[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 9 Reported in House (RH)]

                                                 Union Calendar No. 470

103d CONGRESS

  2d Session

                                H. R. 9

                          [Report No. 103-853]

_______________________________________________________________________

                                 A BILL

    To modify the antitrust exemption applicable to the business of 
                               insurance.

_______________________________________________________________________

                            October 7, 1994

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed





                                                 Union Calendar No. 470
103d CONGRESS
  2d Session
                                 H. R. 9

                          [Report No. 103-853]

    To modify the antitrust exemption applicable to the business of 
                               insurance.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 5, 1993

  Mr. Brooks introduced the following bill; which was referred to the 
                       Committee on the Judiciary

                              June 2, 1994

    Additional sponsors: Mr. Edwards of California, Miss Collins of 
          Michigan, Mr. Kopetski, and Mr. Johnston of Florida

                            October 7, 1994

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]
[For text of introduced bill, see copy of bill as introduced on January 
                                5, 1993]

_______________________________________________________________________

                                 A BILL


 
    To modify the antitrust exemption applicable to the business of 
                               insurance.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Insurance Competitive Pricing Act of 
1994''.

SEC. 2. RULES OF CONSTRUCTION.

    The amendments made by this Act preserve--
            (1) the provisions relating to State taxing and regulatory 
        authority in section 2 of the Act of March 9, 1945 (59 Stat. 
        34; 15 U.S.C. 1012), commonly known as the McCarran-Ferguson 
        Act;
            (2) the availability, to persons engaged in the business of 
        insurance, of the defense of State action in the same manner 
        and to the same extent as such defense is available to other 
        persons;
            (3) the availability, to persons engaged in the business of 
        insurance, of any antitrust immunity or defense that may be 
        applicable under law other than the McCarran-Ferguson Act;
            (4) the legal standards applicable under the McCarran-
        Ferguson Act, as in effect before such Act is amended by this 
        Act, to all conduct described in the safe harbors found in 
        subparagraphs (B), (C), (D), and (E) of section 2(b)(1) of the 
        McCarran-Ferguson Act, as amended by this Act; and
            (5) the provisions relating to boycott, coercion, or 
        intimidation in section 3(b) of the McCarran-Ferguson Act.

SEC. 3. AMENDMENTS.

