[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3210 Engrossed in House (EH)]

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
107th CONGRESS
  1st Session
                                H. R. 3210

_______________________________________________________________________

                                 AN ACT


 
   To ensure the continued financial capacity of insurers to provide 
                   coverage for risks from terrorism.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Terrorism Risk 
Protection Act''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title and table of contents.
Sec. 2. Congressional findings.
Sec. 3. Authority of Secretary of the Treasury.
Sec. 4. Submission of premium information to Secretary.
Sec. 5. Initial and subsequent triggering determinations.
Sec. 6. Federal cost-sharing for commercial insurers.
Sec. 7. Assessments.
Sec. 8. Terrorism loss repayment surcharge.
Sec. 9. Administration of assessments and surcharges.
Sec. 10. Application to self-insurance arrangements and offshore 
                            insurers and reinsurers.
Sec. 11. Study of reserves for property and casualty insurance for 
                            terrorist or other catastrophic events.
Sec. 12. State preemption.
Sec. 13. Consistent State guidelines for coverage for acts of 
                            terrorism.
Sec. 14. Consultation with State insurance regulators and NAIC.
Sec. 15. Litigation management.
Sec. 16. Study of potential effects of terrorism on life insurance 
                            industry.
Sec. 17. Railroad and trucking insurance study.
Sec. 18. Study of reinsurance pool system for future acts of terrorism.
Sec. 19. Definitions.
Sec. 20. Covered period and extension of program.
Sec. 21. Regulations.

SEC. 2. CONGRESSIONAL FINDINGS.

    The Congress finds that--
            (1) the terrorist attacks on the World Trade Center and the 
        Pentagon of September 11, 2001, resulted in a large number of 
        deaths and injuries, the destruction and damage to buildings, 
        and interruption of business operations;
            (2) the attacks have inflicted possibly the largest losses 
        ever incurred by insurers and reinsurers in a single day;
            (3) while the insurance and reinsurance industries have 
        committed to pay the losses arising from the September 11 
        attacks, the resulting disruption has created widespread market 
        uncertainties with regard to the risk of losses arising from 
        possible future terrorist attacks;
            (4) such uncertainty threatens the continued availability 
        of United States commercial property and casualty insurance for 
        terrorism risk at meaningful coverage levels;
            (5) the unavailability of affordable commercial property 
        and casualty insurance for terrorist acts threatens the growth 
        and stability of the United States economy, including impeding 
        the ability of financial services providers to finance 
        commercial property acquisitions and new construction;
            (6) in the past, the private insurance and reinsurance 
        markets have shown a remarkable resiliency in adapting to 
        changed circumstances;
            (7) given time, the private markets will diversify and 
        develop risk spreading mechanisms to increase capacity and 
        guard against possible future losses incurred by terrorist 
        attacks;
            (8) it is necessary to create a temporary industry risk 
        sharing program to ensure the continued availability of 
        commercial property and casualty insurance and reinsurance for 
        terrorism-related risks;
            (9) such action is necessary to limit immediate market 
        disruptions, encourage economic stabilization, and facilitate a 
        transition to a viable market for private terrorism risk 
        insurance;
            (10) in addition, it is necessary promptly to conduct a 
        study of whether there is a need for reserves for property and 
        casualty insurance for terrorist or other catastrophic events; 
        and
            (11) terrorism insurance plays an important role in the 
        efficient functioning of the economy and the financing of 
        commercial property acquisitions and new construction and, 
        therefore, the Congress intends to continue to monitor, review, 
        and evaluate the private terrorism insurance and reinsurance 
        marketplace to determine whether additional action is necessary 
        to maintain the long-term stability of the real estate and 
        capital markets.

SEC. 3. AUTHORITY OF SECRETARY OF THE TREASURY.

    The Secretary of the Treasury shall be responsible for carrying out 
a program for financial assistance for commercial property and casualty 
insurers, as provided in this Act.

SEC. 4. SUBMISSION OF PREMIUM INFORMATION TO SECRETARY.

