' means any additional one-year period
after Program Year 5 during which the Program is in
effect, which period shall begin on January 1 and end
on December 31 of the same calendar year.
``(17) 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 directors and officers
liability 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 the Homeowners
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.);
``(vii) reinsurance or retrocessional
reinsurance;
``(viii) commercial automobile insurance;
``(ix) burglary and theft insurance;
``(x) surety insurance; or
``(xi) professional liability insurance.
``(18) Secretary.--The term `Secretary' means the Secretary
of the Treasury.
``(19) 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.
``(20) 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).
``(21) 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.
``(4) NBCR exemption for certain insurers.--Notwithstanding
the requirements of paragraph (3):
``(A) Eligibility.--Upon request, the Secretary may
provide an exemption from the requirements of
subparagraph (B) of subsection (c)(1) in the Program to
an entity that otherwise meets the definition of an
insurer under this title if--
``(i) such insurer's direct earned premium is
less than $50,000,000 in the calendar year
immediately preceding the current additional
Program Year; and
``(ii) the Secretary makes the determination
set forth in subparagraph (D).
``(B) Insurer group.--For purposes of subparagraph
(A)(i), the direct earned premium of any insurer shall
include the direct earned premiums of every affiliate
of that insurer.
``(C) Information and consultation.--Any insurer
requesting an exemption pursuant to this paragraph
shall provide any information the Secretary may require
to establish its eligibility for the exemption. In
developing standards for evaluating eligibility for the
exemption under this paragraph, the Secretary shall
consult with the NAIC.
``(D) Determination.--In making any determination
regarding eligibility for exemption under this
paragraph, the Secretary shall consult with the
insurance commissioner of the State or other
appropriate State regulatory authority where the
insurer is domiciled and determine whether the insurer
has demonstrated that it would become insolvent if it
were required, in the event of an act of NBCR
terrorism, to satisfy--
``(i) its deductible and maximum applicable
share above the deductible pursuant to sections
102(11)(I) and 103(e)(1)(B), respectively, for
such act of NBCR terrorism resulting in
aggregate industry insured losses above the
trigger established in section 103(e)(1)(C); or
``(ii) its maximum payment obligations for
insured losses for such act of NBCR terrorism
resulting in aggregate industry insured losses
below the trigger established in section
103(e)(1)(C).
``(E) Workers' compensation and other compulsory
insurance law.--In granting an exemption under this
paragraph, the Secretary shall not approve any request
for exemption with regard to State workers'
compensation insurance or other compulsory insurance
law requiring coverage of the risks described in
subparagraph (B) of subsection (c)(1).
``(F) Exemption period.--
``(i) In general.--Any exemption granted to
an insurer by the Secretary under this
paragraph shall have a duration of not longer
than 2 years.
``(ii) Extension.--Notwithstanding clause
(i), the Secretary may, upon application by an
insurer granted an exemption under this
paragraph, extend such exemption for additional
periods of not longer than 2 years.
``(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 (including the additional premium, if
any, charged for the coverage for insured losses resulting from
acts of NBCR terrorism as made available pursuant to subsection
(c)(1)(B)) 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) Availability of coverage for insured losses.--Subject
to paragraph (3), during each Program Year, each entity that
meets the definition of an insurer under section 102 shall make
available--
``(A) in all of its insurance policies for covered
lines, 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; and
``(B) in insurance policies for covered lines for
which the coverage described in subparagraph (A) is
provided, exceptions to the pollution and nuclear
hazard exclusions of such policies that render such
exclusions inapplicable only as to insured losses
arising from acts of NBCR terrorism.
``(2) Allowable exclusions in other coverage.--Subject to
paragraph (3) and notwithstanding any other provision of
Federal or State law, including any State workers' compensation
and other compulsory insurance law, if a person elects not to
purchase an insurance policy with the coverage described in
paragraph (1)--
``(A) an insurer may exclude coverage for all losses
from acts of terrorism including acts of NBCR
terrorism, except for State workers' compensation and
other compulsory insurance law requiring coverage of
the risks described in subsection (c)(1) (unless
permitted by State law); or
``(B) an insurer may offer other options for coverage
that differ materially from the terms, amounts, and
other coverage limitations applicable to losses arising
from events other than acts of terrorism;
except that nothing in this paragraph shall affect paragraph
(4).
``(3) Applicability for nbcr terrorism.--Notwithstanding any
other provision of this Act, paragraphs (1)(B) and (2) shall
apply, beginning upon January 1, 2009, with respect to coverage
for acts of NBCR terrorism, that is purchased or renewed on or
after such date.
``(4) Availability of life insurance without regard to lawful
foreign travel.--During each Program Year, each entity that
meets the definition of an insurer under section 102 shall make
available, in all of its life insurance policies issued after
the date of the enactment of the Terrorism Risk Insurance
Revision and Extension Act of 2007 under which the insured
person is a citizen of the United States or an alien lawfully
admitted for permanent residence in the United States, coverage
that neither considers past, nor precludes future, lawful
foreign travel by the person insured, and shall not decline
such coverage based on past or future, lawful foreign travel by
the person insured or charge a premium for such coverage that
is excessive and not based on a good faith actuarial analysis,
except that an insurer may decline or, upon inception or
renewal of a policy, limit the amount of coverage provided
under any life insurance policy based on plans to engage in
future lawful foreign travel to occur within 12 months of such
inception or renewal of the policy but only if, at time of
application--
``(A) such declination is based on, or such
limitation applies only with respect to, travel to a
foreign destination--
``(i) for which the Director of the Centers
for Disease Control and Prevention of the
Department of Health and Human Services has
issued a highest level alert or warning,
including a recommendation against non-
essential travel, due to a serious health-
related condition;
``(ii) in which there is an ongoing military
conflict involving the armed forces of a
sovereign nation other than the nation to which
the insured person is traveling; or
``(iii)(I) that the insurer has specifically
designated in the terms of the life insurance
policy at the inception of the policy or at
renewal, as applicable; and
``(II) with respect to which the insurer has
made a good-faith determination that--
``(aa) a serious unlawful situation
exists which is ongoing; and
``(bb) the credibility of information
by which the insurer can verify the
death of the insured person is
compromised; and
``(B) in the case of any limitation of coverage, such
limitation is specifically stated in the terms of the
life insurance policy at the inception of the policy or
at renewal, as applicable.
``(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) Conventional terrorism.--Except as provided in
subparagraph (B), the Federal share of compensation
under the Program to be paid by the Secretary for
insured losses of an insurer during any additional
Program Year shall be equal to the sum of--
``(i) 85 percent of that portion of the
amount of such insured losses that--
``(I) exceeds the applicable insurer
deductible required to be paid during
such Program Year; and
``(II) based upon pro rata
determinations pursuant to paragraph
(2)(B), does not result in aggregate
industry insured losses during such
Program Year exceeding
$100,000,000,000; and
``(ii) 100 percent of the insured losses of
the insurer that, based upon pro rata
determinations pursuant to paragraph (2)(B),
result in aggregate industry insured losses
during such Program Year exceeding
$100,000,000,000, up to the limit under
paragraph (2)(A).
``(B) NBCR terrorism.--
``(i) Amount of compensation.--The Federal
share of compensation under the Program to be
paid by the Secretary for insured losses of an
insurer resulting from NBCR terrorism during
any additional Program Year shall be equal to
the sum of--
``(I) the amount of qualified NBCR
losses (as such term is defined in
clause (ii)) of the insurer, multiplied
by a percentage based on the aggregate
industry qualified NBCR losses for the
Program Year, which percentage shall
be--
``(aa) 85 percent of such
aggregate industry qualified
NBCR losses of less than
$10,000,000,000;
``(bb) 87.5 percent of such
aggregate industry qualified
NBCR losses between
$10,000,000,000 and
$20,000,000,000;
``(cc) 90 percent of such
aggregate industry qualified
NBCR losses between
$20,000,000,000 and
$40,000,000,000;
``(dd) 92.5 percent of such
aggregate industry qualified
NBCR losses of between
$40,000,000,000 and
$60,000,000,000; and
``(ee) 95 percent of such
aggregate industry qualified
NBCR losses of more than
$60,000,000,000;
and shall be prorated per insurer based
on each insurer's percentage of the
aggregate industry qualified NBCR
losses for such additional Program
Year; and
``(II) 100 percent of the insured
losses of the insurer resulting from
NBCR terrorism that, based upon pro
rata determinations pursuant to
paragraph (2)(B), result in aggregate
industry insured losses during such
Program Year exceeding
$100,000,000,000, up to the limit under
paragraph (2)(A).
``(ii) Qualified nbcr losses.--For purposes
of this subparagraph, the term `qualified NBCR
losses' means, with respect to insured losses
of an insurer resulting from NBCR terrorism
during an additional Program Year, that portion
of the amount of such insured losses that--
``(I) exceeds the applicable insurer
deductible required to be paid during
such Program Year; and
``(II) based upon pro rata
determinations pursuant to paragraph
(2)(B), does not result in aggregate
industry insured losses during such
Program Year exceeding
$100,000,000,000.
``(C) Program trigger.--In the case of a certified
act of terrorism occurring after March 31, 2006, no
compensation shall be paid by the Secretary under
subsection (a), unless the aggregate industry insured
losses resulting from such certified act of terrorism
exceed $50,000,000, except that if a certified act of
terrorism occurs for which resulting aggregate industry
insured losses exceed $1,000,000,000, the applicable
amount for any subsequent certified act of terrorism
shall be the amount specified in section 102(1)(B)(ii).
``(D) Limitation on compensation for group life
insurance.--Notwithstanding any other provision of this
Act, the Federal share of compensation under the
Program paid by the Secretary for insured losses of an
insurer resulting from coverage of any single
certificate holder under any group life insurance
coverages of the insurer may not during any additional
Program Year exceed $1,000,000.
``(E) 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, including
any State workers' compensation or other compulsory
insurance law, if the aggregate amount of the Federal
share of compensation to be paid to all insurers
pursuant to paragraph (1) exceeds $100,000,000,000,
during any additional Program Year (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 the aggregate insured losses during
such Program Year for which the Federal share
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 the aggregate insured losses
during such Program Year 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.
``(C) Claims allocations.--The Secretary shall, by
regulation, provide for insurers to allocate claims
payments for insured losses under applicable insurance
policies in any case described in subparagraph (A).
Such regulations shall include provisions for payment,
for the purpose of addressing emergency needs of
applicable individuals affected by an act of terrorism,
of a portion of claims for insured losses promptly upon
filing of such claims.
``(3) Limitation on insurer financial responsibility.--
``(A) Limitation.--Notwithstanding any other
provision of Federal or State law, including any State
workers' compensation or other compulsory insurance
law, an insurer's financial responsibility for insured
losses from acts of terrorism shall be limited to its
applicable insurer deductible and its applicable share
of insured losses that exceed its applicable insurer
deductible, subject to the requirements of paragraph
(2).
``(B) Federal reimbursement.--Notwithstanding any
other provision of Federal or State law, the Secretary
shall--
``(i) reimburse insurers for any payment of
excess insured losses made prior to publication
of any notification pursuant to paragraph
(4)(A);
``(ii) reimburse insurers for any payment of
excess insured losses occurring on or after the
date of any notification pursuant to paragraph
(4)(A), but only to the extent that--
``(I) such payment is ordered by a
court pursuant to subparagraph (C) of
this paragraph or is directed by State
law, notwithstanding this paragraph, or
by Federal law;
``(II) such payment is limited to
compensating insurers for their payment
of excess insured losses and does not
include punitive damages, or litigation
or other costs; and
``(III) the insurer has made a good-
faith effort to defend against any
claims for such payment; and
``(iii) have the right to intervene in any
legal proceedings relating to such claims
specified in clause (ii)(III).
``(C) Federal court jurisdiction.--
``(i) Conditions.--All claims relating to or
arising out of an insurer's financial
responsibility for insured losses from acts of
terrorism under this paragraph shall be within
the original and exclusive jurisdiction of the
district courts of the United States, in
accordance with the procedures established in
subparagraph (D), if the Secretary certifies
that the following conditions have been met, or
that there is a reasonable likelihood that the
following conditions may be met:
``(I) The aggregate amount of the
Federal share of compensation to be
paid to all insurers pursuant to
paragraph (1) exceeds $100,000,000,000,
pursuant to paragraph (2); and
``(II) the insurer has paid its
applicable insurer deductible and its
pro rata share of insured losses
determined pursuant to paragraph
(2)(B).
``(ii) Removal of state court actions.--If
the Secretary certifies that conditions set
forth in subclauses (I) and (II) of clause (i)
have been met, all pending State court actions
that relate to or arise out of an insurer's
financial responsibility for insured losses
from acts of terrorism under this paragraph
shall be removed to a district court of the
United States in accordance with subparagraph
(D).
``(D) Venue.--For each certification made by the
Secretary pursuant to subparagraph (C)(i), not later
than 90 days after the Secretary's determination the
Judicial Panel on Multidistrict Litigation shall
designate one 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 relating to or arising out of an
insurer's financial responsibility for insured losses
from acts of terrorism under this paragraph.
``(4) Notices regarding losses and annual liability cap.--
``(A) Approaching cap.--If the Secretary determines
estimated or actual aggregate Federal compensation to
be paid pursuant to paragraph (1) equals or exceeds
$80,000,000,000 during any Program Year, the Secretary
shall promptly provide notification in accordance with
subparagraph (D)--
``(i) of such estimated or actual aggregate
Federal compensation to be paid;
``(ii) of the likelihood that such aggregate
Federal compensation to be paid for such
Program Year will equal or exceed
$100,000,000,000; and
``(iii) that, pursuant to paragraph
(2)(A)(ii), insurers are not required to make
payments of excess insured losses.
``(B) Event likely to cause losses to exceed cap.--If
any act of terrorism occurs that the Secretary
determines is likely to cause estimated or actual
aggregate Federal compensation to be paid pursuant to
paragraph (1) to exceed $100,000,000,000 during any
Program Year, the Secretary shall, not later than 10
days after such act, provide notification in accordance
with subparagraph (D)--
``(i) of such estimated or actual aggregate
Federal compensation to be paid; and
``(ii) that, pursuant to paragraph
(2)(A)(ii), insurers are not required to make
payments for excess insured losses.
``(C) Exceeding cap.--If the Secretary determines
estimated or actual aggregate Federal compensation to
be paid pursuant to paragraph (1) equals or exceeds
$100,000,000,000 during any Program Year--
``(i) the Secretary shall promptly provide
notification in accordance with subparagraph
(D)--
``(I) of such estimated or actual
aggregate Federal compensation to be
paid; and
``(II) that, pursuant to paragraph
(2)(A)(ii), insurers are not required
to make payments for excess insured
losses unless the Congress provides for
payments for excess insured losses
pursuant to clause (ii) of this
subparagraph; and
``(ii) the Congress shall determine the
procedures for and the source of any payments
for such excess insured losses.
``(D) Parties notified.--Notification is provided in
accordance with this subparagraph only if notification
is provided--
``(i) to the Congress, in writing; and
``(ii) to insurers, by causing such notice to
be published in the Federal Register.
``(E) Determinations.--The Secretary shall make
determinations regarding estimated and actual aggregate
Federal compensation to be paid promptly after any act
of terrorism as may be necessary to comply with this
paragraph.
``(F) Mandatory disclosure for insurance contracts.--
All policies for property and casualty insurance and
group life insurance shall be deemed to contain a
provision to the effect that no insurer that has met
its applicable insurer deductible and its applicable
share of insured losses that exceed its applicable
insurer deductible but are not compensated pursuant to
paragraph (1), shall be obligated to pay for any
portion of excess insured loss. Notwithstanding the
preceding sentence, insurers shall include a disclosure
in their policies detailing the maximum level of
Government assistance and the applicable insurer share.
``(5) 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.
``(6) Determinations final.--Any determination of the
Secretary under this subsection shall be final, unless
expressly provided, and shall not be subject to judicial
review.
``(7) Insurance marketplace aggregate retention amount.--For
purposes of paragraph (8), 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;
``(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;
``(D) for Program Year 4, the lesser of--
``(i) $25,000,000,000; and
``(ii) the aggregate amount, for all
insurers, of insured losses during such Program
Year;
``(E) for Program Year 5, the lesser of--
``(i) $27,500,000,000; and
``(ii) the aggregate amount, for all
insurers, of insured losses during such Program
Year; and
``(F) for each additional Program Year--
``(i) for property and casualty insurance,
the lesser of--
``(I) $27,500,000,000; and
``(II) the aggregate amount, for all
such insurance, of insured losses
during such Program Year; and
``(ii) for group life insurance, the lesser
of--
``(I) $5,000,000,000; and
``(II) the aggregate amount, for all
such insurance, of insured losses
during such Program Year.
``(8) Recoupment of federal share.--
``(A) Mandatory recoupment amount.--For purposes of
this paragraph, the mandatory recoupment amount for
each of the Program Years referred to in subparagraphs
(A) through (F) of paragraph (7) shall be the
difference between--
``(i) the applicable insurance marketplace
aggregate retention amount under paragraph (7)
for such Program Year; and
``(ii) the aggregate amount, for all
applicable insurers (pursuant to subparagraph
(E)), of insured losses during such Program
Year 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 applicable insurance marketplace retention.--
Notwithstanding subparagraph (A), if the aggregate
amount of uncompensated insured losses referred to in
clause (ii) of such subparagraph for any Program Year
referred to in any of subparagraphs (A) through (F) of
paragraph (7) is greater than the applicable insurance
marketplace aggregate retention amount under paragraph
(7) for such Program Year, 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 Program Years
referred to in any of subparagraphs (A) through (F) of
paragraph (7), terrorism loss risk-spreading premiums
in an amount equal to any mandatory recoupment amount
for such Program Year.
``(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--
``(i) recoup, through terrorism loss risk-
spreading premiums, such additional amounts; or
``(ii) submit a report to the Congress
identifying such amounts that the Secretary
believes cannot 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.
``(E) Separate recoupment.--``The Secretary shall
provide that--
``(i) any recoupment under this paragraph of
amounts paid for Federal financial assistance
for insured losses for property and casualty
insurance shall be applied to property and
casualty insurance policies; and
``(ii) any recoupment under this paragraph of
amounts paid for Federal financial assistance
for insured losses for group life insurance
shall be applied to group life insurance
policies.
``(9) Policy surcharge for terrorism loss risk-spreading
premiums.--
``(A) Policyholder premium.--Subject to paragraph
(8)(E), 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 and group life 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--
``(I) a percentage of the premium
amount charged for property and
casualty insurance coverage under the
policy; and
``(II) a percentage of the amount at
risk for group life 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 may not exceed, on an annual basis--
``(i) with respect to property and casualty
insurance, the amount equal to 3 percent of the
premium charged under the policy; and
``(ii) with respect to group life insurance,
the amount equal to 0.0053 percent of the
amount at risk 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.'';
(2) in section 104(a)--
(A) in paragraph (1), by striking ``and'' at the end;
(B) in paragraph (2), by striking the period and
inserting ``; and''; and
(C) by adding at the end the following new paragraph:
``(3) during the 90-day period beginning upon the
certification of any act of terrorism, to issue such
regulations as the Secretary considers necessary to carry out
this Act without regard to the notice and comment provisions of
section 553 of title 5, United States Code.'';
(3) in section 104, by adding at the end the following new
subsection:
``(h) Annual Adjustment.--
``(1) In general.--Notwithstanding any other provision of
this title, the Secretary shall adjust, for the second
additional Program Year and for each additional Program Year
thereafter, based upon the percentage change in an appropriate
index during the 12-month period preceding such Program Year,
each of the following amounts (as such amount may have been
previously adjusted):
``(A) The dollar amount in section 102(1)(B)(ii)
(relating to act of terrorism).
``(B) The dollar amount in section 102(11)(J)
(relating to aggregate industry insured losses in a
previously impacted area).
``(C) The dollar amounts in subparagraphs (A) and (B)
of section 103(e)(1) (relating to limitation on Federal
share).
``(D) The dollar amounts in section 103(e)(1)(C)
(relating to Program trigger).
``(E) The dollar amount in section 103(e)(1)(D)
(relating to limitation on group life insurance
compensation).
``(F) The dollar amounts in section 103(e)(2)
(relating to cap on annual liability).
``(G) The dollar amounts in section 103(e)(3)(C)
(relating to limitation on insurer financial
liability).
``(H) The dollar amounts in section 103(e)(4)
(relating to notices regarding losses and annual
liability cap).
``(I) The dollar amounts in section 103(e)(7)
(relating to insurance marketplace aggregate retention
amount).
``(J) The dollar amounts in section 109(b)(1)(C)
(relating to membership of Commission on Terrorism
Insurance Risk).