    Section 2 of the Act of March 9, 1945 (59 Stat. 34; 15 U.S.C. 
1012), commonly known as the McCarran-Ferguson Act, is amended--
            (1) in subsection (b) by striking ``: Provided,'' and all 
        that follows through ``law.'' and inserting the following:
``except as follows:
            ``(1)(A) The antitrust laws shall be applicable to the 
        business of insurance except as provided in subparagraphs (B), 
        (C), (D), and (E).
            ``(B) The antitrust laws shall not be applicable to conduct 
        that consists of making an agreement or engaging in joint 
        conduct--
                    ``(i)(I) to collect, compile, classify, or 
                disseminate historical data;
                    ``(II) to develop procedures to collect, compile, 
                classify, or disseminate historical data; or
                    ``(III) to verify that historical data is accurate 
                and complete;
                    ``(ii) to determine, using standard actuarial 
                techniques, or disseminate, a loss development factor 
                or developed losses;
                    ``(iii) to develop or disseminate a standard 
                insurance policy form (including a standard addendum to 
                an insurance policy form and standard terminology in an 
                insurance policy form) if such agreement or joint 
                conduct does not include an agreement to adhere to such 
                standard form, or to require adherence to such standard 
                form, except that the fact that 2 or more persons 
                engaged in the business of insurance use such standard 
                form--
                            ``(I) shall not be sufficient in itself to 
                        support a finding that an agreement to adhere, 
                        or to require adherence, to such standard form 
                        exists; and
                            ``(II) may be used only for the purpose of 
                        supplementing or explaining direct evidence of 
                        the existence of an agreement to adhere, or to 
                        require adherence, to such standard form;
                    ``(iv) to develop or disseminate, for use in 
                providing insurance in a State, a manual that is filed, 
                before dissemination, with the State entity that 
                regulates the business of insurance under State law, if 
                such manual includes only--
                            ``(I) information and conduct described in 
                        clauses (i), (ii), and (iii), including 
                        relativity factors;
                            ``(II) during the transition period, a 
                        trend factor or information to which a trend 
                        factor has been applied, to the extent 
                        permitted under subparagraph (C); and
                            ``(III) explanations and instructions for 
                        using the manual (or any of the information 
                        contained in the manual), if such agreement or 
                        joint conduct does not include an agreement 
                        among competitors to adhere, or to require 
                        adherence, to any of such explanations or 
                        instructions;
                    ``(v) to provide insurance pursuant to a public 
                necessity market mechanism;
                    ``(vi) to provide insurance as a historical 
                underwriting capacity risk pool;
                    ``(vii) to administer a public necessity market 
                mechanism in a State, pursuant to the authorization of 
                and under the supervision of such State, if all persons 
                who provide insurance in such State pursuant to such 
                mechanism, and all persons seeking to obtain insurance 
                through such mechanism, have a reasonable opportunity 
                to appeal determinations affecting them to a 
                governmental entity;
                    ``(viii) to develop or participate in a program to 
                inspect commercial buildings and fire protection 
                facilities, and evaluate government building code 
                requirements and enforcement of such requirements, to 
                determine the likelihood and potential extent of loss 
                due to fire, wind, hail, earthquake, flood, or tidal 
                wave, pursuant to a State law that provides procedures 
                for making such a determination and provides a 
                reasonable opportunity for an affected person to appeal 
                such a determination to a governmental entity; or
                    ``(ix) to develop or participate in a program, 
                pursuant to a workers' compensation insurance plan 
                filed with the State entity that regulates the business 
                of insurance under State law, to measure an employer's 
                experience with respect to occupational accidents and 
                illnesses for which such employer is liable, against 
                the comparable experience of other employers, and to 
                make a modification for an individual employer based on 
                such comparisons, if an affected employer has a 
                reasonable opportunity to appeal a determination under 
                such program to a governmental entity;
        to the extent that such conduct is regulated by State law.
            ``(C) During the transition period, the antitrust laws 
        shall not be applicable to conduct that consists of making an 
        agreement or engaging in joint conduct to determine or 
        disseminate a trend factor, to the extent that such conduct is 
        regulated by State law.
            ``(D) The antitrust laws shall not be applicable to conduct 
        by a director, officer, or employee of a national trade 
        association representing insurance agents, or of a State trade 
        association representing insurance agents that is affiliated 
        with such national trade association, acting within the scope 
        of the authority vested in such director, officer, or employee 
        by the trade association involved, that consists of preparing, 
        disseminating, or discussing a report or comment (including 
        describing, evaluating, and suggesting possible responses for 
        members of the association whose directors, officers, or 
        employees prepared such report or such comment to consider) 
        with respect to any insurer practice affecting the relationship 
        between insurers and insurance agents, if--
                    ``(i) such report or such comment includes a 
                conspicuous statement that each insurance agent is 
                expected to make his or her own decision regarding 
                matters contained in such report or such comment and 
                that anticompetitive agreements among insurance agents 
                with respect to any response to such practice are 
                illegal under the antitrust laws;
                    ``(ii) such conduct does not involve--
                            ``(I) monitoring or policing the extent to 
                        which any insurance agent follows, or 
                        pressuring any insurance agent to follow, any 
                        of such responses;
                            ``(II) initiating any communication 
                        (including a mailing, association publication, 
                        or association meeting) with any member of any 
                        such association with respect to such report or 
                        such comment (including any of such responses), 
                        other than by a means designed to reach all 
                        members, or all directors and officers, of such 
                        association;
                            ``(III) referring to any of such responses 
                        in any discussion unless the discussion 
                        emphasizes that each insurance agent is 
                        expected to make his or her own decision 
                        regarding matters contained in such report or 
                        such comment and that anticompetitive 
                        agreements among insurance agents with respect 
                        to any response to such practice are illegal 
                        under the antitrust laws; or
                            ``(IV) the formal endorsement of such 
                        report or such comment (including any of such 
                        responses) by any part of the membership of any 
                        such association, other than a statement that 
                        dissemination of such report or such comment 
                        has been approved by the directors or officers 
                        of the association whose directors, officers, 
                        or employees prepared such report or such 
                        comment; and
                    ``(iii) the number of directors and officers of any 
                such association who are involved in preparing, 
                disseminating, or discussing such report or such 
                comment (including any of such responses) does not 
                substantially exceed the number of directors and 
                officers of such association serving on April 30, 1994;
        and if the business of insurance is regulated by State law.
            ``(E) The antitrust laws shall not be applicable to conduct 
        of an insurance agent that is a member of an association 
        referred to in subparagraph (D) that consists of independently 
        initiating a communication, in an issue of a regularly 
        scheduled association publication or at a regularly scheduled 
        association meeting, to members of a local trade association 
        representing insurance agents of which such agent is a member, 
        that describes or summarizes all or part of the contents of a 
        report or comment described in such subparagraph provided to 
        such agent by such association described in such subsection and 
        that is made only by a means designed to reach all such 
        members, if--
                    ``(i) such conduct does not involve--
                            ``(I) monitoring or policing the extent to 