    To the extent such information is not otherwise available to the 
Secretary, the Secretary may require each insurer to submit, to the 
Secretary or to the NAIC, a statement specifying the net premium amount 
of coverage written by such insurer under each line of commercial 
property and casualty insurance sold by such insurer during such 
periods as the Secretary may provide.

SEC. 5. INITIAL AND SUBSEQUENT TRIGGERING DETERMINATIONS.

    (a) In General.--For purposes of this Act, a ``triggering 
determination'' is a determination by the Secretary that an act of 
terrorism has occurred during the covered period and that the aggregate 
insured losses resulting from such occurrence or from multiple 
occurrences of acts of terrorism all occurring during the covered 
period, meet the requirements under either of the following paragraphs:
            (1) Industry-wide trigger.--Such industry-wide losses 
        exceed $1,000,000,000.
            (2) Individual insurer trigger.--Such industry-wide losses 
        exceed $100,000,000 and some portion of such losses for any 
        single commercial insurer exceed--
                    (A) 10 percent of the capital surplus of such 
                commercial insurer (as such term is defined by the 
                Secretary); and
                    (B) 10 percent of the net premium written by such 
                commercial insurer that is in force at the time the 
                insured losses occurred;
        except that this paragraph shall not apply to any commercial 
        insurer that was not providing commercial property and casualty 
        insurance coverage prior to September 11, 2001, unless such 
        insurer incurs such losses under commercial property and 
        casualty insurance providing coverage for acts of terrorism 
        through a pool of reserves for terrorism risks that is not 
        under the control of any commercial insurer.
    (b) Determinations Regarding Occurrences.--The Secretary, after 
consultation with the Attorney General of the United States and the 
Secretary of State, shall have the sole authority which may not be 
delegated or designated to any other officer, employee, or position, 
for determining whether--
            (1) an occurrence was caused by an act of terrorism; and
            (2) an act of terrorism occurred during the covered period.

SEC. 6. FEDERAL COST-SHARING FOR COMMERCIAL INSURERS.

    (a) In General.--Pursuant to a triggering determination, the 
Secretary shall provide financial assistance to commercial insurers in 
accordance with this section to cover insured losses resulting from 
acts of terrorism, which shall be repaid in accordance with subsection 
(e).
    (b) Amount.--
            (1) Industry-wide trigger.--Subject to subsections (c) and 
        (d), with respect to a triggering determination under section 
        5(a)(1), financial assistance shall be made available under 
        this section to each commercial insurer in an amount equal to 
        the difference between--
                    (A) 90 percent of the amount of the insured losses 
                of the insurer as a result of the triggering event 
                involved; and
                    (B) $5,000,000.
            (2) Individual insurer trigger.--Subject to subsections (c) 
        and (d), with respect to a triggering determination under 
        section 5(a)(2), financial assistance shall be made available 
        under this section, to each commercial insurer incurring 
        insured losses as a result of the triggering event involved 
        that exceed the amounts under subparagraphs (A) and (B) of such 
        section, in an amount equal to the difference between--
                    (A) 90 percent of the amount of the insured losses 
                of the insurer as a result of such triggering event; 
                and
                    (B) the amount under subparagraph (B) of section 
                5(a)(2).
            (3) Additional amounts.--Subject to subsection (c), if the 
        Secretary has provided financial assistance to a commercial 
        insurer pursuant to paragraph (2) of this subsection and 
        subsequently makes a triggering determination pursuant to 
        section 5(a)(1), the Secretary shall provide financial 
        assistance to such insurer in connection with such subsequent 
        triggering determination (in addition to the amount of 
        financial assistance provided to such insurer pursuant to 
        paragraph (1) of this subsection) in the amount under section 
        5(a)(2)(B).
    (c) Aggregate Limitation.--
            (1) In general.--The aggregate amount of financial 
        assistance provided pursuant to this section may not exceed 
        $100,000,000,000.
            (2) Sense of congress regarding severe losses.--It is the 
        sense of the Congress that acts of terrorism resulting in 
        insured losses greater than $100,000,000,000 would necessitate 
        further action by the Congress to address such additional 
        losses.
    (d) Limitations.--The Secretary may establish such limitations as 
may be necessary to ensure that payments under this section in 
connection with a triggering determination are made only to commercial 
insurers that are not in default of any obligation under section 7 to 
pay assessments or under section 8 to collect surcharges.
    (e) Repayment.--Financial assistance made available under this 
section shall be repaid through assessments under section 7 collected 
by the Secretary and surcharges remitted to the Secretary under section 
8. Any such amounts collected or remitted shall be deposited into the 
general fund of the Treasury.
    (f) Emergency Designation.--Congress designates the amount of new 
budget authority and outlays in all fiscal years resulting from this 
section as an emergency requirement pursuant to section 252(e) of the 
Balanced Budget and Emergency Deficit Control Act of 1985 (2 U.S.C. 
901(e)). Such amount shall be available only to the extent that a 
request, that includes designation of such amount as an emergency 
requirement as defined in such Act, is transmitted by the President to 
Congress.