``(2) Publication.--The Secretary shall make the dollar
amounts for each additional Program Year, as adjusted pursuant
to this subsection, publicly available in a timely manner.'';
(4) in section 106(a)(2)--
(A) in subparagraph (B), by striking ``and'' at the
end;
(B) by redesignating subparagraph (C) as subparagraph
(F); and
(C) by inserting after subparagraph (B) the following
new subparagraphs:
``(C) during the period beginning on the date of the
enactment of the Terrorism Risk Insurance Revision and
Extension Act of 2007 and ending on December 31, 2008,
rates and forms for property and casualty insurance,
and group life insurance, required by this title and
providing coverage except for NBCR terrorism that are
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;
``(D) during the period beginning on the date of the
enactment of the Terrorism Risk Insurance Revision and
Extension Act of 2007, and ending on December 31, 2009,
forms for property and casualty insurance, and group
life insurance, covered by this title and providing
coverage for NBCR terrorism that are filed with any
State, to the extent of the addition of such coverage
for NBCR terrorism and where such coverage was not
previously required, shall not be subject to prior
approval or waiting period under any law of a State
that would otherwise be applicable;
``(E) during the period beginning on the date of the
enactment of the Terrorism Risk Insurance Revision and
Extension Act of 2007, and ending on December 31, 2010,
rates for property and casualty insurance, and group
life insurance, covered by this title and providing
coverage for NBCR terrorism that are filed with any
State, to the extent of the addition of such coverage
for NBCR terrorism and where such coverage was not
previously required, shall not be subject to prior
approval or 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 inadequate or unfairly
discriminatory; and'';
(5) in section 106, by adding at the end the following new
subsection:
``(c) Rule of Construction Regarding Insurer Coordination.--Nothing
in this Act shall be construed to prohibit, restrict, or otherwise
limit an insurer from entering into an arrangement with another insurer
to make available coverage for any portion of insured losses to fulfill
the requirements of section 103(c). The Secretary shall develop, in
consultation with the NAIC, minimum financial solvency standards and
other standards the Secretary determines appropriate with respect to
such arrangements. Nothing in this subsection shall be construed to
establish any legal partnership.''; and
(6) in section 108(c)(1), by striking ``paragraph (4), (5),
(6), (7), or (8)'' and inserting ``paragraph (5), (6), (7),
(8), or (9)''.
(b) Regulations on Claims Allocations.--The Secretary of the Treasury
shall issue the regulations referred to in subparagraph (C) of section
103(e)(2) of the Terrorism Risk Insurance Act of 2002, as amended by
subsection (a)(1) of this section, and to carry out subparagraph (B) of
such section 103(e)(2), not later than the expiration of the 120-day
period beginning upon the date of the enactment of this Act.
(c) Regulations on NBCR Exemptions.--The Secretary of the Treasury
shall issue the regulations to carry out paragraph (4) of section
103(a) of the Terrorism Risk Insurance Act of 2002, as amended by
subsection (a)(1) of this section, not later than the expiration of the
180-day period beginning upon the date of the enactment of this Act.
SEC. 4. TERRORISM BUY-DOWN FUND.
The Terrorism Risk Insurance Act of 2002 (15 U.S.C. 6701 note) is
amended--
(1) by inserting after section 106 the following new section:
``SEC. 106A. TERRORISM BUY-DOWN FUND.
``(a) Establishment.--The Secretary shall establish a Terrorism Buy-
Down Fund (in this section referred to as the `Fund') that shall make
available additional terrorism coverage for the insured losses of
insurers, which shall be available for purchase by insurers on a
voluntary basis.
``(b) Purchase of Deductible, Co-Share, and Trigger Buy-Down
Coverage.--
``(1) In general.--An insurer may purchase deductible, co-
share, and pre-trigger buy-down coverage (in this section
referred to as `buy-down coverage') through the Fund by making
an election, in advance, to treat some or all of the premiums
it has disclosed pursuant to section 103(b)(2) as fee charges
for the Program imposed by the Secretary and remitting such
amounts to the Fund.
``(2) Limits.--An insurer may not purchase buy-down coverage
in an amount greater than the lesser of--
``(A) the highest amount specified in section
103(e)(1)(C); and
``(B) the insurer's one-in-one-hundred-year risk
exposure to acts of terrorism.
``(c) Buy-Down Coverage.--The Fund shall provide the buy-down
coverage to an insurer for losses for acts of terrorism, without
application of the insurer deductible and in addition to any otherwise
payable Federal share of compensation pursuant to section 103(e).
``(d) Build-up.--The buy-down coverage that shall be payable to an
insurer for qualifying losses shall be the aggregate of the insurer's
buy-down coverage premiums plus interest accrued on such amounts.
``(e) Use by Insurers.--
``(1) Qualifying losses.--For the purpose of this section,
qualifying losses are insured losses by an insurer that are not
excess losses and that do not include amounts for which Federal
financial assistance pursuant to section 103(e) is received,
notwithstanding any limits otherwise applicable regarding
section 103(e)(1)(C) (regarding program triggers) or section
102(11) (regarding insurer deductibles).
``(2) Use of buy-down coverage.--An insurer may use any buy-
down coverage payments received under subsection (f) to
satisfy--
``(A) the applicable insurer deductibles for the
insurer;
``(B) the portion of the insurer's losses that exceed
the insurer deductible but are not compensated by the
Federal share; and
``(C) the insurer's obligations to pay for insured
losses if the Program trigger under section
103(e)(1)(C) is not satisfied.
``(3) Buy-down coverage does not reduce federal co-share.--
The receipt by an insurer of buy-down coverage under this
section for insured losses shall not be considered with respect
to calculating the insurer's insured losses with respect to the
insurer's deductible and eligibility for Federal financial
assistance pursuant to section 103(e).
``(4) Insolvency.--An insurer may sell its rights to buy-down
coverage from the Fund to another insurer as part of or to
avoid an insolvency or as part of a merger, sale, or major
reorganization.
``(f) Payment of Buy-Down Coverage.--The Fund shall pay the
qualifying losses of an insurer purchasing buy-down coverage up to the
amount described in subsection (d).
``(g) Government Borrowing.--The Secretary may borrow the funds from
the Fund to offset, in whole or in part, the Federal share of
compensation provided to all insurers under the Program, except that--
``(1) the Fund shall always immediately provide any buy-down
coverage payments required under subsection (f); and
``(2) any such amounts borrowed must be replenished with
appropriate interest.
``(h) Risk-Sharing Mechanisms.--The Secretary shall establish
voluntary risk-sharing mechanisms for insurers purchasing buy-down
coverage from the Fund to pool their reinsurance purchases and
otherwise share terrorism risk.
``(i) Termination.--Upon termination of the Program under section
108, and subject to the Secretary's continuing authority under section
108(b) to adjust claims in satisfaction under the Program, the
Secretary shall provide that the Fund shall become a privately-operated
mutual terrorism reinsurance company owned by the insurers that have
submitted buy-down coverage premiums in proportion to such premiums
minus any buy-down coverage payments received.''; and
(2) in the table of contents in section 1(b), by inserting
after the item relating to section 106 the following new item:
``Sec. 106A. Terrorism Buy-Down Fund.''.
SEC. 5. ANALYSIS AND STUDY.
(a) Analysis of Market Conditions.--Section 108 of the Terrorism Risk
Insurance Act of 2002 (15 U.S.C. 6701 note) is amended by striking
subsection (e) and inserting the following:
``(e) Analysis of Market Conditions for Terrorism Risk Insurance.--
``(1) In general.--The Secretary, in consultation with the
NAIC, representatives of the insurance industry,
representatives of the securities industry, and representatives
of policyholders, shall perform an analysis regarding the long-
term availability and affordability of insurance for terrorism
risk in the private marketplace, including coverage for--
``(A) property and casualty insurance;
``(B) group life insurance;
``(C) workers' compensation;
``(D) nuclear, biological, chemical, and radiological
events; and
``(E) commercial real estate.
``(2) Biennial reports.--The Secretary shall submit biennial
reports to the Committee on Financial Services of the House of
Representatives and the Committee on Banking, Housing, and
Urban Affairs of the Senate, on its findings pursuant to the
analysis conducted under paragraph (1). The first such report
shall be submitted not later than the expiration of the 24-
month period beginning on the date of the enactment of the
Terrorism Risk Insurance Revision and Extension Act of 2007.
``(3) Testimony.--Upon submission of each biennial report
under paragraph (2), the Secretary shall provide oral testimony
to the Committee on Financial Services of the House of
Representatives and Committee on Banking, Housing, and Urban
Affairs of the United States Senate regarding the report and
the analysis under this subsection for which the report is
submitted.''.
(b) Commission on Terrorism Risk Insurance.--Title I of the Terrorism
Risk Insurance Act of 2002 (15 U.S.C. 6701 note) is amended--
(1) by adding at the end the following new section:
``SEC. 109. COMMISSION ON TERRORISM RISK INSURANCE.
``(a) Establishment.--There is hereby established the Commission on
Terrorism Risk Insurance (in this section referred to as the
`Commission').
``(b) Membership.--
``(1) The Commission shall consist of 21 members, as follows:
``(A) The Secretary of the Treasury or the designee
of the Secretary.
``(B) One member who is a State insurance
commissioner, designated by the NAIC.
``(C) 15 members, who shall be appointed by the
President, who shall include--
``(i) a representative of group life
insurers;
``(ii) a representative of property and
casualty insurers with direct earned premium of
$1,000,000,000 or less;
``(iii) a representative of property and
casualty insurers with direct earned premium of
more than $1,000,000,000;
``(iv) a representative of multiline
insurers;
``(v) a representative of independent
insurance agents;
``(vi) a representative of insurance brokers;
``(vii) a policyholder representative;
``(viii) a representative of the survivors of
the victims of the attacks of September 11,
2001;
``(ix) a representative of the reinsurance
industry;
``(x) a representative of workers'
compensation insurers;
``(xi) a representative from the commercial
mortgage-backed securities industry;
``(xii) a representative from a nationally
recognized statistical rating organization;
``(xiii) a real estate developer;
``(xiv) a representative of workers'
compensation insurers created by State
legislatures, selected in consultation with the
American Association of State Compensation
Insurance Funds from among its members; and
``(xv) a representative from the commercial
real estate brokerage industry or the
commercial property management industry.
``(D) Four members, who shall serve as liaisons to
the Congress, who shall include two members jointly
selected by the Chairman and Ranking Member of the
Committee on Financial Services of the House of
Representatives and two members jointly selected by the
Chairman and Ranking Member of the Committee on
Banking, Housing, and Urban Affairs of the Senate.
``(2) Secretary.--The Program Director of the Terrorism Risk
Insurance Act of the Department of the Treasury shall serve as
Secretary of the Commission. The Secretary of the Commission
shall determine the manner in which the Commission shall
operate, including funding and staffing.
``(c) Duties.--
``(1) In general.--The Commission shall identify and make
recommendations regarding--
``(A) possible actions to encourage, facilitate, and
sustain provision by the private insurance industry in
the United States of affordable coverage for losses due
to an act or acts of terrorism;
``(B) possible actions or mechanisms to sustain or
supplement the ability of the insurance industry in the
United States to cover losses resulting from acts of
terrorism in the event that--
``(i) such losses jeopardize the capital and
surplus of the insurance industry in the United
States as a whole; or
``(ii) other consequences from such acts
occur, as determined by the Commission, that
may significantly affect the ability of the
insurance industry in the United States to
cover such losses independently; and
``(C) possible actions to significantly reduce the
Federal role in covering losses resulting from acts of
terrorism.
``(2) Evaluations.--In identifying and making the
recommendations required under paragraph (1), the Commission
shall specifically evaluate the utility and viability of
proposals aimed at improving the availability of insurance
against terrorism risk in the private marketplace.
``(3) Initial meeting.--The Commission shall hold its first
meeting during the 3-month period that begins 15 months after
the date of the enactment of the Terrorism Risk Insurance
Revision and Extension Act of 2007.
``(4) Reports.--
``(A) Contents.--The Commission shall submit two
reports to the Congress that--
``(i) evaluate and make recommendations
regarding whether there is a need for a Federal
terrorism risk insurance program;
``(ii) if so, include a specific, detailed
recommendation for the replacement of the
Program under this title; and
``(iii) include the identifications,
evaluations, and recommendations required under
paragraphs (1) and (2).
``(B) Timing.--The first report required under
subparagraph (A) shall be submitted before the
expiration of the 60-month period beginning on the date
of the enactment of the Terrorism Risk Insurance
Revision and Extension Act of 2007. The second such
report shall be submitted before the expiration of the
96-month period beginning upon such date of
enactment.''; and
(2) in the table of contents in section 1(b), by inserting
after the item relating to section 108 the following new item:
``Sec. 109. Commission on Terrorism Risk Insurance.''.
SEC. 6. APPLICABILITY.
The amendments made by this Act shall apply beginning on January 1,
2008. The provisions of the Terrorism Risk Insurance Act of 2002, as in
effect on the day before the date of the enactment of this Act, shall
apply through the end of December 31, 2007.
Purpose and Summary
H.R. 2761, the Terrorism Risk Insurance Revision and
Extension Act of 2007, is intended to extend the Terrorism Risk
Insurance Act of 2002 (TRIA) for a second time to ensure the
continued availability of terrorism insurance coverage, limit
market disruptions, encourage economic development and growth,
and maintain the economic security of the United States.
In the aftermath of the terrorist attacks on September 11,
2001, TRIA initially was designed as a three-year program to
provide a Federal backstop to the insurance industry through a
system of shared public and private compensation for insured
losses resulting from acts of terrorism. However, the
developing private marketplace for terrorism insurance coverage
was not sufficiently robust to obviate the need for TRIA.
Congress therefore acted in late 2005 to pass the Terrorism
Risk Insurance Extension Act (TRIEA), which extended TRIA for
an additional two years until December 31, 2007.
H.R. 2761, as reported, would further extend TRIA beyond
its current expiration date of December 31, 2007 for an
additional 15-year period. H.R. 2761 would also make several
revisions to the existing program, such as expanding the
availability of terrorism insurance to protect against nuclear,
biological, chemical, or radiological (NBCR) events; adding
group life insurance as a line covered by the program; and
covering domestic terrorism events.
Background and Need for Legislation
Prior to the events of September 11, 2001, insurers
generally did not exclude terrorism losses from their insurance
policies. After the 2001 attacks that caused more than $35
billion of insured losses, however, reinsurers and insurers
reassessed their terrorism exposure as a result of depleted
surpluses and uncertainty over the likelihood and severity of
future terrorist attacks. Many of them withdrew outright from
the marketplace and placed developers and those with mortgages
in a difficult position. To avoid technical default on their
loan contracts, borrowers needed insurance against terrorism,
but the private market for terrorism insurance coverage was
initially extremely limited.
Congress enacted TRIA to make terrorism insurance coverage
more widely available, with the Federal government sharing the
risk of loss from future terrorist attacks with the insurance
industry for a fixed period of time while the market readjusted
and transitioned towards providing additional coverage. TRIA
mandated insurer participation in the Terrorism Insurance
Program and required that insurers make available terrorism
coverage in all covered commercial property and casualty
insurance policies.
While the initial TRIA did help address an economic need,
the private marketplace did not recover as quickly as many had
hoped. As a result, Congress enacted TRIEA in late 2005 to
extend TRIA for an additional two years until December 31,
2007. This extension left much of the original TRIA program
intact, but raised industry retention and insurer deductible
levels, increased the event ``trigger'' of losses before
requiring Federal involvement, and pared back the insurance
lines covered by the program.
Despite the two-year extension by TRIEA, the terrorism
insurance marketplace remains tenuous, according to many
experts, and there remains a strong need for TRIA. At a June
21, 2007 hearing before the Subcommittee on Capital Markets,
Insurance, and Government Sponsored Enterprises (``Capital
Markets Subcommittee''), a number of witnesses testified in
support of a long-term or permanent extension of TRIA. At the
same hearing, the Superintendent of the New York Insurance
Department testified that the private sector will not offer
terrorism insurance without TRIA. Also, a witness testifying on
behalf of Independent Insurance Agents & Brokers of America
expressed concern that insurance companies, particularly small
and monoline insurers, may not continue to write terrorism risk
insurance if the Federal backstop expires. Moreover, rating
agencies that evaluate the solvency of insurers have already
begun to ask what steps the companies will take to mitigate
their potential exposures if the Program expires. While
insurers and reinsurers have worked to improve their modeling
and pricing systems, they remain uncertain with regard to their
ability to reliably price the coverage for traditional
terrorism events like bombing a building using conventional
means.
Furthermore, terrorism insurance remains in short supply in
places like lower Manhattan, as the developers of the new World
Trade Center noted at a hearing before the Capital Markets
Subcommittee on March 5, 2007. Insurers also report having
limited capital available to cover terrorism losses. While the
President's Working Group on Financial Markets (PWG) observed
in its September 2006 report that the availability and
affordability of terrorism risk insurance has improved, it also
noted that any prediction of the potential degree of long-term
development of the terrorism risk insurance market is
difficult.
Additional factors call for an extension of TRIA. From an
economic perspective, terrorism insurance is a sector likely to
experience market failure. Participants in the terrorism
insurance marketplace have access to imperfect information,
which hampers their decisions about whether to buy the product
and how to price the product. The government's classification
of information related to terrorism for national security
purposes further contributes to the difficulties that insurers
and insureds face when assessing risk. Other factors
contributing to market failure include a limited number of
terrorism reinsurance providers and the virtual inability of
insurers to alter a contract's terms or cancel a policy. TRIA
and TRIEA have helped to overcome some of these economic
difficulties, but the private marketplace in the United States
is not yet mature enough to handle the risk without some type
of assistance. Finally, the private marketplace cannot prevent
or defend against acts of terrorism, and the private
marketplace should not be expected to provide for recovery from
acts of terrorism by itself. Providing economic security
against acts of terrorism is a matter of national defense and
national security, which is a uniquely governmental function.
There is thus a strong need to extend TRIA.
Moreover, in the period since TRIA's enactment, the
insurance markets and the economy have continued to grow.
Aggregate industrydirect earned premiums for TRIA-covered lines
in 2002 were approximately $130 billion and in 2006 were approximately
$170 billion for those same TRIA-covered lines. As a result, there is a
corresponding need to modestly grow the program beyond its current cap
of $100 billion in aggregate insured losses.
Also, while TRIA only covers acts of terrorism committed on
behalf of a foreign person or foreign interest, experience has
shown that the distinction between foreign and domestic
terrorism may be artificial. Witnesses at hearings before the
Subcommittee have noted that post-TRIA events such as the
London Underground bombing and the thwarted attack on John F.
Kennedy Airport have demonstrated both the meaninglessness and
the practical difficulty of making this distinction.
TRIA to date has not applied to group life insurance. After
the 2005 extension of TRIA, the PWG analyzed the group life
marketplace and found that ``group life insurance still appears
to be widely available in the private market and there has not
been any impact on cost to policyholders.'' Indeed, the group
life industry has maintained capacity. However, group life
carriers face potential insolvency should a terrorist event
affect a large group of insureds. Group life insurance is not
written and priced with anticipation that an entire group would
file claims in the same year. Moreover, terrorism reinsurance
availability has greatly decreased since the events of
September 11, 2001, and now has higher deductibles, more
exclusions, and smaller overall coverage limits. It is
important to the economic security of America's workers and
their families that group life carriers remain solvent and
capable of paying claims after a terrorist event.
Additionally, the metric used for the inclusion of group
life in TRIA should be economically fair to group life insurers
and their policyholders. If group life recoupment were based on
premium, individuals with smaller policies and policies with
higher work-related risks (e.g., roofers) will be assessed the
most even though they are not necessarily at higher risk.
Arguably, they may be at a slightly lower risk, since
terrorists are more likely to select ``white collar'' targets.
Moreover, group life premiums are not consistent across product
lines. Therefore, if deductibles were based on premiums, group
life insurers will meet their deductible at different levels
depending on their mix of business.
In addition, many now fear NBCR terrorist attacks. For
instance, according to testimony at a hearing before the
Capital Markets Subcommittee on June 21, 2007, a 2005 survey of
85 non-proliferation and national security experts led by
Senator Richard Lugar put the likelihood of a nuclear attack
somewhere in the world within the next ten years at 20% and the
likelihood of a radiological attack at 40%. The same testimony
noted that the national terrorism insurance programs in France
and the United Kingdom provide NBCR coverage.
The insurance market for NBCR terrorism coverage in the
United States, however, is virtually non-existent. In fact,
witnesses before the Subcommittee testified that NBCR terrorism
exposures are essentially uninsurable without a Federal
government program. These NBCR threats are distinctly different
from those hazards that are predictable, measurable in dollar
terms, and unlikely to result in catastrophic losses. As
currently structured, TRIA only covers NBCR losses to the
extent that insurers provide the coverage, such as in the case
of workers' compensation. Difficulties in modeling and pricing,
however, have resulted in most insurers generally not offering
coverage to protect against NBCR terrorism. Some have referred
to this gap in the nation's economic security plan as an
Achilles' heel.
Moreover, the risk of an NBCR terrorism event is
essentially uninsurable absent a Federal government program. A
September 2006 Government Accountability Office report entitled
``Terrorism Insurance: Measuring and Predicting Losses from
Unconventional Weapons Is Difficult, but Some Industry Exposure
Exists'' found that ``any purely market-driven expansion of
coverage'' for NBCR terrorism risk is ``highly unlikely in the
foreseeable future.'' Similarly, the 2006 PWG report also noted
that reinsurance for NBCR terrorism events is virtually
unavailable and observed that ``[g]iven the general reluctance
of insurance companies to provide coverage for these types of
risks, there may be little potential for future market
development.''
Although the United States has avoided major terrorist
attacks since 2001, recent attacks in London, Madrid, and
Glasgow make it clear that the threat of terrorism will remain
a national concern for the foreseeable future. As such, there
is a need to extend the Federal backstop before the expiration
of TRIEA at the end of 2007 to ensure continued availability of
terrorism insurance coverage, address the gap in NBCR coverage,
and remove the artificial distinction between foreign and
domestic acts of terrorism. These actions, among others, would
allow commercial property owners, developers, and lenders to
obtain the insurance needed to protect their property, comply
with mortgage covenants, and acquire project financing. They
would also promote economic growth and stability as our nation
maintains vigilance against the threat of future terrorist
attacks at home.
The Committee received the following correspondence:
Coalition to Insure Against Terrorism,
Washington DC, July 30, 2007.
Hon. Barney Frank,
Chairman, House Financial Services Committee,
Rayburn House Office Building, Washington, DC.