                        which any insurance agent follows, or 
                        pressuring any insurance agent to follow, any 
                        of the possible responses contained in such 
                        report or such comment;
                            ``(II) referring to any of such responses 
                        unless the reference emphasizes that each 
                        insurance agent is expected to make his or her 
                        own decision regarding matters contained in 
                        such report or such comment and that 
                        anticompetitive agreements among insurance 
                        agents with respect to any response to an 
                        insurance practice discussed in such report or 
                        such comment are illegal under the antitrust 
                        laws; or
                            ``(III) the formal endorsement of such 
                        report or such comment (including any of such 
                        responses); and
                    ``(ii) the primary purpose of such meeting, or of 
                such issue of such publication, is not the discussion 
                of such report or such comment (including any of such 
                responses);
        and if the business of insurance is regulated by State law.
            ``(2) Subsequent to the transition period, the independent 
        purchase of a trend factor by a person engaged in the business 
        of insurance from a person not engaged in providing insurance 
        (and not affiliated with a person engaged in providing 
        insurance) shall be presumed not to violate the antitrust laws.
            ``(3) The Federal Trade Commission Act shall be applicable 
        to the business of insurance to the extent that such business 
        is not regulated by State law, except that, with respect to 
        enforcement of the antitrust laws, section 5 of such Act shall 
        be applicable to the business of insurance to the same extent 
        as the other antitrust laws.'', and
            (2) by adding at the end the following:
    ``(c) For purposes of subsection (b)--
            ``(1) the term `antitrust laws' has the meaning given it in 
        subsection (a) of the first section of the Clayton Act (15 
        U.S.C. 12), except that such term includes section 5 of the 
        Federal Trade Commission Act (15 U.S.C. 45) as such section 5 
        applies to conduct that constitutes a violation of the Sherman 
        Act or the Clayton Act;
            ``(2) the term `developed losses' means aggregate paid 
        losses and aggregate reserves held for received claims, as 
        adjusted by a loss development factor;
            ``(3) the term `historical data' means information 
        respecting--
                    ``(A) losses paid by, claims received by, reserves 
                for such claims set aside by, or units of exposure to 
                loss in insurance policies sold by any person engaged 
                in the business of insurance; or
                    ``(B) insurance premiums received by any person 
                engaged in the business of insurance, if such 
                information is not disseminated in a form from which 
                information respecting premiums received by any 
                separately identifiable person engaged in the business 
                of insurance may be derived;
            ``(4) the term `historical underwriting capacity risk pool' 
        means an underwriting capacity risk pool established prior to 
        April 30, 1994--
                    ``(A) the purpose of which is to provide insurance 
                for a commercial risk relating to--
                            ``(i) an airport, aviation, or aerospace 
                        activity;
                            ``(ii) a large commercial or industrial 
                        property (including machinery, boilers, and 
                        pressure vessels);
                            ``(iii) a grain elevator or feed mill;
                            ``(iv) an oil, gas, or chemical peril;
                            ``(v) the construction or operation of a 
                        nuclear energy facility;
                            ``(vi) an inland marine peril or an ocean 
                        marine enterprise;
                            ``(vii) a natural disaster;
                            ``(viii) an occupational accident or 
                        illness;
                            ``(ix) transportation of currency, mail, 
                        securities, bullion, or other valuables by a 
                        person with fiduciary responsibility for their 
                        safe transport;
                            ``(x) foreign commercial activities 
                        undertaken in cooperation with the United 
                        States Export-Import Bank; or
                            ``(xi) a war, rebellion, riot, or similar 
                        civil commotion;
                    ``(B) whose conduct has not materially changed from 
                the conduct described in accordance with subparagraph 
                (C)(ii) in which such pool--
                            ``(i) was authorized to engage under its 
                        charter, bylaws, or other documents of 
                        organization or governance filed in accordance 
                        with subparagraph (C)(iii); and
                            ``(ii) did engage as so authorized;
                prior to April 30, 1994; and
                    ``(C) that, before the effective date of the 
                Insurance Competitive Pricing Act of 1994, filed with 
                the Attorney General of the United States, in 
                accordance with such rules as the Attorney General may 
                have issued, a notification--
                            ``(i) disclosing the identities of the 
                        members of such pool on April 30, 1994;
                            ``(ii) describing the nature and scope of 
                        the activities of such pool, and the lines of 
                        insurance in which such pool was engaged, prior 
                        to April 30, 1994; and
                            ``(iii) containing the charter, bylaws, and 
                        other documents of organization or governance 
                        of such pool in effect on or before April 30, 
                        1994;
            ``(5) the term `insurance agent' means a person that is--
                    ``(A) engaged as an independent contractor in the 
                business of selling insurance;
                    ``(B) licensed under the law of a State as an 
                insurance agent or insurance broker; and
                    ``(C) neither an insurer in any State in which such 
                person is so engaged, nor an employee of an insurer;
            ``(6) the term `insurance policy' means a contract under 
        which insurance is sold to an insured;
            ``(7) the term `insurer' means a person that is--
                    ``(A) engaged in the business of providing 
                insurance; and
                    ``(B) obligated to pay losses under the insurance 
                policies under which it provides insurance;
            ``(8) the term `loss' means an amount paid or to be paid by 
        a person engaged in the business of insurance to (or for the 
        benefit of) a claimant to satisfy a claim on an insurance 
        policy, and includes any attorney, investigatory, or litigation 
        expenses that are separately incurred, identified, and 
        allocated by such person with respect to that particular claim;
            ``(9) the term `loss development factor' means an 
        adjustment to be made to the aggregate of losses incurred 
        during a prior period of time that have been paid or for which 
        claims have been received and reserves are being held, in order 
        to estimate the aggregate of the losses incurred during such 
        period that will ultimately be paid;
            ``(10) the term `loss incurred' means a loss for which the 
        event has occurred that ultimately gives rise to liability on a 
        claim on an insurance policy, without regard to whether a claim 
        based on such event has been received;
            ``(11) the term `public necessity market mechanism' means a 
        plan established by State law or by the State entity that 
        regulates the business of insurance under State law--
                    ``(A) for providing a type of insurance in a State;
                    ``(B) in which the persons providing such type of 
                insurance pursuant to such mechanism represent a 
                substantial number of the persons engaged in the 
                business of providing such type of insurance in such 
                State and are either required by State law, or formally 
                requested or ordered by such State entity, to 
                participate;
                    ``(C) the purpose of which is to make such type of 
                insurance available to persons who would not otherwise 
                be able to obtain such type of insurance at affordable 
                cost; and
                    ``(D) in which the rate for such type of insurance 
                is subject to the approval or disapproval of such 
                State;
            ``(12) the term `relativity factor' means a ratio comparing 
        one classification of historical data to another such 
        classification, or comparing developed losses in one such 
        classification to developed losses in another such 
        classification;
            ``(13) the term `transition period' means the 2-year period 
        beginning on the effective date of the Insurance Competitive 
        Pricing Act of 1994;
            ``(14) the term `trend factor' means an adjustment to be 
        made to developed losses in order to account for any change 
        that is anticipated to affect losses; and
            ``(15) the term `underwriting capacity risk pool' means a 
        business arrangement or association--
                    ``(A) whose members consist of 2 or more persons 
                engaged in the business of insurance; and
                    ``(B) that operates for the purpose of providing 
                insurance under which the liability for paying losses 
                is spread among such members.''.