SEC. 7. ASSESSMENTS.

    (a) In General.--In the case of a triggering determination, each 
commercial insurer shall be subject to assessments under this section 
for the purpose of repaying a portion of the financial assistance made 
available under section 6 in connection with such determination.
    (b) Aggregate Assessment.--Pursuant to a triggering determination, 
the Secretary shall determine the aggregate amount to be assessed under 
this section among all commercial insurers, which shall be equal to the 
lesser of--
            (1) $20,000,000,000; and
            (2) the amount of financial assistance paid under section 6 
        in connection with the triggering determination.
The aggregate assessment amount under this subsection shall be assessed 
to commercial insurers through an industry obligation assessment under 
subsection (c) and, if necessary, the remainder shall be assessed 
through one or more financing assessments under subsection (d).
    (c) Industry Obligation Assessments.--
            (1) In general.--Immediately upon the occurrence of a 
        triggering determination, the Secretary shall impose an 
        industry obligation assessment under this subsection on all 
        commercial insurers, subject to paragraph (3).
            (2) Amount.--The aggregate amount of an industry obligation 
        assessment in connection with a triggering determination shall 
        be equal to--
                    (A) in the case of a triggering determination 
                occurring during the covered period specified in 
                section 20(a), the lesser of--
                            (i) the difference between (I) 
                        $5,000,000,000, and (II) the aggregate amount 
                        of any assessments made by the Secretary 
                        pursuant to this section during the portion of 
                        such covered period preceding the triggering 
                        determination; and
                            (ii) the amount of financial assistance 
                        made available under section 6 in connection 
                        with the triggering determination; or
                    (B) such other aggregate industry obligation amount 
                as may apply pursuant to subsection (g).
            (3) Timing of multiple assessments.--
                    (A) Delayed imposition and aggregation of 
                assessments.--In the case of any triggering 
                determination occurring within 12 months of the 
                occurrence of a previous triggering determination, any 
                industry obligation assessments under this subsection 
                resulting from such subsequent determination shall be 
                imposed upon the conclusion of the quarterly assessment 
                period under subparagraph (B) during which such 
                determination occurs.
                    (B) Quarterly assessment period.--With respect to a 
                subsequent triggering determination referred to in 
                subparagraph (A), the quarterly assessment periods 
                under this subparagraph are--
                            (i) the 3-month period that begins upon the 
                        imposition of the industry obligation 
                        assessment resulting from the triggering 
                        determination that--
                                    (I) occurred most recently before 
                                such subsequent triggering 
                                determination; and
                                    (II) did not occur within 12 months 
                                of the occurrence of any previous 
                                triggering determination; and
                            (ii) each successive 3-month period 
                        thereafter that begins during the covered 
                        period.
    (d) Financing Assessments.--
            (1) In general.--If the aggregate assessment amount in 
        connection with a triggering determination exceeds the 
        aggregate amount of the industry obligation assessment under 
        subsection (c) in connection with the determination, the 
        remaining amount shall be assessed through one or more, as may 