Dear Chairman Frank: The Coalition to Insure Against
Terrorism (CIAT), a broad-based coalition of business insurance
policyholders representing a significant segment of the
nation's GDP, strongly endorses H.R. 2761, the Terrorism Risk
Insurance Revision and Extension Act (TRIREA) of 2007
introduced by Representative Michael Capuano and others that
would extend and improve the Terrorism Risk Insurance Extension
Act (TRIEA). As the principal consumers of this vital insurance
coverage, CIAT thanks you for your long-standing support and
leadership on the issue of terrorism risk insurance.
The current federal terrorism risk insurance program has
been a tremendous success. TRIEA has helped keep the economy
going in the face of continued terrorist threats by allowing
businesses across America to secure this commercially necessary
product, saving countless jobs in the process. Moreover, it
serves as an important tool to minimize the severe economic
disruption that almost certainly will occur from a future
terrorist attack.
With TRIEA's expiration looming at the end of 2007, CIAT
earlier this year outlined a number of key enhancements to the
program that we believe need to be part of any extension
legislation. CIAT is pleased that H.R. 2761 includes these key
provisions.
Most important to policyholders are four provisions. First,
the program's term would be extended to ten years. We applaud
H.R. 2761 for recognizing that such an extension affords
policyholders with the certainty necessary for long-term
projects and economic activity to move forward. With this in
mind, CIAT strongly supports the amendment to be offered by
Rep. Peter King to extend the program to fifteen years.
Second, H.R. 2761 would give businesses an important new
option to purchase insurance for catastrophic non-conventional
terrorism risks--the types of risks our government warns us
about repeatedly--by making available to policyholders
insurance against weapons of mass destruction--so-called NBCR
risks--under ``same terms and conditions'' as ``conventional''
risks.
Third, this legislation would eliminate the distinction
between foreign and domestic acts. As the London bombings and
the foiled Kennedy Airport plot demonstrate, we must be
prepared for ``home-grown'' terrorism as well as threats from
abroad.
Fourth, H.R. 2761 would lower substantially the program's
trigger level which will encourage smaller insurers, currently
unable to participate in the program, to return to the
terrorism risk insurance marketplace, thereby providing
policyholders with a wider choice of insurance options.
Lastly, there is an additional issue of importance to CIAT.
CIAT strongly opposes any increase in the ``recoupment''
provision contained in TRIEA. We consider any increase above
the current amount to be an excessive burden on the victims of
terrorism and has the potential to be a lengthy drag on the
economy in the aftermath of the next terrorist attack.
CIAT thanks you for taking a significant step towards
securing the economy against terrorism risk by scheduling this
mark-up.
Sincerely,
The Coalition to Insure Against Terrorism.
Hearings
The Subcommittee on Capital Markets, Insurance, and
Government Sponsored Enterprises of the Committee on Financial
Services held three hearings to examine the need for
legislation, the policy options for legislation, and the
legislation itself.
The Subcommittee on Capital Markets, Insurance, and
Government Sponsored Enterprises held a hearing on March 5,
2007, entitled ``The Need to Extend the Terrorism Risk
Insurance Act.'' The following witnesses testified: The
Honorable Charles E. Schumer, United States Senator; The
Honorable Michael R. Bloomberg, Mayor of New York City; Mr.
Eric R. Dinallo, Acting Superintendent, New York Insurance
Department; Dr. Roger W. Ferguson, Chairman, Swiss Re America
Holding Corporation; Mr. John N. Lieber, Senior Vice President,
World Trade Center Properties, LLC; Mr. Stephen L. Green, Chief
Executive Officer, SL Green Realty Corporation; Mr. Steven K.
Graves, Chief Operating Officer, Principal Real Estate
Investors; Mr. Edmund F. Kelly, Chairman, President and Chief
Executive Officer, Liberty Mutual Group; Mr. Warren Heck, CPCU,
President & CEO, Greater New York Mutual Insurance Company; and
Mr. Donald J. Bailey, Chief Executive Officer, Willis NA.
The Subcommittee on Capital Markets, Insurance, and
Government Sponsored Enterprises held a hearing on April 24,
2007, entitled ``Policy Options for Extending the Terrorism
Risk Insurance Act.'' The following witnesses testified: Mr.
Leonard W. Cotton, Vice Chairman, Centerline Capital Group; Mr.
Brian E. Dowd, Chief Executive Officer, Insurance--North
America, ACE Group; Mr. Vincent T. Donnelly, President and
Chief Executive Officer, PMA Insurance Group; Mr. Thomas R.
Watjen, President and Chief Executive Officer, Unum Group; Mr.
Joseph P. Ditchman, Jr., Partner, Colliers Ostendorff Morris,
on behalf of the National Association of REALTORS; and Ms.
Janice M. Abraham, President and Chief Executive Officer,
United Educators.
The Subcommittee on Capital Markets, Insurance, and
Government Sponsored Enterprises held a hearing on June 21,
2007, entitled ``Examining a Legislative Solution to Extend and
Revise the Terrorism Risk Insurance Act.'' The following
witnesses testified: The Honorable David G. Nason, Assistant
Secretary for Financial Institutions, U.S. Department of the
Treasury; The Honorable Eric R. Dinallo, Superintendent, New
York Insurance Department; The Honorable Marc Racicot, Chief
Executive Officer and President, American Insurance
Association; Mr. Christopher J. Nassetta, President and Chief
Executive Officer, Host Hotels & Resorts, Inc. and Chairman,
The Real Estate Roundtable, on behalf of the Coalition to
Insure Against Terrorism; Ms. Jill M. Dalton, Managing
Director, Global Property & Multinational Practice, Marsh,
Inc., on behalf of the Council of Insurance Agents and Brokers;
Ms. Sharon Emek, Ph.D., C.I.C., Partner, CBS Coverage Group,
Inc., on behalf of the Independent Insurance Agents & Brokers
of America; Mr. Warren Heck, CPCU, Chairman and Chief Executive
Officer, Greater New York Mutual Insurance Company, on behalf
of the National Association of Mutual Insurance Companies and
the Property Casualty Insurance Association of America; Dr.
Howard Kunreuther, Ph.D., Cecilia Yen Koo Professor of Decision
Sciences & Public Policy, Co-Director Risk Management and
Decision Processes Center, Wharton School, University of
Pennsylvania; Mr. Frank Nutter, President, Reinsurance
Association of America; and Mr. Dennis W. Smith, President and
Chief Executive Officer, Missouri Employers Mutual Insurance.
Committee Consideration
The Committee on Financial Services met in open session on
August 1, 2007, and ordered H.R. 2761, Terrorism Risk Insurance
Revision and Extension Act of 2007, as amended, favorably
reported to the House by a record vote of 49 yeas and 20 nays.
Previously, the Subcommittee on Capital Markets, Insurance, and
Government Sponsored Enterprises met in open session on July
24, 2007, and ordered H.R. 2761, as amended, forwarded to the
Full Committee with a favorable recommendation by a record vote
of 26 yeas and 17 nays.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. A
motion by Mr. Frank toreport the bill, as amended, to the House
with a favorable recommendation was agreed to by a record vote of 49
yeas and 20 nays (Record vote No. FC-66). The names of Members voting
for and against follow:
RECORD VOTE NO. FC-66
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... X ........ ......... Mr. Bachus....... ........ X .........
Mr. Kanjorski.................. X ........ ......... Mr. Baker........ ........ X .........
Ms. Waters..................... X ........ ......... Ms. Pryce (OH)... X ........ .........
Mrs. Maloney................... X ........ ......... Mr. Castle....... ........ X .........
Mr. Gutierrez.................. X ........ ......... Mr. King (NY).... X ........ .........
Ms. Velazquez.................. X ........ ......... Mr. Royce........ ........ X .........
Mr. Watt....................... X ........ ......... Mr. Lucas........ ........ X .........
Mr. Ackerman................... X ........ ......... Mr. Paul......... ........ X .........
Ms. Carson..................... X ........ ......... Mr. Gillmor...... X ........ .........
Mr. Sherman.................... X ........ ......... Mr. LaTourette... X ........ .........
Mr. Meeks...................... X ........ ......... Mr. Manzullo..... ........ X .........
Mr. Moore (KS)................. X ........ ......... Mr. Jones........ X ........ .........
Mr. Capuano.................... X ........ ......... Mrs. Biggert..... ........ X .........
Mr. Hinojosa................... X ........ ......... Mr. Shays........ X ........ .........
Mr. Clay....................... X ........ ......... Mr. Miller (CA).. X ........ .........
Mrs. McCarthy.................. X ........ ......... Mrs. Capito...... X ........ .........
Mr. Baca....................... ........ ........ ......... Mr. Feeney....... ........ X .........
Mr. Lynch...................... X ........ ......... Mr. Hensarling... ........ X .........
Mr. Miller (NC)................ X ........ ......... Mr. Garrett (NJ). ........ X .........
Mr. Scott...................... X ........ ......... Ms. Brown-Waite.. X ........ .........
Mr. Green...................... X ........ ......... Mr. Barrett (SC). ........ X .........
Mr. Cleaver.................... X ........ ......... Mr. Gerlach...... X ........ .........
Ms. Bean....................... X ........ ......... Mr. Pearce....... ........ X .........
Ms. Moore (WI)................. X ........ ......... Mr. Neugebauer... X ........ .........
Mr. Davis (TN)................. X ........ ......... Mr. Price (GA)... ........ X .........
Mr. Sires...................... X ........ ......... Mr. Davis (KY)... X ........ .........
Mr. Hodes...................... X ........ ......... Mr. McHenry...... X ........ .........
Mr. Ellison.................... X ........ ......... Mr. Campbell..... ........ X .........
Mr. Klein...................... X ........ ......... Mr. Putnam....... X ........ .........
Mr. Mahoney (FL)............... X ........ ......... Mrs. Bachmann.... ........ X .........
Mr. Wilson..................... X ........ ......... Mr. Roskam....... ........ X .........
Mr. Perlmutter................. X ........ ......... Mr. Marchant..... ........ X .........
Mr. Murphy..................... X ........ ......... Mr. McCotter..... ........ X .........
Mr. Donnelly................... X ........ .........
Mr. Wexler..................... X ........ .........
Mr. Marshall................... ........ X .........
Mr. Boren...................... X ........ .........
----------------------------------------------------------------------------------------------------------------
The following amendments to the amendment in the nature of
a substitute recommended by the Subcommittee on Capital
Markets, Insurance, and Government Sponsored Enterprises were
decided by record votes. The names of Members voting for and
against follow:
An amendment by Mr. Putnam, No. 5, inserting an 8+2 year
extension of the program, was not agreed to by a record vote of
26 yeas and 39 nays (Record vote No. FC-63):
RECORD VOTE NO. FC-63
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... X ........ .........
Mr. Kanjorski.................. ........ X ......... Mr. Baker........ X ........ .........
Ms. Waters..................... ........ X ......... Ms. Pryce (OH)... X ........ .........
Mrs. Maloney................... ........ X ......... Mr. Castle....... X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. King (NY).... ........ X .........
Ms. Velazquez.................. ........ X ......... Mr. Royce........ X ........ .........
Mr. Watt....................... ........ X ......... Mr. Lucas........ X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Paul......... X ........ .........
Ms. Carson..................... ........ X ......... Mr. Gillmor...... ........ ........ .........
Mr. Sherman.................... ........ X ......... Mr. LaTourette... ........ X .........
Mr. Meeks...................... ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Moore (KS)................. ........ X ......... Mr. Jones........ ........ X .........
Mr. Capuano.................... ........ X ......... Mrs. Biggert..... X ........ .........
Mr. Hinojosa................... ........ X ......... Mr. Shays........ ........ ........ .........
Mr. Clay....................... ........ X ......... Mr. Miller (CA).. ........ X .........
Mrs. McCarthy.................. ........ X ......... Mrs. Capito...... X ........ .........
Mr. Baca....................... ........ ........ ......... Mr. Feeney....... X ........ .........
Mr. Lynch...................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. Garrett (NJ). X ........ .........
Mr. Scott...................... ........ X ......... Ms. Brown-Waite X ........ .........
(FL).
Mr. Green...................... ........ X ......... Mr. Barrett (SC). X ........ .........
Mr. Cleaver.................... ........ X ......... Mr. Gerlach...... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Pearce....... X ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. Neugebauer... X ........ .........
Mr. Davis (TN)................. ........ X ......... Mr. Price (GA)... X ........ .........
Mr. Sires...................... ........ X ......... Mr. Davis (KY)... X ........ .........
Mr. Hodes...................... ........ X ......... Mr. McHenry...... ........ ........ .........
Mr. Ellison.................... ........ X ......... Mr. Campbell..... X ........ .........
Mr. Klein...................... ........ X ......... Mr. Putnam....... X ........ .........
Mr. Mahoney (FL)............... ........ X ......... Mrs. Bachmann.... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Roskam....... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Marchant..... X ........ .........
Mr. Murphy..................... ........ X ......... Mr. McCotter..... X ........ .........
Mr. Donnelly................... ........ X .........
Mr. Wexler..................... ........ ........ .........
Mr. Marshall................... ........ X .........
Mr. Boren...................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. King (N.Y.), No. 6, extending the
program by 15 years, was agreed to by a record vote of 39 yeas
and 30 nays (Record vote No. FC-64):
RECORD VOTE NO. FC-64
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... X ........ ......... Mr. Bachus....... ........ X .........
Mr. Kanjorski.................. ........ X ......... Mr. Baker........ ........ X .........
Ms. Waters..................... X ........ ......... Ms. Pryce (OH)... ........ X .........
Mrs. Maloney................... X ........ ......... Mr. Castle....... ........ X .........
Mr. Gutierrez.................. X ........ ......... Mr. King (NY).... X ........ .........
Ms. Velazquez.................. X ........ ......... Mr. Royce........ ........ X .........
Mr. Watt....................... X ........ ......... Mr. Lucas........ ........ X .........
Mr. Ackerman................... X ........ ......... Mr. Paul......... ........ X .........
Ms. Carson..................... X ........ ......... Mr. Gillmor...... ........ X .........
Mr. Sherman.................... X ........ ......... Mr. LaTourette... X ........ .........
Mr. Meeks...................... X ........ ......... Mr. Manzullo..... ........ X .........
Mr. Moore (KS)................. X ........ ......... Mr. Jones........ X ........ .........
Mr. Capuano.................... ........ X ......... Mrs. Biggert..... ........ X .........
Mr. Hinojosa................... X ........ ......... Mr. Shays........ X ........ .........
Mr. Clay....................... X ........ ......... Mr. Miller (CA).. X ........ .........
Mrs. McCarthy.................. X ........ ......... Mrs. Capito...... ........ X .........
Mr. Baca....................... ........ ........ ......... Mr. Feeney....... ........ X .........
Mr. Lynch...................... X ........ ......... Mr. Hensarling... ........ X .........
Mr. Miller (NC)................ X ........ ......... Mr. Garrett (NJ). ........ X .........
Mr. Scott...................... X ........ ......... Ms. Brown-Waite ........ X .........
(FL).
Mr. Green...................... X ........ ......... Mr. Barrett (SC). ........ X .........
Mr. Cleaver.................... X ........ ......... Mr. Gerlach...... ........ X .........
Ms. Bean....................... X ........ ......... Mr. Pearce....... ........ X .........
Ms. Moore (WI)................. X ........ ......... Mr. Neugebauer... ........ X .........
Mr. Davis (TN)................. X ........ ......... Mr. Price (GA)... ........ X .........
Mr. Sires...................... X ........ ......... Mr. Davis (KY)... ........ X .........
Mr. Hodes...................... X ........ ......... Mr. McHenry...... X ........ .........
Mr. Ellison.................... X ........ ......... Mr. Campbell..... ........ X .........
Mr. Klein...................... X ........ ......... Mr. Putnam....... ........ X .........
Mr. Mahoney (FL)............... X ........ ......... Mrs. Bachmann.... ........ X .........
Mr. Wilson..................... X ........ ......... Mr. Roskam....... ........ X .........
Mr. Perlmutter................. X ........ ......... Mr. Marchant..... ........ X .........
Mr. Murphy..................... X ........ ......... Mr. McCotter..... ........ X .........
Mr. Donnelly................... X ........ .........
Mr. Wexler..................... X ........ .........
Mr. Marshall................... ........ X .........
Mr. Boren...................... X ........ .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. Garrett, No. 10, regarding a revised 5
percent deductible, was agreed to by a record vote of 42 yeas
and 27 nays (Record vote No. FC-65):
RECORD VOTE NO. FC-65
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... X ........ .........
Mr. Kanjorski.................. X ........ ......... Mr. Baker........ X ........ .........
Ms. Waters..................... X ........ ......... Ms. Pryce (OH)... X ........ .........
Mrs. Maloney................... ........ X ......... Mr. Castle....... X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. King (NY).... ........ X .........
Ms. Velazquez.................. ........ X ......... Mr. Royce........ X ........ .........
Mr. Watt....................... ........ X ......... Mr. Lucas........ X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Paul......... X ........ .........
Ms. Carson..................... ........ X ......... Mr. Gillmor...... X ........ .........
Mr. Sherman.................... ........ X ......... Mr. LaTourette... X ........ .........
Mr. Meeks...................... ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Moore (KS)................. X ........ ......... Mr. Jones........ X ........ .........
Mr. Capuano.................... ........ X ......... Mrs. Biggert..... X ........ .........
Mr. Hinojosa................... X ........ ......... Mr. Shays........ X ........ .........
Mr. Clay....................... ........ X ......... Mr. Miller (CA).. X ........ .........
Mrs. McCarthy.................. ........ X ......... Mrs. Capito...... X ........ .........
Mr. Baca....................... ........ ........ ......... Mr. Feeney....... X ........ .........
Mr. Lynch...................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. Garrett (NJ). X ........ .........
Mr. Scott...................... ........ X ......... Ms. Brown-Waite) X ........ .........
(FL).
Mr. Green...................... ........ X ......... Mr. Barrett (SC). X ........ .........
Mr. Cleaver.................... ........ X ......... Mr. Gerlach...... X ........ .........
Ms. Bean....................... X ........ ......... Mr. Pearce....... X ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. Neugebauer... X ........ .........
Mr. Davis (TN)................. X ........ ......... Mr. Price (GA)... X ........ .........
Mr. Sires...................... ........ X ......... Mr. Davis (KY)... X ........ .........
Mr. Hodes...................... ........ X ......... Mr. McHenry...... X ........ .........
Mr. Ellison.................... ........ X ......... Mr. Campbell..... X ........ .........
Mr. Klein...................... X ........ ......... Mr. Putnam....... X ........ .........
Mr. Mahoney (FL)............... ........ X ......... Mrs. Bachmann.... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Roskam....... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Marchant..... X ........ .........
Mr. Murphy..................... ........ X ......... Mr. McCotter..... X ........ .........
Mr. Donnelly................... X ........ .........
Mr. Wexler..................... ........ X .........
Mr. Marshall................... X ........ .........
Mr. Boren...................... X ........ .........
----------------------------------------------------------------------------------------------------------------
The following other amendments were also considered by the
Committee:
An amendment in the nature of a substitute recommended by
the Subcommittee on Capital Markets, Insurance, and Government
Sponsored Enterprises, making various technical and substantive
changes, as amended, was agreed to by a voice vote.
The following amendments to the amendment in the nature of
a substitute were considered:
An amendment by Mr. Frank, No. 1, a manger's amendment
making various technical and substantive changes, was agreed to
by a voice vote.
An amendment by Mr. Manzullo, No. 2, providing for NBCR
small insurer exemption, was agreed to by a voice vote.
An amendment by Mr. Clay, No. 3, including farm owners'
multiple peril insurance, was agreed to by a voice vote.
An amendment by Mr. Marchant, No. 4, inserting a rule of
construction regarding insurer coordination, was agreed to by a
voice vote.
An amendment by Ms. Brown-Waite, No. 7, requiring an annual
adjustment, was agreed to by a voice vote.
An amendment by Mrs. Bachmann, No. 8, regarding
discretionary recoupment, was agreed to by a voice vote.
An amendment by Mr. Garrett, No. 9, regarding a 5 per cent
deductible, was not agreed to.
On Tuesday, July 24, 2007, the Subcommittee on Capital
Markets, Insurance, and Government Sponsored Enterprises met in
open session and ordered H.R. 2761, as amended, forwarded to
the Full Committee with a favorable recommendation, by a record
vote of 26 yeas and 17 nays (Record vote No. CM-4). The names
of Members voting for and against follow:
RECORD VOTE NO. CM-4
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Kanjorski.................. X ........ ......... Ms. Pryce........ ........ X .........
Mr. Ackerman................... X ........ ......... Mr. Baker........ ........ X .........
Mr. Sherman.................... X ........ ......... Mr. Shays........ X ........ .........
Mr. Meeks...................... X ........ ......... Mr. Gillmor...... X ........ .........
Mr. Moore (KS)................. X ........ ......... Mr. Castle....... ........ X .........
Mr. Capuano.................... X ........ ......... Mr. King......... X ........ .........
Mr. Hinojosa................... X ........ ......... Mr. Lucas........ ........ ........ .........
Mrs. McCarthy.................. X ........ ......... Mr. Manzullo..... ........ X .........
Mr. Baca....................... ........ ........ ......... Mr. Royce........ ........ X .........
Mr. Lynch...................... ........ ........ ......... Ms. Capito....... ........ X .........
Mr. Miller (NC)................ X ........ ......... Mr. Putnam....... ........ X .........
Mr. Scott...................... X ........ ......... Mr. Barrett (SC). ........ X .........
Ms. Velazquez.................. X ........ ......... Ms. Brown-Waite.. ........ X .........
Ms. Bean....................... X ........ ......... Mr. Feeney....... ........ ........ .........
Ms. Moore...................... X ........ ......... Mr. Garrett (NJ). ........ X .........