SEC. 4. PUBLICATION AND AVAILABILITY OF HISTORICAL UNDERWRITING 
              CAPACITY RISK POOL NOTIFICATIONS.

    The Attorney General shall, not later than 30 days after receiving 
a notification filed in accordance with section 2(c)(4)(C) of the Act 
of March 9, 1945 (59 Stat. 34; 15 U.S.C. 1012), commonly known as the 
McCarran-Ferguson Act--
            (1) publish in the Federal Register--
                    (A) a summary of such notification; and
                    (B) notice that such notification is available to 
                the public; and
            (2) make such notification available to the public.

SEC. 5. BUSINESS REVIEW.

    If a person engaged in the business of insurance submits a written 
request to the Attorney General in accordance with section 50.6 of 
title 28 of the Code of Federal Regulations (July 1, 1992), as amended 
from time to time, for a business review letter with respect to the 
application of the antitrust laws to specified activities of an 
underwriting capacity risk pool (as defined in section 2(c)(15) of the 
Act of March 9, 1945, commonly known as the McCarran-Ferguson Act) of 
which such person is, or intends to become, a member, then the Attorney 
General shall issue such letter in accordance with such section.

SEC. 6. STUDY AND REPORT.

    (a) Study.--During the 5-year period beginning on the effective 
date of this Act, the Attorney General shall conduct a study to 
determine the effect of this Act, and the amendments made by this Act, 
on the business of insurance.
    (b) Report.--Not later than 1 year after the expiration of the 5-
year period referred to in subsection (a), the Attorney General shall 
submit, to the Speaker of the House of Representatives and the 
President pro tempore of the Senate, a report summarizing the results 
of the study required by subsection (a).

SEC. 7. EFFECTIVE DATES.

    (a) General Effective Date.--Except as provided in subsection (b), 
this Act shall take effect 1 year after the date of the enactment of 
this Act.
    (b) Effective Date of Sections 4 and 5.--Sections 4 and 5 shall 
take effect on the date of the enactment of this Act.
HR 9 RH----2