        be necessary pursuant to paragraph (3), financing assessments 
        under this subsection.
            (2) Timing.--A financing assessment under this subsection 
        in connection with a triggering determination shall be imposed 
        only upon the expiration of any 12-month period beginning after 
        such determination during which no assessments under this 
        section have been imposed.
            (3) Limitation.--The aggregate amount of any financing 
        assessments imposed under this subsection on any single 
        commercial insurer during any 12-month period shall not exceed 
        the amount that is equal to 3 percent of the net premium for 
        such insurer for such period.
    (e) Allocation of Assessment.--The portion of the aggregate amount 
of any industry obligation assessment or financing assessment under 
this section that is allocated to each commercial insurer shall be 
based on the ratio that the net premium written by such commercial 
insurer during the year during which the assessment is imposed bears to 
the aggregate written premium for such year, subject to section 9 and 
the limitation under subsection (d)(3) of this section.
    (f) Notice and Obligation To Pay.--
            (1) Notice.--As soon as practicable after any triggering 
        determination, the Secretary shall notify each commercial 
        insurer in writing of an assessment under this section, which 
        notice shall include the amount of the assessment allocated to 
        such insurer.
            (2) Effect of notice.--Upon notice to a commercial insurer, 
        the commercial insurer shall be obligated to pay to the 
        Secretary, not later than 60 days after receipt of such notice, 
        the amount of the assessment on such commercial insurer.
            (3) Failure to make timely payment.--If any commercial 
        insurer fails to pay an assessment under this section before 
        the deadline established under paragraph (2) for the 
        assessment, the Secretary may take either or both of the 
        following actions:
                    (A) Civil monetary penalty.--Assess a civil 
                monetary penalty pursuant to section 9(d) upon such 
                insurer.
                    (B) Interest.--Require such insurer to pay 
                interest, at such rate as the Secretary considers 
                appropriate, on the amount of the assessment that was 
                not paid before the deadline established under 
                paragraph (2).
    (g) Aggregate Industry Obligation Amount for Program Extension 
Years.--If the Secretary exercises the authority under section 20(b) to 
extend the covered period, the aggregate industry obligation amount for 
purposes of subsection (c)(2)(B) shall, in the case of a triggering 
determination occurring during the portion of the covered period 
beginning on the date referred to in section 20(a), be equal to the 
lesser of--
            (1) the difference between (A) $10,000,000,000, and (B) the 
        aggregate amount of any assessments made by the Secretary 
        pursuant to this section during the 12-month period preceding 
        the triggering determination; and
            (2) the amount of financial assistance made available under 
        section 6 in connection with the triggering determination.
    (h) Administrative Flexibility.--
            (1) Adjustment of assessments.--The Secretary may provide 
        for or require estimations of amounts under this section and 
        may provide for subsequent refunds or require additional 
        payments to correct such estimations, as appropriate.
            (2) Deferral of contributions.--The Secretary may defer the 
        payment of part or all of an assessment required under this 
        section to be paid by a commercial insurer, but only to the 
        extent that the Secretary determines that such deferral is 
        necessary to avoid the likely insolvency of the commercial 
        insurer.
            (3) Timing of assessments.--The Secretary shall make 
        adjustments regarding the timing and imposition of assessments 
        (including the calculation of net premiums and aggregate 
        written premium) as appropriate for commercial insurers that 
        provide commercial property and casualty insurance on a non-
        calendar year basis.