Mr. Davis (TN)................. X ........ ......... Mr. Gerlach...... ........ X .........
Mr. Sires...................... X ........ ......... Mr. Hensarling... ........ ........ .........
Mr. Hodes...................... X ........ ......... Mr. Davis (KY)... ........ X .........
Mr. Klein...................... X ........ ......... Mr. Campbell..... ........ X .........
Mr. Mahoney.................... X ........ ......... Mrs. Bachmann.... ........ X .........
Mr. Perlmutter................. X ........ ......... Mr. Roskam....... ........ X .........
Mr. Murphy..................... X ........ ......... Mr. Marchant..... ........ X .........
Mr. Donnelly................... X ........ ......... Mr. McCotter..... ........ X .........
Mr. Wexler..................... X ........ ......... Mr. Bachus, ex ........ ........ .........
officio.
Mr. Marshall................... ........ ........ .........
Mr. Boren...................... X ........ .........
Mr. Frank, ex officio.......... ........ ........ .........
----------------------------------------------------------------------------------------------------------------
During the Subcommittee markup, the following amendments
were disposed of by record votes. The names of Members voting
for and against follow:
An amendment by Mr. Garrett, No. 1f, Section 2 changing of
date, was not agreed to by a record vote of 14 yeas and 29 nays
(Record vote No. CM-1):
RECORD VOTE NO. CM-1
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Kanjorski.................. ........ X ......... Ms. Pryce........ ........ X .........
Mr. Ackerman................... ........ X ......... Mr. Baker........ X ........ .........
Mr. Sherman.................... ........ X ......... Mr. Shays........ ........ X .........
Mr. Meeks...................... ........ X ......... Mr. Gillmor...... X ........ .........
Mr. Moore (KS)................. ........ X ......... Mr. Castle....... X ........ .........
Mr. Capuano.................... ........ X ......... Mr. King......... ........ X .........
Mr. Hinojosa................... ........ X ......... Mr. Lucas........ ........ ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Baca....................... ........ ........ ......... Mr. Royce........ X ........ .........
Mr. Lynch...................... ........ ........ ......... Ms. Capito....... ........ X .........
Mr. Miller (NC)................ ........ X ......... Mr. Putnam....... X ........ .........
Mr. Scott...................... ........ X ......... Mr. Barrett (SC). X ........ .........
Ms. Velazquez.................. ........ X ......... Ms. Brown-Waite.. X ........ .........
Ms. Bean....................... ........ X ......... Mr. Feeney....... ........ ........ .........
Ms. Moore...................... ........ X ......... Mr. Garrett (NJ). X ........ .........
Mr. Davis (TN)................. ........ X ......... Mr. Gerlach...... ........ X .........
Mr. Sires...................... ........ X ......... Mr. Hensarling... ........ ........ .........
Mr. Hodes...................... ........ X ......... Mr. Davis (KY)... ........ X .........
Mr. Klein...................... ........ X ......... Mr. Campbell..... X ........ .........
Mr. Mahoney.................... ........ X ......... Mrs. Bachmann.... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Roskam....... X ........ .........
Mr. Murphy..................... ........ X ......... Mr. Marchant..... X ........ .........
Mr. Donnelly................... ........ X ......... Mr. McCotter..... X ........ .........
Mr. Wexler..................... ........ X ......... Mr. Bachus, ex ........ ........ .........
officio.
Mr. Marshall................... ........ ........ .........
Mr. Boren...................... ........ X .........
Mr. Frank, ex officio.......... ........ ........ .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. Putnam, No. 1g, striking section 2 and
inserting new section setting new termination dates, was not
agreed to by a record vote of 18 yeas and 25 nays (Record vote
No. CM-2):
RECORD VOTE NO. CM-2
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Kanjorski.................. ........ X ......... Ms. Pryce........ X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Baker........ X ........ .........
Mr. Sherman.................... ........ X ......... Mr. Shays........ ........ X .........
Mr. Meeks...................... ........ X ......... Mr. Gillmor...... X ........ .........
Mr. Moore (KS)................. ........ X ......... Mr. Castle....... X ........ .........
Mr. Capuano.................... ........ X ......... Mr. King......... ........ X .........
Mr. Hinojosa................... ........ X ......... Mr. Lucas........ ........ ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Baca....................... ........ ........ ......... Mr. Royce........ X ........ .........
Mr. Lynch...................... ........ ........ ......... Ms. Capito....... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. Putnam....... X ........ .........
Mr. Scott...................... ........ X ......... Mr. Barrett (SC). X ........ .........
Ms. Velazquez.................. ........ X ......... Ms. Brown-Waite.. X ........ .........
Ms. Bean....................... ........ X ......... Mr. Feeney....... ........ ........ .........
Ms. Moore...................... ........ X ......... Mr. Garrett (NJ). X ........ .........
Mr. Davis (TN)................. ........ X ......... Mr. Gerlach...... X ........ .........
Mr. Sires...................... ........ X ......... Mr. Hensarling... ........ ........ .........
Mr. Hodes...................... ........ X ......... Mr. Davis (KY)... X ........ .........
Mr. Klein...................... ........ X ......... Mr. Campbell..... X ........ .........
Mr. Mahoney.................... ........ X ......... Mrs. Bachmann.... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Roskam....... X ........ .........
Mr. Murphy..................... ........ X ......... Mr. Marchant..... X ........ .........
Mr. Donnelly................... ........ X ......... Mr. McCotter..... X ........ .........
Mr. Wexler..................... ........ X ......... Mr. Bachus, ex ........ ........ .........
officio.
Mr. Marshall................... ........ ........ .........
Mr. Boren...................... ........ X .........
Mr. Frank, ex officio.......... ........ ........ .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mrs. Bachmann, No. 1h, requiring full
recoupment of Federal financial assistance share, was not
agreed to by a record vote of 19 yeas and 24 nays (Record vote
No. CM-3):
RECORD VOTE NO. CM-3
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Kanjorski.................. ........ X ......... Ms. Pryce........ X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Baker........ X ........ .........
Mr. Sherman.................... ........ X ......... Mr. Shays........ X ........ .........
Mr. Meeks...................... ........ X ......... Mr. Gillmor...... X ........ .........
Mr. Moore (KS)................. ........ X ......... Mr. Castle....... X ........ .........
Mr. Capuano.................... ........ X ......... Mr. King......... ........ X .........
Mr. Hinojosa................... ........ X ......... Mr. Lucas........ ........ ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Baca....................... ........ ........ ......... Mr. Royce........ X ........ .........
Mr. Lynch...................... ........ ........ ......... Ms. Capito....... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. Putnam....... X ........ .........
Mr. Scott...................... ........ X ......... Mr. Barrett (SC). X ........ .........
Ms. Velazquez.................. ........ X ......... Ms. Brown-Waite.. X ........ .........
Ms. Bean....................... ........ X ......... Mr. Feeney....... ........ ........ .........
Ms. Moore...................... ........ X ......... Mr. Garrett (NJ). X ........ .........
Mr. Davis (TN)................. ........ X ......... Mr. Gerlach...... X ........ .........
Mr. Sires...................... ........ X ......... Mr. Hensarling... ........ ........ .........
Mr. Hodes...................... ........ X ......... Mr. Davis (KY)... X ........ .........
Mr. Klein...................... ........ X ......... Mr. Campbell..... X ........ .........
Mr. Mahoney.................... ........ X ......... Mrs. Bachmann.... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Roskam....... X ........ .........
Mr. Murphy..................... ........ X ......... Mr. Marchant..... X ........ .........
Mr. Donnelly................... ........ X ......... Mr. McCotter..... X ........ .........
Mr. Wexler..................... ........ X ......... Mr. Bachus, ex ........ ........ .........
officio.
Mr. Marshall................... ........ ........ .........
Mr. Boren...................... ........ X .........
Mr. Frank, ex officio.......... ........ ........ .........
----------------------------------------------------------------------------------------------------------------
During the Subcommittee markup, the following amendments
were also considered:
An amendment by Mr. Kanjorski, No. 1, a manager's amendment
in the nature of a substitute, was agreed to, as amended, by a
voice vote.
An amendment by Ms. Pryce, No. 1a, striking Section 2 and
inserting new termination dates for NBCR, was not agreed to by
a voice vote.
An amendment by Mr. Ackerman, No. 1b, including the
Secretary of Homeland Security in certification for acts of
terrorism and acts of NBCR terrorism, was agreed to by a voice
vote.
An amendment by Mr. Baker, No. 1c, regarding rates and
disallowed claims at State level may go to Federal court, was
withdrawn.
An amendment by Mr. Manzullo, No. 1d, regarding NBCR make-
available exceptions for small businesses, was withdrawn.
An amendment by Mr. Marchant, No. 1e, to allow NBCR
insurance partnering, was withdrawn.
An amendment by Mr. Baker, No. 1i, striking ``in the same
previously impacted areas'' and ``in the same impacted areas'',
was agreed to by a voice vote.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee has held hearings and
made findings that are reflected in this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
H.R. 2761, the ``Terrorism Risk Insurance Revision and
Extension Act of 2007,'' is intended to extend the Terrorism
Risk Insurance Act of 2002 (TRIA) to ensure the continued
availability of terrorism insurance coverage, limit market
disruptions, encourage economic development and growth, and
maintain the economic security of the United States. As
reported, H.R. 2761 would further extend TRIA beyond its
current expiration date of December 31, 2007 for an additional
15-year period. H.R. 2761 would also make several revisions to
the existing program, such as expanding the availability of
insurance to protect against nuclear, biological, chemical, or
radiological (NBCR) events; adding group life insurance as a
line covered by the program; and covering domestic terrorism
events.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate of the Director of the Congressional Budget
Office pursuant to section 402 of the Congressional Budget Act.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
September 6, 2007.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2761, the
Terrorism Risk Insurance Revision and Extension Act of 2007.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Susan Willie.
Sincerely,
Peter Orszag.
Enclosure.
H.R. 2761--Terrorism Risk Insurance Revision and Extension Act of 2007
Summary: H.R. 2761 would extend the Terrorism Risk
Insurance Act (TRIA) for 15 years--through calendar year 2022.
The bill also would add group life insurance to the lines of
coverage included under the program and would require insurers
to make coverage available to property and casualty and group
life insurance policyholders for losses resulting from domestic
terrorism and, after January 1, 2009, terrorism involving
nuclear, biological, chemical, and radioactive (NBCR)
materials.
Enacted in 2002, TRIA requires insurance firms that sell
commercial property and casualty insurance to offer clients
insurance coverage for damages caused by foreign terrorist
attacks. Under TRIA, the federal government would help insurers
cover losses in the event of a terrorist attack under certain
conditions, and would also impose assessments on the insurance
industry to recover all or a portion of the federal payments.
The program is set to expire at the end of calendar year 2007.
There is no reliable way to predict how much insured damage
terrorists might cause in any specific year. Rather, CBO's
estimate of the cost of financial assistance provided under
H.R. 2761 represents an expected value of payments from the
program--a weighted average that reflects industry experts'
opinions of various outcomes ranging from zero damages up to
very large damages resulting from possible future terrorist
attacks. The expected value can be thought of as the amount of
an insurance premium that would be necessary to just offset the
government's losses from providing this insurance, although
firms do not pay any premium for the federal assistance offered
by TRIA.
On this basis, CBO estimates that enacting H.R. 2761 would
increase direct spending by $3.7 billion over the 2008-2012
period and by $10.4 billion over the 2008-2017 period. An
additional $13.7 billion would be spent after 2017.
Under H.R. 2761, the Department of the Treasury would be
directed to recoup some or all of the costs of providing
financial assistance through taxes imposed on insurance firms
(surcharges). Over many years, CBO expects that an increase in
spending for financial assistance would be largely offset (on a
cash basis) by a corresponding increase in governmental
receipts (i.e., revenues) depending on the amount of insured
losses. We assume, however, that the Secretary of the Treasury
would not impose any surcharges until two years after federal
assistance is provided and that those amounts would be
collected over many years. Thus, CBO estimates that enacting
the recoupment provision of H.R. 2761 would increase
governmental receipts by about $100 million over the 2008-2012
period and by $2.0 billion over the 2008-2017 period, net of
income and payroll tax offsets.
Considering both the direct spending and revenue impacts of
the bill, CBO estimates that enacting H.R. 2761 would increase
budget deficits or decrease surpluses by $200 million in 2008,
$3.5 billion over the 2008-2012 period, and $8.4 billion over
the 2008-2017 period.
H.R. 2761 would extend and impose intergovernmental and
private-sector mandates as defined in the Unfunded Mandates
Reform Act (UMRA). CBO estimates that the aggregate costs of
complying with those mandates would not exceed the annual
thresholds established by UMRA ($66 million for
intergovernmental mandates and $131 million for private-sector
mandates in 2007, adjusted annually for inflation).
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 2761 is shown in Table 1. The costs of
this legislation fall within budget function 370 (commerce and
housing credit).
TABLE 1.--ESTIMATED BUDGETARY IMPACT OF H.R. 2761, THE TERRORISM RISK INSURANCE REVISION AND EXTENSION ACT OF 2007
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in billions of dollars--
-----------------------------------------------------------------------------------------------------
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008-2012 2008-2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING
Estimated Budget Authority........................ 0.2 0.5 0.8 1.0 1.1 1.2 1.3 1.4 1.4 1.5 3.6 10.4
Estimated Outlays................................. 0.2 0.5 0.8 1.0 1.1 1.2 1.3 1.4 1.4 1.5 3.6 10.4
CHANGES IN REVENUES
Estimated Revenues................................ 0 0 * * 0.1 0.2 0.3 0.4 0.4 0.6 0.1 2.0
NET IMPACT
Estimated Change in the Deficit or Surplus\1\..... -0.2 -0.5 -0.8 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0 -0.9 -3.5 -8.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: * = less than $50 million.
\1\Negative numbers indicate an increase in the deficit or a decrease in the surplus.
Basis of estimate: For this estimate, CBO assumes that H.R.
2761 will be enacted before the end of calendar year 2007. We
estimate that enacting H.R. 2761 would increase direct spending
by $10.4 billion and would increase governmental revenues by
$2.0 billion over the 2008-2017 period. While this estimate
reflects CBO's best judgment on the basis of available
information, the cost of this federal program is a function of
inherently unpredictable future terrorist attacks. As such,
actual costs are likely to vary significantly from the
estimated amounts. Such costs could be either higher or lower
than the expected-value estimates provided for each year.
Terrorism Risk Insurance Act under current law
Enacted in 2002 and reauthorized in 2005, the Terrorism
Risk Insurance Act provides financial assistance to commercial
property and casualty insurers for losses above certain
thresholds caused by terrorist attacks by individuals acting on
behalf of foreign interests. For such assistance to be
provided, the Secretary of the Treasury must certify that a
terrorist attack has occurred in the United States or other
specified locations. TRIA is currently set to expire on
December 31, 2007.
TRIA does not require commercial property and casualty
insurance policies to cover losses from terrorist attacks
committed by a domestic interest or those involving nuclear,
biological, chemical, or radioactive materials. If an insurer
and a policyholder choose to include losses from terrorist
attacks involving NBCR materials in a policy, TRIA would cover
a portion of the losses resulting from those risks.
For the Secretary of the Treasury to certify a terrorist
attack, insured damages resulting from the attack must exceed
$5 million. Financial assistance becomes available to insurers
suffering losses from a certified attack once the industry's
aggregate insured losses from that attack exceed $100 million
(in 2007). Once that $100 million threshold is exceeded,
participating insurance companies that suffer losses are
responsible for paying claims up to a deductible amount based
on the premiums they collected for covered lines in the
calendar year preceding a certified attack. In 2007, the
deductible is 20 percent of such premiums.
After meeting their individual deductibles for damage
claims, insurers and the federal government would each pay a
portion of the loss above the deductible (the federal
government would pay 85 percent of insured losses in 2007,
individual insurers, 15 percent) up to total losses of $100
billion. The law does not address about how losses above the
$100 billion cap would be handled.
The Secretary of the Treasury is authorized to recover
payments made by the federal government through taxes in the
form of surcharges paid by the insurance industry and
purchasers of commercial property and casualty insurance. The
Secretary is required to recoup federal payments to the extent
that the total amount paid by the insurance industry including
the deductible is less than the industry ``retention amount''
specified in law, which represents the total liability of the
property and casualty insurance industry in the event of a
certified attack. In 2007, that amount is $27.5 billion.
Modifications to TRIA under H.R. 2761
H.R. 2761 would extend TRIA for 15 years, through December
31, 2022. The bill also would add group life insurance to the
lines of insurance covered by the program and would eliminate
the distinction between foreign and domestic terrorist attacks.
TRIA would now cover attacks by either foreign or domestic
interests. Further, both commercial property and casualty
insurance policies and group life insurance policies would be
required to offer coverage for losses from terrorist attacks
involving NBCR materials. Currently, such coverage is typically
excluded from property and casualty insurance policies, other
than workers' compensation policies, but is generally covered
by group life insurance policies.
H.R. 2761 would lower the threshold for financial
assistance from $100 million in insured damages from a
certified attack to $50 million; further, if a certified attack
caused insured damages to exceed $1 billion, the threshold
would be set at $5 million in subsequent years.
As in current law, an insurer suffering losses as a result
of an attack would pay claims up to a specified deductible. For
losses incurred by property and casualty insurers, H.R. 2761
would set different deductible limits based on the cause of the
loss (conventional vs. NBCR attack) based on the premiums
collected by each insurer in the calendar year preceding an
attack. For insurers providing group life coverage, deductibles
under H.R. 2761 would be based on the insurer's amount at
risk--that is, the face value of life insurance policies not
including any additional cash value--and also on the cause of
the loss.
Likewise, H.R. 2761 would continue the payment-sharing
process that exists under current law. Insurers and the federal
government would each pay a portion of the loss over the
deductible. For most types of attacks, the federal government's
portion would remain 85 percent of insured losses up to the
$100 billion limit for each year of the 15-year extension. In
the case of losses caused by an attack using NBCR materials,
however, the federal share would be based on the amount of
total losses, starting at 85 percent and rising to as high as
95 percent, up to the $100 billion limit. Table 2 shows a
breakdown of the industry deductible and federal cost-sharing
limits.
Direct spending
By extending financial assistance to certain commercial
insurers for future acts of terrorism against insured private
property, enacting H.R. 2761 would expose the federal
government to potentially large liabilities for 15 more years
(2008 through 2022). For any particular year, the amount of
insured damage caused by terrorists could range from zero to
many billions of dollars. CBO's estimate of the cost of this
program reflects how much, on average, the government could be
expected to pay to insurers and recover from the industry over
the 2008-2017 period.
The following sections describe our method for estimating
the expected value of financial assistance under H.R. 2761 and
explain how we convert that cost to annual estimates of
spending.
TABLE 2.--DEDUCTIBLE AND FEDERAL SHARE LIMITS UNDER H.R. 2761
------------------------------------------------------------------------
------------------------------------------------------------------------
DEDUCTIBLE
Percent of Direct Earned
Premiums
Property and Casualty Insurance:
Attack Using Conventional Materials...
Losses Less Than $1 Billion....... 20.0
Losses in Excess of $1 Billion\1\. 5.0
Attack Using NBCR Materials\1\........ 3.5
Percent of Amount at Risk
Group Life Insurance:
Attack Using Conventional Materials... .03510
Attack Using NBCR Materials\2\........ .00614
FEDERAL SHARE OF COVERED LOSSES OVER DEDUCTIBLE
Percent of Losses (Up to
$100 Billion)
Attack Using Conventional Materials....... 85.0
Attack Using NBCR Materials:
Losses Less Than $10 Billion.......... 85.5
Losses Between $10 Billion and $20 87.5
Billion.
Losses Between $20 Billion and $40 90.0
Billion.
Losses Between $40 Billion and $60 92.5
Billion.
Losses Between $60 Billion and $100 95.0
Billion.
------------------------------------------------------------------------
\1\Increasing by 0.5 percent per year.
\2\Increasing by .00088 percent each year.
Estimating the Expected Cost of Federal Assistance. For
this estimate, CBO discussed the concepts involved in
estimating insured losses with industry actuaries and reviewed
models used by firms to set premiums for the terrorism
component of property and casualty insurance and group life
insurance that they offer. State insurance regulators generally
require such premiums to be grounded in a widely accepted model
of expected losses from covered events. After the terrorist
attacks on September 11, 2001, the insurance industry began
efforts to set premiums for insurance coverage for terrorist
events using such models.
Although estimating losses associated with terrorist events
is difficult because of the lack of meaningful historical data,
the insurance industry has experience setting premiums for
catastrophic events--namely, natural disasters. Setting
premiums for hurricanes and earthquakes, for example, involves
determining areas that could sustain damage, the value of the
losses that could result from various types of events with
different levels of severity, and the frequency of such events.
Similarly, estimating premiums for losses resulting from
terrorist attacks involves judgments regarding potential
targets and the frequency of such attacks. Because there is a
very limited history of terrorist attacks in the United States,
many of the parameters needed by the insurance industry to set
premiums are based on expert opinion regarding terrorist
activities and capabilities rather than on historical data.
Estimating potential insured losses. Based on discussions
with insurers and information provided by the insurance
industry, CBO estimates that the expected or average annual
loss subject to TRIA coverage under H.R. 2761 would be about
$2.6 billion (in 2007 dollars). This estimate incorporates
industry expectations of the probabilities of terrorist
attacks, encompassing the possibility of attacks that result in
enormous loss of life and property damage, as well as a
significant likelihood that no such attacks would occur in any
given year. This estimate also reflects our expectation that
some portion of losses from terrorism would not be covered by
TRIA because some policyholders would choose not to purchase
insurance coverage for terrorism risks.