SEC. 8. TERRORISM LOSS REPAYMENT SURCHARGE.

    (a) Determination of Imposition and Collection.--
            (1) In general.--If, pursuant to a triggering 
        determination, the Secretary determines that the aggregate 
        amount of financial assistance provided pursuant to section 6 
        exceeds $20,000,000,000, the Secretary shall consider and weigh 
        the factors under paragraph (2) to determine the extent to 
        which a surcharge under this section should be established.
            (2) Factors.--The factors under this paragraph are--
                    (A) the ultimate costs to taxpayers if a surcharge 
                under this section is not established;
                    (B) the economic conditions in the commercial 
                marketplace;
                    (C) the affordability of commercial insurance for 
                small- and medium-sized business; and
                    (D) such other factors as the Secretary considers 
                appropriate.
            (3) Policyholder premium.--The amount established by the 
        Secretary as a surcharge under this section shall be 
        established and imposed as a policyholder premium surcharge on 
        commercial property and casualty insurance written after such 
        determination, for the purpose of repaying financial assistance 
        made available under section 6 in connection with such 
        triggering determination.
            (4) Collection.--The Secretary shall provide for commercial 
        insurers to collect surcharge amounts established under this 
        section and remit such amounts collected to the Secretary.
    (b) Amount and Duration.--Subject to subsection (c), the surcharge 
under this section shall be established in such amount, and shall apply 
to commercial property and casualty insurance written during such 
period, as the Secretary determines is necessary to recover the 
aggregate amount of financial assistance provided under section 6 in 
connection with the triggering determination that exceeds 
$20,000,000,000.
    (c) Percentage Limitation.--The surcharge under this section 
applicable to commercial property and casualty insurance coverage may 
not exceed, on an annual basis, the amount equal to 3 percent of the 
premium charged for such coverage.
    (d) Other Terms.--The surcharge under this section shall--
            (1) be based on a percentage of the premium amount charged 
        for commercial property and casualty insurance coverage that a 
        policy provides; and
            (2) be imposed with respect to all commercial property and 
        casualty insurance coverage written during the period referred 
        to in subsection (b).
    (e) Exclusions.--For purposes of this section, commercial property 
and casualty insurance does not include any reinsurance provided to 
primary insurance companies.

SEC. 9. ADMINISTRATION OF ASSESSMENTS AND SURCHARGES.

    (a) Manner and Method.--
            (1) In general.--Except to the extent specified in such 
        sections, the Secretary shall provide for the manner and method 
        of carrying out assessments under section 7 and surcharges 
        under section 8, including the timing and procedures of making 
        assessments and surcharges, notifying commercial insurers of 
        assessments and surcharge requirements, collecting payments 
        from and surcharges through commercial insurers, and refunding 
        of any excess amounts paid or crediting such amounts against 
        future assessments.
            (2) Effect of assessments and surcharges on urban and 
        smaller commercial and rural areas and different lines of 
        insurance.--In determining the method and manner of imposing 
        assessments under section 7 and surcharges under section 8, 
        including the amount of such assessments and surcharges, the 
        Secretary shall take into consideration--
                    (A) the economic impact of any such assessments and 
                surcharges 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;
                    (B) 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
                    (C) the various exposures to terrorism risk for 
                different lines of commercial property and casualty 
                insurance.
    (b) Timing of Coverages and Assessments.--The Secretary may adjust 
the timing of coverages and assessments provided under this Act to 
provide for equivalent application of the provisions of this Act to 
commercial insurers and policies that are not based on a calendar year.
    (c) Adjustment.--The Secretary may adjust the assessments charged 
under section 7 or the percentage imposed under the surcharge under 
section 8 at any time, as the Secretary considers appropriate to 
protect the national interest, which may include avoiding unreasonable 
economic disruption or excessive market instability and avoiding undue 
burdens on small businesses.
    (d) Civil Monetary Penalty.--
            (1) In general.--The Secretary may assess a civil monetary 
        penalty in an amount not exceeding the amount under paragraph 
        (2) against any commercial insurer that the Secretary 
        determines, on the record after opportunity for a hearing--
                    (A) has failed to pay an assessment under section 7 
                in accordance with the requirements of, or regulations 
                issued, under this Act;
                    (B) has failed to charge, collect, or remit 
                surcharges under section 8 in accordance with the 
                requirements of, or regulations issued under, this Act;
                    (C) has intentionally provided to the Secretary 
                erroneous information regarding premium or loss 
                amounts; or
                    (D) has otherwise failed to comply with the 
                provisions of, or the regulations issued under, this 
                Act.
            (2) Amount.--The amount under this paragraph is the greater 
        of $1,000,000 and, in the case of any failure to pay, charge, 
        collect, or remit amounts in accordance with this Act or the 
        regulations issued under this Act, such amount in dispute.

SEC. 10. APPLICATION TO SELF-INSURANCE ARRANGEMENTS AND OFFSHORE 
              INSURERS AND REINSURERS.

    (a) Self-Insurance Arrangements.--The Secretary may, in 
consultation with the NAIC, apply the provisions of this Act, as 
appropriate, to self-insurance arrangements by municipalities and other 
entities, but only if such application is determined before the 
occurrence of a triggering event and all of the provisions of this Act 
are applied uniformly to such entities.
    (b) Offshore Insurers and Reinsurers.--The Secretary shall ensure 
that the provisions of this Act are applied as appropriate to any 
offshore or non-admitted entities that provide commercial property and 
casualty insurance.

SEC. 11. STUDY OF RESERVES FOR PROPERTY AND CASUALTY INSURANCE FOR 
              TERRORIST OR OTHER CATASTROPHIC EVENTS.

    (a) In General.--The Secretary of the Treasury shall conduct a 
study of issues relating to permitting property and casualty insurance 
companies to establish deductible reserves against losses for future 
acts of terrorism, including--
            (1) whether such tax-favored reserves would promote (A) 
        insurance coverage of risks of terrorism, and (B) the 
        accumulation of additional resources needed to satisfy 
        potential claims resulting from such risks,
            (2) the lines of business for which such reserves would be 
        appropriate, including whether such reserves should be applied 
        to personal or commercial lines of business,
            (3) how the amount of such reserves would be determined,
            (4) how such reserves would be administered,
            (5) a comparison of the Federal tax treatment of such 
        reserves with other insurance reserves permitted under Federal 
        tax laws,
            (6) an analysis of the use of tax-favored reserves for 
        catastrophic events, including acts of terrorism, under the tax 
        laws of foreign countries, and
            (7) whether it would be appropriate to permit similar 
        reserves for other future catastrophic events, such as natural 
        disasters, taking into account the factors under the preceding 
        paragraphs.
    (b) Report.--Not later than 4 months after the date of the 
enactment of this Act, the Secretary of the Treasury shall submit a 
report to Congress on the results of the study under subsection (a), 
together with recommendations for amending the Internal Revenue Code of 
1986 or other appropriate action.

SEC. 12. STATE PREEMPTION.

    (a) Covered Perils.--A commercial insurer shall be considered to 
have complied with any State law that requires or regulates the 
provision of insurance coverage for acts of terrorism if the insurer 
provides coverage in accordance with the definitions regarding acts of 
terrorism under this Act or under any regulations issued by the 
Secretary.
    (b) Rate Laws.--If any provision of any State law prevents an 
insurer from increasing its premium rates in an amount necessary to 
recover any assessments pursuant to section 7, such provision is 
preempted only to the extent necessary to provide for such insurer to 
recover such losses.
    (c) File and Use.--
            (1) In general.--With respect only to commercial property 
        and casualty insurance covering acts of terrorism, any 
        provision of State law that requires, as a condition precedent 
        to the effectiveness of rates or policies for such insurance 
        that is made available by an insurer licensed to transact such 
        business in the State, any action (including prior approval by 
        the State insurance regulator for such State) other than filing 
        of such rates and policies and related information with such 
        State insurance regulator is preempted to the extent such law 
        requires such additional actions for such insurance coverage.
            (2) Subsequent review authority.--Paragraph (1) shall not 
        be considered to preempt a provision of State law solely 
        because the law provides that rates and policies for such 
        insurance coverage are, upon such filing, subject to subsequent 
        review and action, which may include actions to disapprove or 
        discontinue use of such rates or policies, by the State 
        insurance regulator.
            (3) Treatment of prior review provisions.--Any authority 
        for prior review and action by a State regulator preempted 
        under paragraph (1) shall be deemed to be authority to conduct 
        a subsequent review and action on such filings.

SEC. 13. CONSISTENT STATE GUIDELINES FOR COVERAGE FOR ACTS OF 
              TERRORISM.