Our estimate of expected annual losses covered by TRIA
under H.R. 2761 includes less than $100 million for the
inclusion of group life insurance policies and around $200
million for the inclusion of coverage for domestic terrorism.
The estimate also includes about $1 billion in additional
expected losses resulting from a provision in the bill that
would require insurance policies to include coverage for losses
resulting from terrorist attacks involving NBCR materials.
Under current law, insurers are not required to offer this
coverage, although if an insurer and a policyholder voluntarily
agree to include this coverage in a policy, TRIA would cover
some of those losses.
Based on information provided by the industry, it appears
that only a small amount of coverage is currently in place for
losses resulting from terrorist attacks involving NBCR
materials as compared to coverage for losses involving
conventional weapons. Thus, under current law the government's
exposure to losses resulting from terrorist attacks involving
NBCR materials is relatively small, except in the workers'
compensation line, where no exclusions are allowed.
Enacting the legislation could potentially expose firms
offering NBCR coverage and the federal government to much
higher losses than under current law. Our estimate of losses
assumes that the coverage for terrorism losses caused by
attacks using NBCR materials would increase three-fold over
current coverage levels. However, we expect that coverage for
such losses will remain far lower than coverage for losses
resulting from more conventional methods.
CBO's estimate assumes that, in most years, losses from
terrorist attacks covered by TRIA would cost less than $2.6
billion. We expect that there is a significant chance that no
terrorist attacks that would be covered by TRIA would occur in
a given year. Since enactment of TRIA, no covered events have
occurred; it is unclear whether no such attacks were planned or
attempted, or whether some were prevented by law enforcement
and other security measures. Although the risk of a terrorist
attack with many lives lost and substantial property damage
still remains, based on industry models, CBO assumes for this
estimate that attacks causing losses similar in scale to those
sustained on September 11, 2001, in New York City are likely to
occur very rarely.\1\
---------------------------------------------------------------------------
\1\Industry losses on September 11, 2001, are estimated to be about
$36 billion (in 2006 dollars), including about $30 billion in losses in
New York City that would have qualified for coverage under TRIA had the
law been in effect on that date.
---------------------------------------------------------------------------
Determining the federal share of insured losses. Federal
payments under TRIA would be lower than expected losses from
terrorist attacks because TRIA places limits on eligibility for
federal assistance and requires that insurers pay a share of
covered losses. CBO took account of these requirements to
calculate federal spending for any given amount of insured
losses from future terrorist attacks.
First, because federal payments under TRIA would be capped
at $100 billion per event, we excluded costs for potential
losses above that level. In addition, H.R. 2761 would set the
minimum losses that would trigger federal payments under TRIA
at $50 million.
Second, we accounted for the share of losses that would be
paid by affected insurers in the event of a covered attack.
Before the federal government would make any payments under
TRIA, an insurer incurring losses would first pay claims up to
a deductible amount. The bill would set different deductible
levels for property and casualty insurers and for group life
insurers.
The total amount of claims paid by insurers below the
deductible amount could range from a few million dollars to
several billion dollars, depending on how many insurers provide
coverage for losses resulting from a particular terrorist
attack. In addition, the value of each individual insurer's
deductibles would vary greatly across the industry. For this
estimate, CBO considered a range of possibilities regarding the
share of federal assistance, based on industry data regarding
estimated insurers' deductibles under H.R. 2167. The range
encompasses the possibility that an attack would affect only a
few insurers with relatively small deductibles or several
insurers with relatively large deductibles. CBO expects
thatinsured losses below a few hundred million dollars would most
likely be covered by insurers' deductibles and therefore would not
result in a significant increase in federal spending.
Finally, once affected insurers have paid claims up to
their deductibles, the federal government would share a portion
of the losses above the deductible with each insurer.
Under H.R. 2761, for losses sustained by both property and
casualty and group life insurers, the federal government's
share of claims above the deductible would be at least 85
percent of total losses up to the $100 billion limit covered by
the program. In the case of losses resulting from an attack
using NBCR materials, the federal government's share would
increase, based on total losses, to as much as 95 percent of
losses above the deductible.
After taking into account maximum limits, deductibles, and
the insurers' share of payments above the deductible, CBO
estimates that enacting H.R. 2761 would increase direct
spending by about $24 billion over the full life of the program
before taking into account any revenues from surcharges on
policyholders. Actual spending would be spread out over many
years and most such costs would eventually be recovered through
surcharges imposed on policyholders.
Taken another way, if the Secretary of the Treasury were
authorized to collect premiums for the program, CBO estimates
that the Secretary would need to charge, on average, about $1.6
billion per year to fully compensate the government for the
projected average annual loss due to terrorist attacks under
H.R. 2761. The bill, however, would not authorize any charges
prior to a certified attack. Similarly, the bill does not
contain an explicit requirement for the Secretary to recoup
interest that would accrue on amounts outstanding.
Timing of Federal Spending. To estimate federal spending
for this program on a cash basis, CBO used information from
insurance experts on historical rates of payment for property
and casualty claims following catastrophic events. Based on
such information, CBO estimates that outlays under H.R. 2761
would total about $3.7 billion over the 2008-2012 period, an
additional $6.7 billion over the 2013-2017 period, and about
$13.7 billion after 2017. In general, following a catastrophic
loss, it takes many years to complete insurance payments
because of disputes over the value of covered losses by
property and business owners. For this estimate, we assumed
that financial assistance to insurers would be paid over
several years, with most of the spending occurring within the
first five years following an insurable event.
Revenues
Enacting H.R. 2761 would affect federal receipts by
authorizing the Secretary of the Treasury to impose taxes in
the form of surcharges on policyholders to recover the amount
of federal payments made under the program, with certain
limitations. CBO estimates that this provision would increase
revenues by about $100 million over the 2008-2012 period and
$2.0 billion over the 2008-2017 period. Surcharges could
continue for many years beyond 2017.
In addition, another provision of the bill would allow
insurers to set aside a portion of premiums charged for
terrorism coverage in a reserve fund set up in the Department
of the Treasury. Amounts held in the reserve fund would be used
by the Secretary of the Treasury, in the event of a certified
attack, to pay certain deductible and copayment liabilities of
the insurers incurring losses that had allocated premiums to
the reserve fund.
Surcharges. If a terrorist attack were to require the
government to provide financial assistance, H.R. 2761 would
require the Secretary of the Treasury to recoup some or all of
that cost through taxes paid by the insurance industry and
purchasers of commercial property and casualty and group life
insurance. The Secretary would be required to recover the
difference between the total amount paid by the insurance
industry for deductibles and the industry's share of payments
over the deductible and the industry retention amount (the
maximum aggregate loss to be paid by the insurance industry),
which would be set at $27.5 billion for property and casualty
insurers and $5 billion for group life insurers.
The Secretary would have discretion in determining whether
to recover the full amount of financial assistance provided
under the program. Should the Secretary determine that amounts
above the industry retention amount cannot be recovered, the
Congress would be notified as to the determination and provided
with an analysis of the effect of that determination on
taxpayers, the economy, and the burdens on small- and medium-
sized businesses. For this estimate, CBO assumes that the
Secretary would not seek to recover financial assistance
provided above the industry retention amount and would not
collect interest on outstanding amounts.
Under TRIA, the recoupment of financial assistance would be
accomplished by assessing each insurer based on its portion of
aggregate property and casualty premiums or the amount at risk
for group life insurance policies for the preceding calendar
year. Surcharges would apply to insurance sold following a
terrorist attack that necessitated federal assistance; each
property and casualty insurance company's surcharge would be
limited to 3 percent of its aggregate premiums, and each group
life insurance company's surcharge would be limited to 0.0053
percent of its amount at risk. H.R. 2761 would direct the
Secretary to impose surcharges for as long as necessary to
recover the financial assistance provided by the federal
government (at least up to the industry retention amount).
Thus, the government could collect surcharges for many years,
depending on the amount of financial assistance. CBO estimates
that surcharges resulting from a 15-year extension of TRIA
would total $23.6 billion--but that recovery would extend well
past 2017.
Timing and Tax Offset. The bill would allow the Secretary
to reduce annual charges after considering the effect on
taxpayers, the economy, or burdens on small- and medium-sized
businesses. Therefore, if annual losses were very high, we
expect that the Secretary would limit annual collections by
spreading them over many years. CBO assumes that the Secretary
would not impose surcharges until two years after federal
assistance is provided and that it would take more than 10
years to recover the costs of any financial assistance provided
under H.R. 2761. Thus, we estimate that surcharges would total
$2.6 billion over the next 10 years and that an additional
$21.0 billion would be collected after 2017.
Those gross collections would be partially offset by a loss
of receipts from income and payroll taxes. Consistent with
standard procedures for estimating the revenue impact of
indirect business taxes, CBO reduced the gross revenue impact
of the insurance surcharges by 25 percent to reflect offsetting
effects on income and payroll tax receipts. On balance, CBO
estimates that H.R. 2167 would increase revenues by a total of
$2.0 billion over the next 10 years and that an additional
$15.7 billion will be collected after 2017, net of income and
payroll tax offsets.
Terrorism Buy-Down Fund. Section 4 of H.R. 2761 would
establish a Terrorism Buy-Down Fund into which a property and
casualty insurer could elect to contribute premiums it collects
for terrorism insurance. The premiums deposited in the fund in
the Treasury would be available to the Secretary of the
Treasury, in the event of a certified terrorist attack, to
satisfy the insurer's deductible amounts as well as the portion
of the insurer's losses that exceed the deductible but are not
included in the federal share.
Because the tax implications of the fund are unclear, the
Joint Committee on Taxation has not yet prepared an estimate of
its potential revenue impact.
Intergovernmental and private-sector impact: H.R. 2761
would extend and expand mandates contained in the Terrorism
Risk Insurance Act. Those mandates would:
Require that certain insurers offer terrorism
insurance, including insurance for nuclear, biological,
chemical, and radiological attacks;
Require that certain insurers and their
policyholders repay the federal government for the cost of
assistance (in the form of assessments and surcharges); and
Preempt state laws regulating insurance.
CBO estimates that the aggregate costs of complying with
those mandates would not exceed the annual thresholds
established by UMRA ($66 million for intergovernmental mandates
and $131 million for private-sector mandates in 2007, adjusted
annually for inflation).
REQUIREMENT TO OFFER INSURANCE
Current law requires that through calendar year 2007,
certain insurance companies offer terrorism insurance as part
of a property and casualty insurance policy. H.R. 2761 would
extend that requirement to offer terrorism insurance through
calendar year 2022. The bill also would add group life
insurance to the lines of coverage included under the program
and would require insurers to make coverage available to
property, casualty, and group life insurance policyholders for
losses resulting from domestic terrorism and, after January 1,
2009, terrorism involving NBCR materials. Also, in some cases,
the bill would restrict insurers' ability to underwrite
policies based on lawful international travel. According to
industry representatives, the direct cost to continue making
terrorism insurance available under property, casualty, and
group life insurance policies would be minimal. Furthermore,
the bill would require only that firms offer terrorism
insurance, including NBCR terrorism insurance; they would set
their own premium rates and policyholders could choose whether
or not to purchase such insurance. In the event of a certified
attack with costs that exceeded deductible requirements,
insurers who offer such terrorism insurance would receive
federal payments that would help finance claims payments.
REPAYMENT OF ASSISTANCE
The bill would require the Secretary of the Treasury to
recoup the costs of financial assistance provided to certain
insurers through assessments paid by the insurance industry and
surcharges paid by purchasers of commercial property, casualty
and group life insurance. This requirement to repay the federal
government for financial assistance received would be both an
intergovernmental and private-sector mandate under UMRA because
both state and local governments and private entities are
providers and purchasers of insurance.
Specifically, the bill would require commercial property,
casualty, and group life insurers, as well as self-insured risk
pools, to pay back through assessments a portion of the
financial assistance provided by the federal government. Taken
individually, some insurers might benefit from the financial
assistance while others might face only the cost of the
assessment. CBO cannot predict how these costs and benefits
would be distributed among private and public insurers.
However, for that group as a whole, the cost of the assessment
would be no greater than the financial assistance received, so
the net cost of this mandate would be zero.
In addition, the bill would require purchasers of
commercial property, casualty, and group life insurance to
repay, in the form of a surcharge, federal assistance provided
to certain insurers. CBO estimates that the expected value of
the surcharges paid by policyholders would total about $200
million over the next five years. The surcharge would be a
mandate on both private-sector purchasers and state and local
governments (in their capacity as purchasers of insurance). For
purchasers as a group, the cost of the surcharges would be no
greater than the financial assistance received. However, some
purchasers would receive a direct benefit under the bill that
would at least partially offset those costs, while other
purchasers would not.
PREEMPTION OF STATE LAW
The bill also would preempt some state laws that regulate
insurance. Based on information from state insurance
regulators, CBO estimates that the cost to states of extending
these preemptions would be minimal.
Estimate prepared by: Federal Costs: Susan Willie; Impact
on State, Local, and Tribal Governments: Elizabeth Cove; Impact
on the Private Sector: Paige Piper/Bach.
Estimate approved by: Peter H. Fontaine, Assistant Director
for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional Authority of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
general welfare of the United States) and clause 3 (relating to
the power to regulate interstate commerce).
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
H.R. 2761 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Exchange of Committee Correspondence
Congress of the United States, House of
Representatives, Committee on the Judiciary,
Washington, DC, September 4, 2007.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Chairman Frank: In recognition of the desire to
expedite consideration of H.R. 2761, the ``Terrorism Risk
Insurance Revision Act of 2007,'' the Committee on the
Judiciary agrees to wavie consideration of the bill.
There are several provisions contained in H.R. 2761 that
implicate the rule X jurisdiction of the Committee on the
Judiciary. In addition to reauthorizing a number of provisions
in the Terrorism Risk Insurance Act of 2002, the legislation
also adds new litigation management and judicial review and
venue provisions.
The Committee takes this action with the understanding that
by foregoing consideration of H.R. 2761 at this time, the
Committee on the Judiciary does not waive any jurisdiction over
subject matter contained in this or similar legislation. The
Commitee also reserves the right to seek appointment of an
appropriate number of conferees to any House-Senate conference
involving this legislation, and requests your support if such a
request is made.
I would appreciate your including this letter in your
Committee's report for H.R. 2761, or in the Congressional
Record during consideration of the bill on the House floor.
Thank you for your attention to this matter.
Sincerely,
John Conyers, Jr.,
Chairman.
----------
House of Representatives,
Committee on Financial Services,
Washington, DC, September 4, 2007.
Hon. John Conyers,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Chairman Conyers: Thank you for your letter agreeing
to waive consideration by the Committee on the Judiciary of
H.R. 2761, the ``Terrorism Risk Insurance Revision Act of
2007.'' The Committee on Financial Services has ordered this
bill reported, and the House will be considering it shortly.
I want to cofirm our mutural understanding with respect to
the consideration of this bill. I acknowledge that portions of
the bill as reported fall within the jurisdiction of the
Committee on the Judiciary and I appreciate your cooperation in
moving the bill to the House floor expeditiously. I further
agree that your decision to not to proceed with a markup on
this bill will not prejudice the Committee on the Judiciary
with respect to its prerogatives on this or similar
legislation. I would support your request for conferees on
those provisions within your jurisdiction in the event of a
House-Senate conference.
I will include this exchange of correspondence in the
Committee report, or in the Congressional Record during
consideration of the bill. Thank you again for your assistance.
Barney Frank,
Chairman.
Section-By-Section Analysis of the Legislation
Section 1. Short title
This section establishes the short title of the bill as the
``Terrorism Risk Insurance Revision and Extension Act of 2007''
(TRIREA).
Section 2. Termination of program
This section extends the Terrorism Risk Insurance Act of
2002 (TRIA) until December 31, 2022.
Section 3. Revision of Terrorism Insurance Program
This section amends TRIA to extend and revise the Terrorism
Insurance Program (the Program), replacing sections 101, 102,
and 103.
TRIA Section 101. Congressional findings and purpose
This section amends the findings and purposes of TRIA to
reflect the inclusion of group life insurance and enhanced
coverage of NBCR terrorism risk in the Program and to clarify
that the Program provides finite liability limits for insurers
and the Federal government.
TRIA Section 102. Definitions
This section establishes definitions for the following
terms: ``act of terrorism,'' ``affiliate,'' ``amount at risk,''
``control,'' ``covered lines,'' ``direct earned premium,''
``excess insured loss,'' ``group life insurance,'' ``insured
loss,'' ``insurer,'' ``insurer deductible,'' ``NAIC,'' ``NBCR
terrorism,'' ``person,'' ``program,'' ``program years,''
``property and casualty insurance,'' ``Secretary,'' ``State,''
and ``United States.''
In particular, TRIREA revises the definition of an ``act of
terrorism'' to eliminate the requirement that such act be
committed by individuals acting on behalf of foreign interests,
thus covering acts of domestic terrorism. The definition of
``control'' is also revised to conform to the definition in the
Bank Holding Company Act. Group life insurance is added as a
covered line. Farm owners multiple peril insurance is no longer
excluded from the definition of property and casualty
insurance. A new definition is added for NBCR terrorism and the
definition of ``act of terrorism'' is revised to include
certification by the Secretary of Treasury (Secretary) of acts
of NBCR terrorism. The concurrence of the Secretary of Homeland
Security, in addition to the Secretary of State and the
Attorney General, is required to certify an act of terrorism or
an act of NBCR terrorism. However, nothing in this Act
generally or in the Secretary's certification authority
specifically shall be interpreted to affect or change in any
way an insurer's contractual obligations to a policyholder
under a lawful insurance contract. Certification of an act of
terrorism as an act of NBCR terrorism does not mean that all
insured losses are NBCR losses. Policyholders that do not have
NBCR coverage may still be covered under their insurance
contracts in these instances.
The ``insurer deductible'' definition is amended to fix the
deductible for acts of conventional terrorism at 20% of an
insurer's direct earned premiums for property and casualty
insurance and at 0.0351% of an insurer's amount at risk for
group life insurance. For acts of NBCR terrorism, the insurer
deductible starts at 3.5% in the second additional Program Year
and increases by 50 basis points each succeeding Program Year
for property and casualty insurance, and starts at 0.00614% in
the second additional Program Year and increases by 0.088 basis
point each succeeding Program Year for group life insurance.
For an act of terrorism resulting in aggregate industry
insured losses exceeding $1 billion, the deductible for
property and casualty insurance that would apply to insurers
affected by that particular $1 billion or greater act of
terrorism decreases to the following percentage: 5% if such act
occurs in first additional Program Year, and increasing by 50
basis points each additional Program Year (i.e., 5.5% if such
act occurs in the second additional Program Year and 6% if such
act occurs in the third additional Program Year). However, such
percentage will reset to 5% in the additional Program Year
immediately following a $1 billion or greater act of terrorism,
and starts increasing again by 50 basis points each additional
Program Year. The Secretary may combine multiple acts of
terrorism in the same Program Year in the same geographic area
for determining whether the $1 billion threshold has been
exceeded. For purposes of section 102(11)(J), regardless of the
different deductibles that may apply to an insurer from
multiple acts of terrorism in a given Program Year, an
insurer's total payment obligation with respect to its
deductible in a given Program Year is not intended to exceed
20% of its direct earned premiums from the previous calendar
year.
TRIA Section 103. Terrorism Insurance Program
This section continues the Program in the Treasury
Department and makes a number of improvements to the terrorism
backstop. Insurers are required to offer coverage for losses
resulting from acts of terrorism that does not differ
materially from the terms, amounts, and other coverage
limitations applicable to losses arising from events other than
acts of terrorism, and offer coverage for losses resulting from
acts of NBCR terrorism in a similar manner after a short
transition period. This section further provides exceptions to
pollution and nuclear hazard exclusions for losses from acts of
NBCR terrorism if NBCR coverage is purchased. If a person
elects not to purchase an insurance policy providing such
coverage, an insurer may exclude coverage for all losses from
acts of terrorism (including acts of NBCR terrorism), except
for workers' compensation and other compulsory insurance law
prohibiting such exclusions, or may offer other options for
coverage that differ materially from the terms, amounts, and
other coverage limitations applicable to losses arising from
events other than acts of terrorism Section 103(c)(1)(B)
extends the ``make available'' requirement for policyholders
that have been provided coverage under subparagraph (A) to
include the availability of exceptions to pollution and nuclear
hazard exclusions that would negate those exclusions only as to
losses from acts of NBCR terrorism. Section 103(c)(1)(B)
provides certainty to both parties to an insurance contract and
is intended to require insurers that have policies of insurance
with pollution and nuclear hazard exclusions to make available
a clear exception to those exclusions for acts of NBCR
terrorism upon the payment of an appropriate premium, and is
intended to confirm to policyholders that do not purchase the
available exceptions to those exclusions that the exclusions
continue to apply as written to acts of NBCR terrorism and that
the policies of insurance do not cover losses arising out of
acts of NBCR terrorism unless the policyholder and insurer
otherwise agree to cover such losses. The requirement to make
available coverage for acts of NBCR terrorism applies beginning
on January 1, 2009.
Insurers offering life insurance are required to offer
coverage that neither considers past nor precludes future
lawful foreign travel and are prohibited from declining such
coverage based on past or future lawful foreign travel or
charging a premium that is excessive and not based on a good
faith actuarial analysis, except an insurer may decline or
limit coverage based on plans to engage in future lawful
foreign travel within 12 months under certain enumerated
circumstances.
The Secretary, in consultation with the National
Association of Insurance Commissioners (NAIC), may exempt
insurers with less than $50 million in direct earned premiums
for TRIA-covered lines from complying with the requirement to
make NBCR coverage available if such insurers demonstrate they
would become insolvent in the event of certain acts of NBCR
terrorism. The exemption would be for 2 years, and insurers may
apply for additional 2-year extensions.
For acts of conventional terrorism, the total Federal share
of insured loss compensation is 85% of the aggregate industry
insured losses that exceed the applicable insurer deductibles
but do not exceed $100 billion during a Program Year, plus 100%
of the aggregate industry insured losses that exceed $100
billion, but only up to the $100 billion cap on total Federal
compensation. The Secretary will determine the pro rata share
of insured losses to be paid by each insurer that incurs
insured losses under the Program.
For acts of NBCR terrorism, the total Federal share of
insured loss compensation is 85% of the aggregate industry
qualified NBCR losses of less than $10 billion, 87.5% of the
aggregate industry qualified NBCR losses between $10 billion
and $20 billion, 90% of the aggregate industry qualified NBCR
losses between $20 billion and $40 billion, 92.5% of the
aggregate industry qualified NBCR losses between $40 billion
and $60 billion, and 95% of the aggregate industry qualified
NBCR losses above $60 billion. The Federal share will be
prorated per insurer based on each insurer's percentage of the
aggregate industry qualified NBCR losses for each additional
Program Year.
The minimum size of a terrorist event required to trigger
any potential Federal assistance is set at $50 million, except
the trigger will decrease to $5 million if a certified act of
terrorism occurs for which resulting aggregate industry insured
losses exceed $1 billion. The Federal share of insured loss
compensation for any single certificate holder under any group
life insurance coverage may not exceed $1 million.
The cap on the annual liability of the Federal government
is set at $100 billion; that is, the aggregate amount of the
Federal share of compensation to be paid to all insurers will
not exceed $100 billion. In addition, an insurer that has met
its insurer deductible will not be liable for the payment of
any portion of the aggregate insured losses in a year that
exceed $100 billion.
If the Secretary determines that estimated or actual
aggregate Federal compensation equals or exceeds $80 billion,
the Secretary must promptly provide notification to Congress
and insurers. The Secretary must also give notice when
estimated or actual aggregate Federal compensation equals or
exceeds $100 billion and within ten days of an act of terrorism
that is likely to pierce the $100 billion cap on Federal
compensation. The Secretary will reimburse insurers for: (1)
any payment for portions of aggregate insured losses that
exceed $100 billion made before the Secretary provides notice
at $80 billion in Federal compensation; and (2) any payment for
portions of aggregate insured losses that exceed $100 billion
made after such notice, but only to the extent that such
payment is ordered by a court, such payment does not include
punitive damages or litigation or other costs, and the insurer
made a good-faith effort to defend against any claims for such
payment. The Secretary has the right to intervene in any legal
proceedings related to such claims.
Federal courts will have original and exclusive
jurisdiction over claims relating to or arising out of the
limitation on an insurer's financial responsibility for insured
losses from acts of terrorism set forth in paragraph 103(e)(3),
if the Secretary certifies that the $100 billion cap on Federal
compensation has been or is likely to have been exceeded, and
the insurer has paid, or is likely to pay, its deductible and
pro rata share of insured losses. In the event of such
certification, all pending State court actions relating to or
arising out of such limitation on an insurer's financial
responsibility set forth in paragraph 103(e)(3) will be removed
to the Federal district court, or courts, chosen by the
Judicial Panel on Multidistrict Litigation.
The insurance marketplace aggregate retention amount is set
at the lesser of $27.5 billion and the aggregate amount of
property and casualty insured losses for property and casualty
insurance, and the lesser of $5 billion and the aggregate
amount of group life insured losses for group life insurance.
The Secretary is granted emergency rulemaking powers during the
90-day period beginning upon the certification of any act of
terrorism. The Secretary will adjust each year, based on the
percentage change in an appropriate index, certain enumerated
dollar amounts in TRIA, including the trigger and the Program
cap. It is intended that the dollar amounts be indexed to
inflation.
Between the enactment of TRIREA and December 31, 2008, the
rates and forms for coverage of acts of conventional terrorism
will not be subject to prior approval or waiting period
requirement under State law, except that a State may invalidate
a rate as excessive, inadequate, or unfairly discriminatory and
a State that had prior approval authority over forms may
conduct subsequent review of such forms. Between the enactment
of TRIREA and December 31, 2009, forms for coverage of acts of
NBCR terrorism (to the extent of the addition ofsuch coverage
and where such coverage was not previously required) will not be
subject to prior approval or waiting period requirement under State
law. Between the enactment of TRIREA and December 31, 2010, rates for
coverage of acts of NBCR terrorism (to the extent of the addition of
such coverage and where such coverage was not previously required) will
not be subject to prior approval or waiting period requirement under
State law, except a State may invalidate a rate as inadequate or
unfairly discriminatory.
An insurer is not prohibited, restricted, or otherwise
limited from entering into an arrangement with another insurer
to make available coverage for any portion of insured losses to
fulfill the mandatory make-available requirements under section
103(c). It is not intended, however, that an insurer could
fulfill all of its requirements under section 103(c) solely by
entering into an arrangement to have another insurer make
available coverage that would otherwise only fulfill part of
such requirements. For example, an insurer may not consider its
requirement under section 103(c)(1)(B) (NBCR coverage)
fulfilled by simply arranging to have another insurer make
available coverage for acts of conventional terrorism pursuant
to section 103(c)(1)(A).
Section 4. Terrorism Buy-Down Fund
This section directs the Secretary to establish a Terrorism
Buy-Down Fund (the Fund) that allows insurers to voluntarily
reserve with the Federal government for their insured losses.
An insurer may purchase deductible, co-share, or pre-trigger
buy-down coverage by making an advance election to treat some
or all of the premiums it has disclosed under the Program as
fee charges imposed by the Secretary and remitting such amounts
to the Fund. Such buy-down coverage does not reduce the Federal
co-share. However, an insurer may not purchase coverage in an
amount greater than the lesser of (a) the program trigger or
(b) the insurer's one-in-one-hundred-year risk exposure to acts
of terrorism.
An insurer may sell its rights to buy-down coverage from
the Fund to another insurer as part of or to avoid insolvency
or as part of a sale, merger, or major reorganization. The
Secretary may borrow funds from the Fund to offset the Federal
share of compensation provided to all insurers under the
Program. The Secretary shall establish voluntary risk-sharing
mechanisms for insurers participating in the Fund to pool their
reinsurance purchases and share terrorism risk. Upon
termination of the Program, the Fund shall become a privately-
operated mutual terrorism reinsurance company owned by the
insurers that submitted buy-down coverage premiums.
Section 5. Analysis and Study
This section requires the Secretary, in consultation with
the NAIC, representatives of the insurance industry,
representatives of the securities industry, and representatives
of policyholders, to analyze the long-term availability and
affordability of private terrorism risk insurance. The
Secretary will submit biennial reports to and, upon submission
of each such report, testify before Congress. The Secretary
will submit the first such report within two years of enactment
of TRIREA.
This section also establishes a Commission on Terrorism
Risk Insurance. The 21-member Commission will consist of the
Secretary or the Secretary's designee; a State insurance
commissioner designated by the NAIC; 15 members appointed by
the President, including a representative of group life
insurers, property and casualty insurers with direct earned
premium of $1 billion or less, property and casualty insurers
with direct earned premium of more than $1 billion, multi-line
insurers, independent insurance agents, insurance brokers,
policyholders, the survivors of the victims of the September
11, 2001 terrorist attacks, the reinsurance industry, workers'
compensation insurers, the commercial mortgage-backed
securities industry, a nationally recognized statistical rating
organization, a real estate developer, workers' compensation
insurers created by State legislatures, and the commercial real
estate brokerage industry or the commercial property management
industry; and four members who will serve as liaisons to
Congress, two of whom shall be jointly selected by the Chairman
and Ranking Member of the Committee and two jointly selected by
the Chairman and Ranking Member of the Committee on Banking,
Housing, and Urban Affairs of the Senate.
The Commission will make recommendations to encourage the
private insurance industry to provide affordable terrorism
insurance in the United States and significantly reduce the
Federal role in covering losses resulting from acts of
terrorism. The Commission will specifically evaluate the
utility and viability of proposals aimed at improving the
availability of terrorism insurance in the private marketplace.
The Commission will submit two reports to Congress that
evaluate and make recommendations regarding the need for a
Federal terrorism risk insurance program and include the
Commission's recommendations for encouraging the growth of
private marketplace for terrorism insurance and reducing the
Federal role. The Commission will submit the first report
within five years of enactment of TRIREA and the second report
within eight years of TRIREA enactment.
Section 6. Applicability
This section provides that the provisions of TRIA, as
amended, will continue to apply through the end of December 31,
2007, and the amendments made by TRIREA will apply beginning on
January 1, 2008.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
TERRORISM RISK INSURANCE ACT OF 2002
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) * * *
(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. 106A. Terrorism Buy-Down Fund.
* * * * * * *
Sec. 109. Commission on Terrorism Risk Insurance.
* * * * * * *
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;
[(E) for Program Year 4, the value of an
insurer's direct earned premiums over the
calendar year immediately preceding Program
Year 4, multiplied by 17.5 percent;
[(F) for Program Year 5, the value of an
insurer's direct earned premiums over the
calendar year immediately preceding Program
Year 5, multiplied by 20 percent; and
[(G) notwithstanding subparagraphs (A)
through (F), for the Transition Period or any
Program Year, 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.
[(E) Program year 4.--The term ``Program Year
4'' means the period beginning on January 1,
2006 and ending on December 31, 2006.
[(F) Program year 5.--The term ``Program Year
5'' means the period beginning on January 1,
2007 and ending on December 31, 2007.
[(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 directors
and officers liability 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
the Homeowners 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.);
[(vii) reinsurance or retrocessional
reinsurance;
[(viii) commercial automobile
insurance;
[(ix) burglary and theft insurance;
[(x) surety insurance;
[(xi) professional liability
insurance; or
[(xii) farm owners multiple peril
insurance.
[(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.--During each Program Year, each
entity that meets the definition of an insurer under section
102--
[(1) shall make available, in all of its property and
casualty insurance policies, coverage for insured
losses; and
[(2) 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.
[(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 through Program Year 4 shall be equal to
90 percent, and during Program Year 5 shall be
equal to 85 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) Program trigger.--In the case of a
certified act of terrorism occurring after
March 31, 2006, no compensation shall be paid
by the Secretary under subsection (a), unless
the aggregate industry insured losses resulting
from such certified act of terrorism exceed--
[(i) $50,000,000, with respect to
such insured losses occurring in
Program Year 4; or
[(ii) $100,000,000, with respect to
such insured losses occurring in
Program Year 5.
[(C) 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 any of Program Years 2 through 5 (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 any
of Program Years 2 through 5, 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;
[(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;
[(D) for Program Year 4, the lesser of--
[(i) $25,000,000,000; and
[(ii) the aggregate amount, for all
insurers, of insured losses during such
Program Year; and
[(E) for Program Year 5, the lesser of--
[(i) $27,500,000,000; 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) through (E) 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
any of subparagraphs (A) through (E) 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 any of subparagraphs (A) through (E) 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. 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;
(6) the United States Government should coordinate
with insurers to provide financial compensation to
insured parties for losses from acts of terrorism,
contributing to the stabilization of the United States
economy in a time of national crisis, and periodically
assess the ability of the financial services industry
to develop the systems, mechanisms, products, and
programs necessary to create a viable financial
services market for private terrorism risk insurance
that will lessen the financial participation of the
United States Government;
(7) in addition to a terrorist attack on the United
States using conventional means or weapons, there is
and continues to be a potential threat of a terrorist
attack involving the use of unconventional means or
weapons, such as nuclear, biological, chemical, or
radiological agents;
(8) as nuclear, biological, chemical, or radiological
acts of terrorism (known as NBCR terrorism) present a
threat of loss of life, injury, disease, and property
damage potentially unparalleled in scope and complexity
by any prior event, natural or man-made, the Federal
Government's responsibility in providing for and
preserving national economic security calls for a
strong Federal role in ensuring financial compensation
and economic recovery in the event of such an attack;
(9) a report issued by the Government Accountability
Office in September 2006 concluded that ``any purely
market-driven expansion of coverage'' for NBCR
terrorism risk is ``highly unlikely in the foreseeable
future'', and the September 2006 report from the
President's Working Group on Financial Markets
concluded that reinsurance for NBCR terrorist events is
virtually unavailable and that ``[g]iven the general
reluctance of insurance companies to provide coverage
for these types of risks, there may be little potential
for future market development'';
(10) group life insurance companies are important
financial institutions whose products make life
insurance coverage affordable for millions of Americans
and often serve as their only life insurance benefit;
(11) the group life insurance industry, in the event
of a severe act of terrorism, is vulnerable to
insolvency because high concentrations of covered
employees work in the same locations, because primary
group life insurers do not exclude conventional and
NBCR terrorism risks while most catastrophic
reinsurance does exclude such terrorism risks, and
because a large-scale loss of life would fall outside
of actuarial expectations of death; and
(12) 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 and group life insurance for all types of
terrorism risk, including conventional terrorism risk
and nuclear, biological, chemical, and radiological
terrorism risk;
(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 (unless otherwise preempted by this Act);
and
(3) provide finite liability limits for terrorism
insurance losses for insurers and the United States
Government.
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, the Secretary of Homeland
Security, 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 (9)(B);
or
(II) the premises of a United
States mission; and
(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.
(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
and group life insurance losses
resulting from the act, in the
aggregate, do not exceed $5,000,000.
(C) Certification of act of nbcr terrorism.--
Upon certification of an act of terrorism, the
Secretary, in concurrence with the Secretary of
State, the Secretary of Homeland Security, and
the Attorney General of the United States,
shall determine whether the act of terrorism
meets the definition of NBCR terrorism in this
section. If such determination is that the act
does meet such definition, the Secretary shall
further certify such act of terrorism as an act
of NBCR terrorism.
(D) Determinations final.--Any certification
of, or determination not to certify, an act as
an act of terrorism or as an act of NBCR
terrorism under this paragraph shall be final,
and shall not be subject to judicial review.
(E) 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,
including an act of NBCR 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) Amount at risk.--The term ``amount at risk''
means face amount less statutory policy reserves for
group life insurance issued by any insurer for
insurance against losses occurring at the locations
described in subparagraph (A) of paragraph (9).
(4) 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; except that for purposes of
any proceeding under this subparagraph, there
shall be a presumption that any entity which
directly or indirectly owns, controls, or has
power to vote less than 5 percent of any class
of voting securities of another entity does not
have control over that entity.
(5) Covered lines.--The term ``covered lines'' means
property and casualty insurance and group life
insurance, as defined in this section.
(6) 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 subparagraph (A) of paragraph (9).
(7) Excess insured loss.--The term ``excess insured
loss'' means, with respect to a Program Year, any
portion of the amount of insured losses during such
Program Year that exceeds the cap on annual liability
under section 103(e)(2)(A).
(8) Group life insurance.--The term ``group life
insurance'' means an insurance contract that provides
life insurance coverage, including term life insurance
coverage, universal life insurance coverage, variable
universal life insurance coverage, and accidental death
coverage, or a combination thereof, for a number of
individuals under a single contract, on the basis of a
group selection of risks, but does not include
``Corporate Owned Life Insurance'' or ``Business Owned
Life Insurance,'' each as defined under the Internal
Revenue Code of 1986, or any similar product, or group
life reinsurance or retrocessional reinsurance.
(9) Insured loss.--
(A) In general.--Except as provided in
subparagraph (B), 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, or group life insurance to the
extent of the amount at risk, issued by an
insurer, if such loss--
(i) occurs within the United States;
or
(ii) 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.
(B) Limitation for group life insurance.--
Such term shall not include any losses of an
insurer resulting from coverage of any single
certificate holder under any group life
insurance coverages of the insurer to the
extent such losses are not compensated under
the Program by reason of section 103(e)(1)(D).
(10) 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, or group life
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, or, in the case of group
life insurance, that receives direct premiums,
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.
(11) 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;
(E) for Program Year 4, the value of an
insurer's direct earned premiums over the
calendar year immediately preceding Program
Year 4, multiplied by 17.5 percent;
(F) for Program Year 5, the value of an
insurer's direct earned premiums over the
calendar year immediately preceding Program
Year 5, multiplied by 20 percent;
(G) for each additional Program Year--
(i) with respect to property and
casualty insurance, the value of an
insurer's direct earned premiums over
the calendar year immediately preceding
such Program Year, multiplied by 20
percent; and
(ii) with respect to group life
insurance, the value of an insurer's
amount at risk over the calendar year
immediately preceding such Program
Year, multiplied by 0.0351 percent;
(H) notwithstanding subparagraphs (A) through
(G), for the Transition Period or any Program
Year, 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 with
respect to property and casualty insurance, and
such portion of the amounts at risk with
respect to group life insurance, of the insurer
as the Secretary determines appropriate,
subject to appropriate methodologies
established by the Secretary for measuring such
direct earned premiums and amounts at risk;
(I) notwithstanding subparagraphs (A) through
(H) and (J), in the case of any act of NBCR
terrorism, for any additional Program Year--
(i) with respect to property and
casualty insurance, the value of an
insurer's direct earned premiums over
the calendar year immediately preceding
such Program Year, multiplied by a
percentage, which--
(I) for the second additional
Program Year, shall be 3.5
percent; and
(II) for each succeeding
Program Year thereafter, shall
be 50 basis points greater than
the percentage applicable to
the preceding additional
Program Year; and
(ii) with respect to group life
insurance, the value of an insurer's
amount at risk over the calendar year
immediately preceding such Program
Year, multiplied by a percentage,
which--
(I) for the first additional
Program Year, shall be 0.00614
percent; and
(II) for each succeeding
Program Year thereafter, shall
be 0.088 basis point greater
than the percentage applicable
to the preceding additional
Program Year; and
(J) notwithstanding subparagraph (G)(i), if
aggregate industry insured losses resulting
from a certified act of terrorism exceed
$1,000,000,000, for any insurer that sustains
insured losses resulting from such act of
terrorism, the value of such insurer's direct
earned premiums over the calendar year
immediately preceding the Program Year,
multiplied by a percentage, which--
(i) for the first additional Program
Year shall be 5 percent;
(ii) for each additional Program Year
thereafter, shall be 50 basis points
greater than the percentage applicable
to the preceding additional Program
Year, except that if an act of
terrorism occurs during any additional
Program Year that results in aggregate
industry insured losses exceeding
$1,000,000,000, the percentage for the
succeeding additional Program Year
shall be 5 percent and the increase
under this clause shall apply to
additional Program Years thereafter;
except that for purposes of determining under
this subparagraph whether aggregate industry
insured losses exceed $1,000,000,000, the
Secretary may combine insured losses resulting
from two or more certified acts of terrorism
occurring during such Program Year in the same
geographic area (with such area determined by
the Secretary), in which case such insurer
shall be permitted to combine insured losses
resulting from such acts of terrorism for
purposes of satisfying its insurer deductible
under this subparagraph; and except that the
insurer deductible under this subparagraph
shall apply only with respect to compensation
of insured losses resulting from such certified
act, or combined certified acts, and that for
purposes of compensation of any other insured
losses occurring in the same Program Year, the
insurer deductible determined under
subparagraph (G)(i) or (I) shall apply.
(12) NAIC.--The term ``NAIC'' means the National
Association of Insurance Commissioners.
(13) NBCR terrorism.--The term ``NBCR terrorism''
means an act of terrorism that involves nuclear,
biological, chemical, or radiological reactions,
releases, or contaminations, to the extent any insured
losses result from any such reactions, releases, or
contaminations.
(14) 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.
(15) Program.--The term ``Program'' means the
Terrorism Insurance Program established by this title.
(16) 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.
(E) Program year 4.--The term ``Program Year
4'' means the period beginning on January 1,
2006 and ending on December 31, 2006.
(F) Program year 5.--The term ``Program Year
5'' means the period beginning on January 1,
2007 and ending on December 31, 2007.
(G) Additional program year.--The term
``additional Program Year'' means any
additional one-year period after Program Year 5
during which the Program is in effect, which
period shall begin on January 1 and end on
December 31 of the same calendar year.
(17) 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 directors
and officers liability 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
the Homeowners 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.);
(vii) reinsurance or retrocessional
reinsurance;
(viii) commercial automobile
insurance;
(ix) burglary and theft insurance;
(x) surety insurance; or
(xi) professional liability
insurance.
(18) Secretary.--The term ``Secretary'' means the
Secretary of the Treasury.
(19) 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.
(20) 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).
(21) 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.
(4) NBCR exemption for certain insurers.--
Notwithstanding the requirements of paragraph (3):
(A) Eligibility.--Upon request, the Secretary
may provide an exemption from the requirements
of subparagraph (B) of subsection (c)(1) in the
Program to an entity that otherwise meets the
definition of an insurer under this title if--
(i) such insurer's direct earned
premium is less than $50,000,000 in the
calendar year immediately preceding the
current additional Program Year; and
(ii) the Secretary makes the
determination set forth in subparagraph
(D).
(B) Insurer group.--For purposes of
subparagraph (A)(i), the direct earned premium
of any insurer shall include the direct earned
premiums of every affiliate of that insurer.
(C) Information and consultation.--Any
insurer requesting an exemption pursuant to
this paragraph shall provide any information
the Secretary may require to establish its
eligibility for the exemption. In developing
standards for evaluating eligibility for the
exemption under this paragraph, the Secretary
shall consult with the NAIC.