    (a) Sense of Congress Regarding Covered Perils.--It is the sense of 
the Congress that--
            (1) the NAIC, in consultation with the Secretary, should 
        develop appropriate definitions for acts of terrorism that are 
        consistent with this Act and appropriate standards for making 
        determinations regarding occurrences of acts of terrorism;
            (2) each State should adopt the definitions and standards 
        developed by the NAIC for purposes of regulating insurance 
        coverage made available in that State;
            (3) in consulting with the NAIC, the Secretary should 
        advocate and promote the development of definitions and 
        standards that are appropriate for purposes of this Act; and
            (4) after consultation with the NAIC, the Secretary should 
        adopt further definitions for acts of terrorism and standards 
        for determinations that are appropriate for this Act.
    (b) Insurance Reserve Guidelines.--
            (1) Sense of congress regarding adoption by states.--It is 
        the sense of the Congress that--
                    (A) the NAIC should develop appropriate guidelines 
                for commercial insurers and pools regarding maintenance 
                of reserves against the risks of acts of terrorism; and
                    (B) each State should adopt such guidelines for 
                purposes of regulating commercial insurers doing 
                business in that State.
            (2) Consideration of adoption of national guidelines.--Upon 
        the expiration of the 6-month period beginning on the date of 
        the enactment of this Act, the Secretary shall make a 
        determination of whether the guidelines referred to in 
        paragraph (1) have, by such time, been developed and adopted by 
        nearly all States in a uniform manner. If the Secretary 
        determines that such guidelines have not been so developed and 
        adopted, the Secretary shall consider adopting, and may adopt, 
        such guidelines on a national basis in a manner that supersedes 
        any State law regarding maintenance of reserves against such 
        risks.
    (c) Guidelines Regarding Disclosure of Pricing and Terms of 
Coverage.--
            (1) Sense of congress.--It is the sense of the Congress 
        that the States should require, by laws or regulations 
        governing the provision of commercial property and casualty 
        insurance that includes coverage for acts of terrorism, that 
        the price of any such terrorism coverage, including the costs 
        of any terrorism related assessments or surcharges under this 
        Act, be separately disclosed.
            (2) Adoption of national guidelines.--If the Secretary 
        determines that the States have not enacted laws or adopted 
        regulations adequately providing for the disclosures described 
        in paragraph (1) within a reasonable period of time after the 
        date of the enactment of this Act, the Secretary shall, after 
        consultation with the NAIC, adopt guidelines on a national 
        basis requiring such disclosure in a manner that supersedes any 
        State law regarding such disclosure.

SEC. 14. CONSULTATION WITH STATE INSURANCE REGULATORS AND NAIC.

    (a) In General.--The Secretary shall consult with the State 
insurance regulators and the NAIC in carrying out this Act.
    (b) Financial Assistance, Assessments, and Surcharges.--The 
Secretary may take such actions, including entering into such 
agreements and providing such technical and organizational assistance 
to insurers and State insurance regulators, as may be necessary to 
provide for the distribution of financial assistance under section 6 
and the collection of assessments under section 7 and surcharges under 
section 8.
    (c) Investigating and Auditing Claims.--The Secretary may, in 
consultation with the State insurance regulators and the NAIC, 
investigate and audit claims of insured losses by commercial insurers 
and otherwise require verification of amounts of premiums or losses, as 
appropriate.

SEC. 15. LITIGATION MANAGEMENT.