(D) Determination.--In making any
determination regarding eligibility for
exemption under this paragraph, the Secretary
shall consult with the insurance commissioner
of the State or other appropriate State
regulatory authority where the insurer is
domiciled and determine whether the insurer has
demonstrated that it would become insolvent if
it were required, in the event of an act of
NBCR terrorism, to satisfy--
(i) its deductible and maximum
applicable share above the deductible
pursuant to sections 102(11)(I) and
103(e)(1)(B), respectively, for such
act of NBCR terrorism resulting in
aggregate industry insured losses above
the trigger established in section
103(e)(1)(C); or
(ii) its maximum payment obligations
for insured losses for such act of NBCR
terrorism resulting in aggregate
industry insured losses below the
trigger established in section
103(e)(1)(C).
(E) Workers' compensation and other
compulsory insurance law.--In granting an
exemption under this paragraph, the Secretary
shall not approve any request for exemption
with regard to State workers' compensation
insurance or other compulsory insurance law
requiring coverage of the risks described in
subparagraph (B) of subsection (c)(1).
(F) Exemption period.--
(i) In general.--Any exemption
granted to an insurer by the Secretary
under this paragraph shall have a
duration of not longer than 2 years.
(ii) Extension.--Notwithstanding
clause (i), the Secretary may, upon
application by an insurer granted an
exemption under this paragraph, extend
such exemption for additional periods
of not longer than 2 years.
(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 (including
the additional premium, if any, charged for the
coverage for insured losses resulting from acts of NBCR
terrorism as made available pursuant to subsection
(c)(1)(B)) 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) Availability of coverage for insured losses.--
Subject to paragraph (3), during each Program Year,
each entity that meets the definition of an insurer
under section 102 shall make available--
(A) in all of its insurance policies for
covered lines, 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; and
(B) in insurance policies for covered lines
for which the coverage described in
subparagraph (A) is provided, exceptions to the
pollution and nuclear hazard exclusions of such
policies that render such exclusions
inapplicable only as to insured losses arising
from acts of NBCR terrorism.
(2) Allowable exclusions in other coverage.--Subject
to paragraph (3) and notwithstanding any other
provision of Federal or State law, including any State
workers' compensation and other compulsory insurance
law, if a person elects not to purchase an insurance
policy with the coverage described in paragraph (1)--
(A) an insurer may exclude coverage for all
losses from acts of terrorism including acts of
NBCR terrorism, except for State workers'
compensation and other compulsory insurance law
requiring coverage of the risks described in
subsection (c)(1) (unless permitted by State
law); or
(B) an insurer may offer other options for
coverage that differ materially from the terms,
amounts, and other coverage limitations
applicable to losses arising from events other
than acts of terrorism;
except that nothing in this paragraph shall affect
paragraph (4).
(3) Applicability for nbcr terrorism.--
Notwithstanding any other provision of this Act,
paragraphs (1)(B) and (2) shall apply, beginning upon
January 1, 2009, with respect to coverage for acts of
NBCR terrorism, that is purchased or renewed on or
after such date.
(4) Availability of life insurance without regard to
lawful foreign travel.--During each Program Year, each
entity that meets the definition of an insurer under
section 102 shall make available, in all of its life
insurance policies issued after the date of the
enactment of the Terrorism Risk Insurance Revision and
Extension Act of 2007 under which the insured person is
a citizen of the United States or an alien lawfully
admitted for permanent residence in the United States,
coverage that neither considers past, nor precludes
future, lawful foreign travel by the person insured,
and shall not decline such coverage based on past or
future, lawful foreign travel by the person insured or
charge a premium for such coverage that is excessive
and not based on a good faith actuarial analysis,
except that an insurer may decline or, upon inception
or renewal of a policy, limit the amount of coverage
provided under any life insurance policy based on plans
to engage in future lawful foreign travel to occur
within 12 months of such inception or renewal of the
policy but only if, at time of application--
(A) such declination is based on, or such
limitation applies only with respect to, travel
to a foreign destination--
(i) for which the Director of the
Centers for Disease Control and
Prevention of the Department of Health
and Human Services has issued a highest
level alert or warning, including a
recommendation against non-essential
travel, due to a serious health-related
condition;
(ii) in which there is an ongoing
military conflict involving the armed
forces of a sovereign nation other than
the nation to which the insured person
is traveling; or
(iii)(I) that the insurer has
specifically designated in the terms of
the life insurance policy at the
inception of the policy or at renewal,
as applicable; and
(II) with respect to which the
insurer has made a good-faith
determination that--
(aa) a serious unlawful
situation exists which is
ongoing; and
(bb) the credibility of
information by which the
insurer can verify the death of
the insured person is
compromised; and
(B) in the case of any limitation of
coverage, such limitation is specifically
stated in the terms of the life insurance
policy at the inception of the policy or at
renewal, as applicable.
(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) Conventional terrorism.--Except as
provided in subparagraph (B), the Federal share
of compensation under the Program to be paid by
the Secretary for insured losses of an insurer
during any additional Program Year shall be
equal to the sum of--
(i) 85 percent of that portion of the
amount of such insured losses that--
(I) exceeds the applicable
insurer deductible required to
be paid during such Program
Year; and
(II) based upon pro rata
determinations pursuant to
paragraph (2)(B), does not
result in aggregate industry
insured losses during such
Program Year exceeding
$100,000,000,000; and
(ii) 100 percent of the insured
losses of the insurer that, based upon
pro rata determinations pursuant to
paragraph (2)(B), result in aggregate
industry insured losses during such
Program Year exceeding
$100,000,000,000, up to the limit under
paragraph (2)(A).
(B) NBCR terrorism.--
(i) Amount of compensation.--The
Federal share of compensation under the
Program to be paid by the Secretary for
insured losses of an insurer resulting
from NBCR terrorism during any
additional Program Year shall be equal
to the sum of--
(I) the amount of qualified
NBCR losses (as such term is
defined in clause (ii)) of the
insurer, multiplied by a
percentage based on the
aggregate industry qualified
NBCR losses for the Program
Year, which percentage shall
be--
(aa) 85 percent of
such aggregate industry
qualified NBCR losses
of less than
$10,000,000,000;
(bb) 87.5 percent of
such aggregate industry
qualified NBCR losses
between $10,000,000,000
and $20,000,000,000;
(cc) 90 percent of
such aggregate industry
qualified NBCR losses
between $20,000,000,000
and $40,000,000,000;
(dd) 92.5 percent of
such aggregate industry
qualified NBCR losses
of between
$40,000,000,000 and
$60,000,000,000; and
(ee) 95 percent of
such aggregate industry
qualified NBCR losses
of more than
$60,000,000,000;
and shall be prorated per
insurer based on each insurer's
percentage of the aggregate
industry qualified NBCR losses
for such additional Program
Year; and
(II) 100 percent of the
insured losses of the insurer
resulting from NBCR terrorism
that, based upon pro rata
determinations pursuant to
paragraph (2)(B), result in
aggregate industry insured
losses during such Program Year
exceeding $100,000,000,000, up
to the limit under paragraph
(2)(A).
(ii) Qualified nbcr losses.--For
purposes of this subparagraph, the term
``qualified NBCR losses'' means, with
respect to insured losses of an insurer
resulting from NBCR terrorism during an
additional Program Year, that portion
of the amount of such insured losses
that--
(I) exceeds the applicable
insurer deductible required to
be paid during such Program
Year; and
(II) based upon pro rata
determinations pursuant to
paragraph (2)(B), does not
result in aggregate industry
insured losses during such
Program Year exceeding
$100,000,000,000.
(C) Program trigger.--In the case of a
certified act of terrorism occurring after
March 31, 2006, no compensation shall be paid
by the Secretary under subsection (a), unless
the aggregate industry insured losses resulting
from such certified act of terrorism exceed
$50,000,000, except that if a certified act of
terrorism occurs for which resulting aggregate
industry insured losses exceed $1,000,000,000,
the applicable amount for any subsequent
certified act of terrorism shall be the amount
specified in section 102(1)(B)(ii).
(D) Limitation on compensation for group life
insurance.--Notwithstanding any other provision
of this Act, the Federal share of compensation
under the Program paid by the Secretary for
insured losses of an insurer resulting from
coverage of any single certificate holder under
any group life insurance coverages of the
insurer may not during any additional Program
Year exceed $1,000,000.
(E) 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, including any State workers' compensation
or other compulsory insurance law, if the
aggregate amount of the Federal share of
compensation to be paid to all insurers
pursuant to paragraph (1) exceeds
$100,000,000,000, during any additional Program
Year (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 the aggregate
insured losses during such Program Year
for which the Federal share 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 the
aggregate insured losses during such
Program Year 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.
(C) Claims allocations.--The Secretary shall,
by regulation, provide for insurers to allocate
claims payments for insured losses under
applicable insurance policies in any case
described in subparagraph (A). Such regulations
shall include provisions for payment, for the
purpose of addressing emergency needs of
applicable individuals affected by an act of
terrorism, of a portion of claims for insured
losses promptly upon filing of such claims.
(3) Limitation on insurer financial responsibility.--
(A) Limitation.--Notwithstanding any other
provision of Federal or State law, including
any State workers' compensation or other
compulsory insurance law, an insurer's
financial responsibility for insured losses
from acts of terrorism shall be limited to its
applicable insurer deductible and its
applicable share of insured losses that exceed
its applicable insurer deductible, subject to
the requirements of paragraph (2).
(B) Federal reimbursement.--Notwithstanding
any other provision of Federal or State law,
the Secretary shall--
(i) reimburse insurers for any
payment of excess insured losses made
prior to publication of any
notification pursuant to paragraph
(4)(A);
(ii) reimburse insurers for any
payment of excess insured losses
occurring on or after the date of any
notification pursuant to paragraph
(4)(A), but only to the extent that--
(I) such payment is ordered
by a court pursuant to
subparagraph (C) of this
paragraph or is directed by
State law, notwithstanding this
paragraph, or by Federal law;
(II) such payment is limited
to compensating insurers for
their payment of excess insured
losses and does not include
punitive damages, or litigation
or other costs; and
(III) the insurer has made a
good-faith effort to defend
against any claims for such
payment; and
(iii) have the right to intervene in
any legal proceedings relating to such
claims specified in clause (ii)(III).
(C) Federal court jurisdiction.--
(i) Conditions.--All claims relating
to or arising out of an insurer's
financial responsibility for insured
losses from acts of terrorism under
this paragraph shall be within the
original and exclusive jurisdiction of
the district courts of the United
States, in accordance with the
procedures established in subparagraph
(D), if the Secretary certifies that
the following conditions have been met,
or that there is a reasonable
likelihood that the following
conditions may be met:
(I) The aggregate amount of
the Federal share of
compensation to be paid to all
insurers pursuant to paragraph
(1) exceeds $100,000,000,000,
pursuant to paragraph (2); and
(II) the insurer has paid its
applicable insurer deductible
and its pro rata share of
insured losses determined
pursuant to paragraph (2)(B).
(ii) Removal of state court
actions.--If the Secretary certifies
that conditions set forth in subclauses
(I) and (II) of clause (i) have been
met, all pending State court actions
that relate to or arise out of an
insurer's financial responsibility for
insured losses from acts of terrorism
under this paragraph shall be removed
to a district court of the United
States in accordance with subparagraph
(D).
(D) Venue.--For each certification made by
the Secretary pursuant to subparagraph (C)(i),
not later than 90 days after the Secretary's
determination the Judicial Panel on
Multidistrict Litigation shall designate one
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 relating to or
arising out of an insurer's financial
responsibility for insured losses from acts of
terrorism under this paragraph.
(4) Notices regarding losses and annual liability
cap.--
(A) Approaching cap.--If the Secretary
determines estimated or actual aggregate
Federal compensation to be paid pursuant to
paragraph (1) equals or exceeds $80,000,000,000
during any Program Year, the Secretary shall
promptly provide notification in accordance
with subparagraph (D)--
(i) of such estimated or actual
aggregate Federal compensation to be
paid;
(ii) of the likelihood that such
aggregate Federal compensation to be
paid for such Program Year will equal
or exceed $100,000,000,000; and
(iii) that, pursuant to paragraph
(2)(A)(ii), insurers are not required
to make payments of excess insured
losses.
(B) Event likely to cause losses to exceed
cap.--If any act of terrorism occurs that the
Secretary determines is likely to cause
estimated or actual aggregate Federal
compensation to be paid pursuant to paragraph
(1) to exceed $100,000,000,000 during any
Program Year, the Secretary shall, not later
than 10 days after such act, provide
notification in accordance with subparagraph
(D)--
(i) of such estimated or actual
aggregate Federal compensation to be
paid; and
(ii) that, pursuant to paragraph
(2)(A)(ii), insurers are not required
to make payments for excess insured
losses.
(C) Exceeding cap.--If the Secretary
determines estimated or actual aggregate
Federal compensation to be paid pursuant to
paragraph (1) equals or exceeds
$100,000,000,000 during any Program Year--
(i) the Secretary shall promptly
provide notification in accordance with
subparagraph (D)--
(I) of such estimated or
actual aggregate Federal
compensation to be paid; and
(II) that, pursuant to
paragraph (2)(A)(ii), insurers
are not required to make
payments for excess insured
losses unless the Congress
provides for payments for
excess insured losses pursuant
to clause (ii) of this
subparagraph; and
(ii) the Congress shall determine the
procedures for and the source of any
payments for such excess insured
losses.
(D) Parties notified.--Notification is
provided in accordance with this subparagraph
only if notification is provided--
(i) to the Congress, in writing; and
(ii) to insurers, by causing such
notice to be published in the Federal
Register.
(E) Determinations.--The Secretary shall make
determinations regarding estimated and actual
aggregate Federal compensation to be paid
promptly after any act of terrorism as may be
necessary to comply with this paragraph.
(F) Mandatory disclosure for insurance
contracts.--All policies for property and
casualty insurance and group life insurance
shall be deemed to contain a provision to the
effect that no insurer that has met its
applicable insurer deductible and its
applicable share of insured losses that exceed
its applicable insurer deductible but are not
compensated pursuant to paragraph (1), shall be
obligated to pay for any portion of excess
insured loss. Notwithstanding the preceding
sentence, insurers shall include a disclosure
in their policies detailing the maximum level
of Government assistance and the applicable
insurer share.
(5) 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.
(6) Determinations final.--Any determination of the
Secretary under this subsection shall be final, unless
expressly provided, and shall not be subject to
judicial review.
(7) Insurance marketplace aggregate retention
amount.--For purposes of paragraph (8), 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;
(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;
(D) for Program Year 4, the lesser of--
(i) $25,000,000,000; and
(ii) the aggregate amount, for all
insurers, of insured losses during such
Program Year;
(E) for Program Year 5, the lesser of--
(i) $27,500,000,000; and
(ii) the aggregate amount, for all
insurers, of insured losses during such
Program Year; and
(F) for each additional Program Year--
(i) for property and casualty
insurance, the lesser of--
(I) $27,500,000,000; and
(II) the aggregate amount,
for all such insurance, of
insured losses during such
Program Year; and
(ii) for group life insurance, the
lesser of--
(I) $5,000,000,000; and
(II) the aggregate amount,
for all such insurance, of
insured losses during such
Program Year.
(8) Recoupment of federal share.--
(A) Mandatory recoupment amount.--For
purposes of this paragraph, the mandatory
recoupment amount for each of the Program Years
referred to in subparagraphs (A) through (F) of
paragraph (7) shall be the difference between--
(i) the applicable insurance
marketplace aggregate retention amount
under paragraph (7) for such Program
Year; and
(ii) the aggregate amount, for all
applicable insurers (pursuant to
subparagraph (E)), of insured losses
during such Program Year 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 applicable insurance marketplace
retention.--Notwithstanding subparagraph (A),
if the aggregate amount of uncompensated
insured losses referred to in clause (ii) of
such subparagraph for any Program Year referred
to in any of subparagraphs (A) through (F) of
paragraph (7) is greater than the applicable
insurance marketplace aggregate retention
amount under paragraph (7) for such Program
Year, 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 Program Years
referred to in any of subparagraphs (A) through
(F) of paragraph (7), terrorism loss risk-
spreading premiums in an amount equal to any
mandatory recoupment amount for such Program
Year.
(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--
(i) recoup, through terrorism loss
risk-spreading premiums, such
additional amounts; or
(ii) submit a report to the Congress
identifying such amounts that the
Secretary believes cannot 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.
(E) Separate recoupment.--``The Secretary
shall provide that--
(i) any recoupment under this
paragraph of amounts paid for Federal
financial assistance for insured losses
for property and casualty insurance
shall be applied to property and
casualty insurance policies; and
(ii) any recoupment under this
paragraph of amounts paid for Federal
financial assistance for insured losses
for group life insurance shall be
applied to group life insurance
policies.
(9) Policy surcharge for terrorism loss risk-
spreading premiums.--
(A) Policyholder premium.--Subject to
paragraph (8)(E), 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 and group
life 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--
(I) a percentage of the
premium amount charged for
property and casualty insurance
coverage under the policy; and
(II) a percentage of the
amount at risk for group life
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 may not exceed, on an
annual basis--
(i) with respect to property and
casualty insurance, the amount equal to
3 percent of the premium charged under
the policy; and
(ii) with respect to group life
insurance, the amount equal to 0.0053
percent of the amount at risk 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.
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[.]; and
(3) during the 90-day period beginning upon the
certification of any act of terrorism, to issue such
regulations as the Secretary considers necessary to
carry out this Act without regard to the notice and
comment provisions of section 553 of title 5, United
States Code.
* * * * * * *
(h) Annual Adjustment.--
(1) In general.--Notwithstanding any other provision
of this title, the Secretary shall adjust, for the
second additional Program Year and for each additional
Program Year thereafter, based upon the percentage
change in an appropriate index during the 12-month
period preceding such Program Year, each of the
following amounts (as such amount may have been
previously adjusted):
(A) The dollar amount in section
102(1)(B)(ii) (relating to act of terrorism).
(B) The dollar amount in section 102(11)(J)
(relating to aggregate industry insured losses
in a previously impacted area).
(C) The dollar amounts in subparagraphs (A)
and (B) of section 103(e)(1) (relating to
limitation on Federal share).
(D) The dollar amounts in section
103(e)(1)(C) (relating to Program trigger).
(E) The dollar amount in section 103(e)(1)(D)
(relating to limitation on group life insurance
compensation).
(F) The dollar amounts in section 103(e)(2)
(relating to cap on annual liability).
(G) The dollar amounts in section
103(e)(3)(C) (relating to limitation on insurer
financial liability).
(H) The dollar amounts in section 103(e)(4)
(relating to notices regarding losses and
annual liability cap).
(I) The dollar amounts in section 103(e)(7)
(relating to insurance marketplace aggregate
retention amount).
(J) The dollar amounts in section
109(b)(1)(C) (relating to membership of
Commission on Terrorism Insurance Risk).
(2) Publication.--The Secretary shall make the dollar
amounts for each additional Program Year, as adjusted
pursuant to this subsection, publicly available in a
timely manner.
* * * * * * *
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) * * *
(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 the enactment of the Terrorism Risk
Insurance Revision and Extension Act of 2007
and ending on December 31, 2008, rates and
forms for property and casualty insurance, and
group life insurance, required by this title
and providing coverage except for NBCR
terrorism that are 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;
(D) during the period beginning on the date
of the enactment of the Terrorism Risk
Insurance Revision and Extension Act of 2007,
and ending on December 31, 2009, forms for
property and casualty insurance, and group life
insurance, covered by this title and providing
coverage for NBCR terrorism that are filed with
any State, to the extent of the addition of
such coverage for NBCR terrorism and where such
coverage was not previously required, shall not
be subject to prior approval or waiting period
under any law of a State that would otherwise
be applicable;
(E) during the period beginning on the date
of the enactment of the Terrorism Risk
Insurance Revision and Extension Act of 2007,
and ending on December 31, 2010, rates for
property and casualty insurance, and group life
insurance, covered by this title and providing
coverage for NBCR terrorism that are filed with
any State, to the extent of the addition of
such coverage for NBCR terrorism and where such
coverage was not previously required, shall not
be subject to prior approval or 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 inadequate or unfairly
discriminatory; and
[(C)] (F) 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.
* * * * * * *
(c) Rule of Construction Regarding Insurer Coordination.--
Nothing in this Act shall be construed to prohibit, restrict,
or otherwise limit an insurer from entering into an arrangement
with another insurer to make available coverage for any portion
of insured losses to fulfill the requirements of section
103(c). The Secretary shall develop, in consultation with the
NAIC, minimum financial solvency standards and other standards
the Secretary determines appropriate with respect to such
arrangements. Nothing in this subsection shall be construed to
establish any legal partnership.
SEC. 106A. TERRORISM BUY-DOWN FUND.
(a) Establishment.--The Secretary shall establish a Terrorism
Buy-Down Fund (in this section referred to as the ``Fund'')
that shall make available additional terrorism coverage for the
insured losses of insurers, which shall be available for
purchase by insurers on a voluntary basis.
(b) Purchase of Deductible, co-Share, and Trigger Buy-Down
Coverage.--
(1) In general.--An insurer may purchase deductible,
co-share, and pre-trigger buy-down coverage (in this
section referred to as 'buy-down coverage') through the
Fund by making an election, in advance, to treat some
or all of the premiums it has disclosed pursuant to
section 103(b)(2) as fee charges for the Program
imposed by the Secretary and remitting such amounts to
the Fund.
(2) Limits.--An insurer may not purchase buy-down
coverage in an amount greater than the lesser of--
(A) the highest amount specified in section
103(e)(1)(C); and
(B) the insurer's one-in-one-hundred-year
risk exposure to acts of terrorism.
(c) Buy-Down Coverage.--The Fund shall provide the buy-down
coverage to an insurer for losses for acts of terrorism,
without application of the insurer deductible and in addition
to any otherwise payable Federal share of compensation pursuant
to section 103(e).
(d) Build-up.--The buy-down coverage that shall be payable to
an insurer for qualifying losses shall be the aggregate of the
insurer's buy-down coverage premiums plus interest accrued on
such amounts.
(e) Use by Insurers.--
(1) Qualifying losses.--For the purpose of this
section, qualifying losses are insured losses by an
insurer that are not excess losses and that do not
include amounts for which Federal financial assistance
pursuant to section 103(e) is received, notwithstanding
any limits otherwise applicable regarding section
103(e)(1)(C) (regarding program triggers) or section
102(11) (regarding insurer deductibles).
(2) Use of buy-down coverage.--An insurer may use any
buy-down coverage payments received under subsection
(f) to satisfy--
(A) the applicable insurer deductibles for
the insurer;
(B) the portion of the insurer's losses that
exceed the insurer deductible but are not
compensated by the Federal share; and
(C) the insurer's obligations to pay for
insured losses if the Program trigger under
section 103(e)(1)(C) is not satisfied.
(3) Buy-down coverage does not reduce federal co-
share.--The receipt by an insurer of buy-down coverage
under this section for insured losses shall not be
considered with respect to calculating the insurer's
insured losses with respect to the insurer's deductible
and eligibility for Federal financial assistance
pursuant to section 103(e).
(4) Insolvency.--An insurer may sell its rights to
buy-down coverage from the Fund to another insurer as
part of or to avoid an insolvency or as part of a
merger, sale, or major reorganization.
(f) Payment of Buy-Down Coverage.--The Fund shall pay the
qualifying losses of an insurer purchasing buy-down coverage up
to the amount described in subsection (d).
(g) Government Borrowing.--The Secretary may borrow the funds
from the Fund to offset, in whole or in part, the Federal share
of compensation provided to all insurers under the Program,
except that--
(1) the Fund shall always immediately provide any
buy-down coverage payments required under subsection
(f); and
(2) any such amounts borrowed must be replenished
with appropriate interest.
(h) Risk-Sharing Mechanisms.--The Secretary shall establish
voluntary risk-sharing mechanisms for insurers purchasing buy-
down coverage from the Fund to pool their reinsurance purchases
and otherwise share terrorism risk.
(i) Termination.--Upon termination of the Program under
section 108, and subject to the Secretary's continuing
authority under section 108(b) to adjust claims in satisfaction
under the Program, the Secretary shall provide that the Fund
shall become a privately-operated mutual terrorism reinsurance
company owned by the insurers that have submitted buy-down
coverage premiums in proportion to such premiums minus any buy-
down coverage payments received.
* * * * * * *
SEC. 108. TERMINATION OF PROGRAM.
(a) Termination of Program.--The Program shall terminate on
[December 31, 2007] December 31, 2022.
* * * * * * *
(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)]
paragraph (5), (6), (7), (8), or (9) 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
* * * * * * *
[(e) Analysis of Market Conditions for Terrorism Risk
Insurance.--
[(1) In general.--The President's Working Group on
Financial Markets, in consultation with the National
Association of Insurance Commissioners, representatives
of the insurance industry, representatives of the
securities industry, and representatives of policy
holders, shall perform an analysis regarding the long-
term availability and affordability of insurance for
terrorism risk, including--
[(A) group life coverage; and
[(B) coverage for chemical, nuclear,
biological, and radiological events.
[(2) Report.--Not later than September 30, 2006, the
President's Working Group on Financial Markets shall
submit a report to the Committee on Banking, Housing,
and Urban Affairs of the Senate and the Committee on
Financial Services of the House of Representatives on
its findings pursuant to the analysis conducted under
subsection (a).]
(e) Analysis of Market Conditions for Terrorism Risk
Insurance.--
(1) In general.--The Secretary, in consultation with
the NAIC, representatives of the insurance industry,
representatives of the securities industry, and
representatives of policyholders, shall perform an
analysis regarding the long-term availability and
affordability of insurance for terrorism risk in the
private marketplace, including coverage for--
(A) property and casualty insurance;
(B) group life insurance;
(C) workers' compensation;
(D) nuclear, biological, chemical, and
radiological events; and
(E) commercial real estate.
(2) Biennial reports.--The Secretary shall submit
biennial reports to the Committee on Financial Services
of the House of Representatives and the Committee on
Banking, Housing, and Urban Affairs of the Senate, on
its findings pursuant to the analysis conducted under
paragraph (1). The first such report shall be submitted
not later than the expiration of the 24-month period
beginning on the date of the enactment of the Terrorism
Risk Insurance Revision and Extension Act of 2007.
(3) Testimony.--Upon submission of each biennial
report under paragraph (2), the Secretary shall provide
oral testimony to the Committee on Financial Services
of the House of Representatives and Committee on
Banking, Housing, and Urban Affairs of the United
States Senate regarding the report and the analysis
under this subsection for which the report is
submitted.
SEC. 109. COMMISSION ON TERRORISM RISK INSURANCE.
(a) Establishment.--There is hereby established the
Commission on Terrorism Risk Insurance (in this section
referred to as the ``Commission'').
(b) Membership.--
(1) The Commission shall consist of 21 members, as
follows:
(A) The Secretary of the Treasury or the
designee of the Secretary.
(B) One member who is a State insurance
commissioner, designated by the NAIC.
(C) 15 members, who shall be appointed by the
President, who shall include--
(i) a representative of group life
insurers;
(ii) a representative of property and
casualty insurers with direct earned
premium of $1,000,000,000 or less;
(iii) a representative of property
and casualty insurers with direct
earned premium of more than
$1,000,000,000;
(iv) a representative of multiline
insurers;
(v) a representative of independent
insurance agents;
(vi) a representative of insurance
brokers;
(vii) a policyholder representative;
(viii) a representative of the
survivors of the victims of the attacks
of September 11, 2001;
(ix) a representative of the
reinsurance industry;
(x) a representative of workers'
compensation insurers;
(xi) a representative from the
commercial mortgage-backed securities
industry;
(xii) a representative from a
nationally recognized statistical
rating organization;
(xiii) a real estate developer;
(xiv) a representative of workers'
compensation insurers created by State
legislatures, selected in consultation
with the American Association of State
Compensation Insurance Funds from among
its members; and
(xv) a representative from the
commercial real estate brokerage
industry or the commercial property
management industry.
(D) Four members, who shall serve as liaisons
to the Congress, who shall include two members
jointly selected by the Chairman and Ranking
Member of the Committee on Financial Services
of the House of Representatives and two members
jointly selected by the Chairman and Ranking
Member of the Committee on Banking, Housing,
and Urban Affairs of the Senate.
(2) Secretary.--The Program Director of the Terrorism
Risk Insurance Act of the Department of the Treasury
shall serve as Secretary of the Commission. The
Secretary of the Commission shall determine the manner
in which the Commission shall operate, including
funding and staffing.
(c) Duties.--
(1) In general.--The Commission shall identify and
make recommendations regarding--
(A) possible actions to encourage,
facilitate, and sustain provision by the
private insurance industry in the United States
of affordable coverage for losses due to an act
or acts of terrorism;
(B) possible actions or mechanisms to sustain
or supplement the ability of the insurance
industry in the United States to cover losses
resulting from acts of terrorism in the event
that--
(i) such losses jeopardize the
capital and surplus of the insurance
industry in the United States as a
whole; or
(ii) other consequences from such
acts occur, as determined by the
Commission, that may significantly
affect the ability of the insurance
industry in the United States to cover
such losses independently; and
(C) possible actions to significantly reduce
the Federal role in covering losses resulting
from acts of terrorism.
(2) Evaluations.--In identifying and making the
recommendations required under paragraph (1), the
Commission shall specifically evaluate the utility and
viability of proposals aimed at improving the
availability of insurance against terrorism risk in the
private marketplace.
(3) Initial meeting.--The Commission shall hold its
first meeting during the 3-month period that begins 15
months after the date of the enactment of the Terrorism
Risk Insurance Revision and Extension Act of 2007.
(4) Reports.--
(A) Contents.--The Commission shall submit
two reports to the Congress that--
(i) evaluate and make recommendations
regarding whether there is a need for a
Federal terrorism risk insurance
program;
(ii) if so, include a specific,
detailed recommendation for the
replacement of the Program under this
title; and
(iii) include the identifications,
evaluations, and recommendations
required under paragraphs (1) and (2).
(B) Timing.--The first report required under
subparagraph (A) shall be submitted before the
expiration of the 60-month period beginning on
the date of the enactment of the Terrorism Risk
Insurance Revision and Extension Act of 2007.
The second such report shall be submitted
before the expiration of the 96-month period
beginning upon such date of enactment.
* * * * * * *
ADDITIONAL REPUBLICAN VIEWS
Enacted after the September 11, 2001 terrorist attacks, the
Terrorism Risk Insurance Act (TRIA) was intended to be ``a
temporary Federal program . . . to allow for a transitional
period for the private market to stabilize, resume pricing of
[terrorism] insurance, and build capacity.'' Subsequently,
Congress recognized the need for a short-term extension of this
new program to curb uncertainty and maintain market stability.
To ensure that the taxpayers' liability under TRIA would not
become permanent, several mechanisms were included to phase out
the Federal subsidy over time, including: increasing the
insurer deductibles from 7 to 20 percent, increasing the
program trigger from $5 million to $100 million, increasing the
insurer co-share from 10 to 15 percent, increasing industry
retention from $10 billion to $27.5 billion, and narrowing
lines of coverage.
TRIA has successfully fulfilled its mandate. According to a
report by the President's Working Group on Financial Markets,
as the Federal subsidies for terrorism insurance have been
slowly phased out, take-up rates have risen, prices have
declined, reinsurance has expanded, and the private marketplace
has been successfully diversifying and absorbing additional
risk exposure. Unfortunately, H.R. 2761 radically revises TRIA,
changing it from a temporary hand-up into a permanent hand-out.
Instead of continuing to expand the private sector role in the
marketplace, H.R. 2761 turns the program on its head, shifting
the responsibility from a majority-private sector program to a
more government-run program with taxpayers on the hook for
massive increased potential liabilities.
While Republicans authored the original TRIA proposals and
continue to strongly support extending it for a reasonable
period of time, H.R. 2761 goes in the wrong direction with
respect to the proper balance between private and public sector
participation. The 15 year program extension is too long for
such an enormous taxpayer liability--particularly with the
terrorist threat continuing to rapidly evolve. The phase-out of
the Federal role and narrowing of scope under current law would
be largely reversed, the program trigger halved, and required
deductibles and co-shares would be dramatically reduced for
insurance companies. While deductibles would continue to
slightly increase annually, they are reset below Year 1 levels,
with the rate of increase not bringing the deductibles even
close to current levels until long after the 15 year extension.
Despite H.R. 2761's vast expansion of TRIA's federal
subsidies, Committee Republicans and Democrats worked together
in a number of critical areas to provide more protection from
terrorist threats in the marketplace. For example, many of the
provisions of H.R. 2761 protecting policyholders from domestic
threats and nuclear, biological, chemical, and radiological
(NBCR) risks were initially developed in TRIA extension
legislation that passed the House last Congress. Republicans
were also successful in getting several important amendments
adopted to add more market reforms to TRIA, encourage the long-
term build-up of dedicated terrorism surplus, protect
taxpayers, increase private sector responsibility, and better
implement the NBCR mandates.
For example, the manager's amendment to H.R. 2761 offered
by Chairman Frank at the Committee markup contained several key
Republican provisions to create a transition period for
implementation of the new NBCR requirements, better balance the
application of insurance company deductibles, and allow
insurers to accumulate and pool dedicated long-term terrorism
reserves for their deductibles and co-shares. State forms
requirements for NBCR terrorism coverage not previously
required will be exempt from state review for the first two
years as the NBCR marketplace adjusts and evolves. State price
controls will be partly preempted for three years to allow
insurers to charge appropriate rates for NBCR coverage as they
adjust their risk portfolios during this transition period,
although states will still be permitted to invalidate a rate as
inadequate or unfairly discriminatory. Insurers are allowed to
voluntarily participate in a terrorism buy-down fund, to lower
their liability for deductibles and co-shares after an event by
contributing premiums to a fund that would accumulate interest
over time. The funds can be pooled to help create additional
capacity over time, particularly to help insurers absorb the
increasing deductibles or increases in the Program trigger.
These reforms are based on amendments offered by Rep. Richard
Baker at the Capital Markets, Insurance, and Government
Sponsored Enterprises Subcommittee markup of H.R. 2761, and
will especially benefit smaller insurers, who may find it
difficult to initially price and set aside reserves for NBCR
coverage.
In addition to the Manager's Amendment, the Committee
approved two Republican amendments that improve the ability of
insurers to comply with the NBCR make-available mandate. Rep.
Kenny Marchant offered a measure clarifying that an insurer may
partner with another insurer with a comparable credit rating to
provide NBCR coverage. This will allow insurers that may find
it more difficult to offer NBCR coverage without risking
insolvency or a ratings downgrade to continue offering
commercial property and casualty insurance in high-risk areas.
Rep. Donald Manzullo had an amendment accepted to allow
exemptions to the NBCR make-available mandate for small
insurers that demonstrate a likelihood of insolvency in the
case of nuclear, biological, chemical, or radiological
terrorism. This amendment allows small insurers to continue
offering their underlying coverage to policyholders even though
the NBCR mandate would otherwise magnify their risk exposure
and force a significant coverage contraction. These reforms
will ease the implementation of the NBCR mandates for covered
lines under the TRIA program. It should be noted that TRIA does
not provide a backstop for homeowners' insurance or other
personal lines, and NBCR risks are expected to continue to be
excluded from most homeowners' policies. Past Committee reports
have suggested that NBCR is a relatively uninsurable risk
absent some form of government backstop.
Republican amendments were also accepted to better protect
taxpayers from bearing the brunt of an expanded TRIA program.
Rep. Michele Bachmann offered an amendment directing Treasury
to either require full taxpayer recoupment of any Federal
payouts to cover terrorism losses, or to report to Congress on
why full recoupment is not appropriate, based on such factors
as cost to taxpayers, the economic environment, and insurance
affordability for small- and mediumsized companies. Full
recoupment is a vital component of any TRIA extension. While
mandatory 100% payback of the taxpayers has been included in
every previous Committee-passed TRIA bill, requiring Treasury
to either recoup such amounts or report to Congress why and to
what extent such full recoupment cannot be made is an
improvement over the introduced language of H.R. 2761. The
Committee also adopted an amendment offered by Rep. Scott
Garrett increasing the TRIA deductible each year for events
over $1 billion by one-half a percentage point each year (50
basis points), with a reset mechanism to bring the deductibles
back down if another major terrorist event occurred.
Deductibles have increased by at least 2.5% each year since the
creation of TRIA. Though the new increase is much more modest,
adding at least some increase to H.R. 2761 ensures that private
sector responsibility will continue to grow and the Federal
subsidy decline over time. Rep. Ginny Brown-Waite also offered
a fiscal responsibility amendment designed to reduce taxpayer
exposure to terrorism losses. Under this amendment, Treasury is
directed to index the TRIA program--including the trigger and
cap--to adjust each year for inflation. This will ensure that
the dollar amounts do not decline in actual value each year,
protecting the government and taxpayers from having to
intervene in relatively small events that do not threaten the
functioning or solvency of the marketplace.
The vast majority of Republicans remain strongly committed
to TRIA and its extension for a reasonable length of time. H.R.
2761 includes a number of important reforms that have been
developed as the result of bipartisan efforts over several
years. It is my hope that H.R. 2761 can be rebalanced, either
on the House Floor or in conference with the Senate, to better
reflect its intended temporary and private sector focused
nature. TRIA is working extremely well today. Its Federal
subsidies should not be increased, but rather slowly decreased
to encourage private sector solutions and innovation. If this
goal can be achieved, final passage of TRIA will have
overwhelming bipartisan support.
Spencer Bachus, Ranking Member.
DISSENTING VIEWS OF RON PAUL ON H.R. 2761
Six years ago, when the Congress considered the bill
creating the terrorism insurance program, I urged my colleagues
to reject it. One of the reasons I opposed the bill was my
concern that, contrary to the claims of the bill's supporters,
terrorism insurance would not be allowed to sunset. As I said
then:
The drafters of H.R. 3210 claim that this creates a
``temporary'' government program. However, Mr. Speaker,
what happens in three years if industry lobbyists come
to Capitol Hill to explain that there is still a need
for this program because of the continuing threat of
terrorist attacks. Does anyone seriously believe that
Congress will refuse to reauthorize this ``temporary''
insurance program or provide some other form of
taxpayer help to the insurance industry? I would like
to remind my colleagues that the federal budget is full
of expenditures for long-lasting programs that were
originally intended to be ``temporary.''
I am disappointed to be proven correct. I am also skeptical
that, having renewed the program twice, this time for fifteen
years, Congress will ever allow it to expire.
As Congress considers extending this program, I renew my
opposition to it for substantially the same reasons I stated
six years ago. However, I do have a suggestion on how to
improve the program. Since one claimed problem with allowing
the private market to provide terrorism insurance is the
difficulty of quantifying the risk of an attack, the taxpayers'
liability under the terrorism reinsurance program should be
reduced for an attack occurring when the country is under
orange or red alert. After all, because the point of the alert
system is to let Americans know when there is an increased
likelihood of an attack it is reasonable to expect insurance
companies to demand that their clients take extra precautionary
measures during periods of high alert. Reducing taxpayer
subsidies will provide an incentive to ensure private parties
take every possible precaution to minimize the potential damage
from possible terrorists attack.
Since my fundamental objections to the program remain the
same as six years ago, I am attaching my statement regarding
H.R. 3210, which created the terrorist insurance program in the
107th Congress:
Mr. Speaker, no one doubts that the government has a role
to play in compensating American citizens who are victimized by
terrorist attacks. However, Congress should not lose sight of
fundamental economic and constitutional principles when
considering how best to provide the victims of terrorist
attacks just compensation. I am afraid that H.R. 3210, the
Terrorism Risk Protection Act, violates several of those
principles and therefore passage of this bill is not in the
best interests of the American people.
Under H.R. 3210, taxpayers are responsible for paying 90%
of the costs of a terrorist incident when the total cost of
that incident exceeds a certain threshold. While insurance
companies technically are responsible under the bill for paying
back monies received from the Treasury, the administrator of
this program may defer repayment of the majority of the subsidy
in order to ``avoid the likely insolvency of the commercial
insurer,'' or avoid ``unreasonable economic disruption and
market instability.'' This language may cause administrators to
defer indefinitely the repayment of the loans, thus causing
taxpayers to permanently bear the loss. This scenario is
especially likely when one considers that ``avoid . . . likely
insolvency, unreasonable economic disruption, and market
instability'' are highly subjective standards, and that any
administrator who attempts to enforce a strict repayment
schedule likely will come under heavy political pressure to be
more ``flexible'' in collecting debts owed to the taxpayers.
The drafters of H.R. 3210 claim that this creates a
``temporary'' government program. However, Mr. Speaker, what
happens in three years if industry lobbyists come to Capitol
Hill to explain that there is still a need for this program
because of the continuing threat of terrorist attacks. Does
anyone seriously believe that Congress will refuse to
reauthorize this ``temporary'' insurance program or provide
some other form of taxpayer help to the insurance industry? I
would like to remind my colleagues that the federal budget is
full of expenditures for long-lasting programs that were
originally intended to be ``temporary.''
H.R. 3210 compounds the danger to taxpayers because of what
economists call the ``moral hazard'' problem. A moral hazard is
created when individuals have the costs incurred from a risky
action subsidized by a third party. In such a case individuals
may engage in unnecessary risks or fail to take steps to
minimize their risks. After all, if a third party will bear the
costs of negative consequences of risky behavior, why should
individuals invest their resources in avoiding or minimizing
risk?
While no one can plan for terrorist attacks, individuals
and businesses can take steps to enhance security. For example,
I think we would all agree that industrial plants in the United
States enjoy reasonably good security. They are protected not
by the local police, but by owners putting up barbed wire
fences, hiring guards with guns, and requiring identification
cards to enter. One reason private firms put these security
measures in place is because insurance companies provide them
with incentives, in the form of lower premiums, to adopt
security measures. H.R. 3210 contains no incentives for this
private activity. The bill does not even recognize the
important role insurance plays in providing incentives to
minimize risks. By removing an incentive for private parties to
avoid or at least mitigate the damage from a future terrorist
attack, the government inadvertently increases the damage that
will be inflicted by future attacks!
Instead of forcing taxpayers to subsidize the costs of
terrorism insurance, Congress should consider creating a tax
credit or deduction for premiums paid for terrorism insurance,
as well as a deduction for claims and other costs borne by the
insurance industry connected with offering terrorism insurance.
A tax credit approach reduces government's control over the
insurance market. Furthermore, since a tax credit approach
encourages people to devote more of their own resources to
terrorism insurance, the moral hazard problems associated with
federally funded insurance is avoided.
The version of H.R. 3210 passed by the Financial Services
committee took a good first step in this direction by repealing
the tax penalty which prevents insurance companies from
properly reserving funds for human-created catastrophes. I am
disappointed that this sensible provision was removed from the
final bill. Instead, H.R. 3210 instructs the Treasury
Department to study the benefits of allowing insurers to
establish tax-free reserves to cover losses from terrorist
events. The perceived need to study the wisdom of cutting taxes
while expanding the federal government without hesitation
demonstrates much that is wrong with Washington.
In conclusion, Mr. Speaker, H.R. 3210 may reduce the risk
to insurance companies from future losses, but it increases the
costs incurred by an American taxpayer. More significantly, by
ignoring the moral hazard problem this bill may have the
unintended consequence of increasing the losses suffered in any
future terrorist attacks. Therefore, passage of this bill is
not in the long-term interests of the American people.
Ron Paul.