    (a) Federal Cause of Action for Claims Relating to Terrorist 
Acts.--
            (1) In general.--Subject to paragraph (2), if the Secretary 
        makes a determination pursuant to section 5(b) that one or more 
        acts of terrorism occurred, there shall exist a Federal cause 
        of action, which, except as provided in subsection (b), shall 
        be the exclusive remedy for claims arising out of, relating to, 
        or resulting from such acts of terrorism.
            (2) Effect of determination.--A determination referred to 
        in paragraph (1)--
                    (A) shall not be subject to judicial review;
                    (B) shall take effect upon its publication in the 
                Federal Register; and
                    (C) shall be subject to such changes as the 
                Secretary may provide in one or more later 
                determinations made in accordance with the provisions 
                of this paragraph.
            (3) Substantive law.--The substantive law for decision in 
        any such action shall be derived from the law, including choice 
        of law principles, of the State in which such acts of terrorism 
        occurred, unless such law is inconsistent with or preempted by 
        Federal law.
            (4) Jurisdiction.--For each determination under paragraph 
        (1), the Judicial Panel on Multidistrict Litigation shall 
        designate one or more district courts of the United States 
        which shall have original and exclusive jurisdiction over all 
        actions for any claim (including any claim for loss of 
        property, personal injury, or death) brought pursuant to this 
        subsection. The Judicial Panel on Multidistrict Litigation 
        shall select and assign the district court or courts based on 
        the convenience of the parties and the just and efficient 
        conduct of the proceedings. For purposes of personal 
        jurisdiction, the district court or courts designated by the 
        Judicial Panel on Multidistrict Litigation shall be deemed to 
        sit in all judicial districts in the United States.
            (5) Limits on damages.--In an action brought under this 
        subsection for damages:
                    (A) No punitive damages intended to punish or 
                deter, exemplary damages, or other damages not intended 
                to compensate a plaintiff for actual losses may be 
                awarded, nor shall any party be liable for interest 
                prior to the judgment.
                    (B)(i) Each defendant in such an action shall be 
                liable only for the amount of noneconomic damages 
                allocated to the defendant in direct proportion to the 
                percentage of responsibility of the defendant for the 
                harm to the plaintiff, and no plaintiff may recover 
                noneconomic damages unless the plaintiff suffered 
                physical harm.
                    (ii) For purposes of clause (i), the term 
                ``noneconomic damages'' means damages for losses for 
                physical and emotional pain, suffering, inconvenience, 
                physical impairment, mental anguish, disfigurement, 
                loss of enjoyment of life, loss of society and 
                companionship, loss of consortium, hedonic damages, 
                injury to reputation, and any other nonpecuniary 
                losses.
            (6) Collateral sources.--Any recovery by a plaintiff in an 
        action under this subsection shall be reduced by the amount of 
        collateral source compensation, if any, that the plaintiff has 
        received or is entitled to receive as a result of the acts of 
        terrorism with respect to which the determination under 
        paragraph (1) was made.
            (7) Attorney fees.--Reasonable attorneys fees for work 
        performed shall be subject to the discretion of the court, but 
        in no event shall any attorney charge, demand, receive, or 
        collect for services rendered, fees or compensation in an 
        amount in excess of 20 percent of the damages ordered by the 
        court to be paid pursuant to this section, or in excess of 20 
        percent of any court-approved settlement made of any claim 
        cognizable under this section. Any attorney who charges, 
        demands, receives, or collects for services rendered in 
        connection with such claim any amount in excess of that allowed 
        under this section, if recovery be had, shall be fined not more 
        than $2,000 or imprisoned not more than 1 year, or both.
    (b) Exclusion.--Nothing in this section shall in any way limit the 
liability of any person who--
            (1) attempts to commit, knowingly participates in, aids and 
        abets, or commits any act of terrorism with respect to which a 
        determination under subsection (a)(1) was made, or any criminal 
        act related to or resulting from such act of terrorism; or
            (2) participates in a conspiracy to commit any such act of 
        terrorism or any such criminal act.
    (c) Right of Subrogation.--The United States shall have the right 
of subrogation with respect to any claim paid by the United States 
under this Act.
    (d) Relationship to Other Law.--Nothing in this section shall be 
construed to affect--
            (1) any party's contractual right to arbitrate a dispute; 
        or
            (2) any provision of the Air Transportation Safety and 
        System Stabilization Act (Public Law 107-42; 49 U.S.C. 40101 
        note).
    (e) Satisfaction of Judgments From Frozen Assets of Terrorists, 
Terrorist Organizations, and State Sponsors of Terrorism.--
            (1) In general.--Except as provided in paragraph (2), in 
        every case in which a person obtains a judgment against a 
        terrorist party on a claim for compensatory damages for an act 
        of terrorism, or a claim for money damages brought pursuant to 
        section 1605(a)(7) of title 28, United States Code, the frozen 
        assets of that terrorist party, or any agency or 
        instrumentality of that terrorist party, shall be available for 
        satisfaction of the judgment, to the extent of any compensatory 
        damages awarded in the judgment for which the terrorist party 
        is liable.
            (2) Presidential waiver.--
                    (A) Subject to subparagraph (B), upon determining 
                on an asset-by-asset basis that a waiver is necessary 
                in the national security interest, the President may 
                waive the requirements of this subsection in connection 
                with (and prior to the enforcement of) any judicial 
                order directing attachment in aid of execution or 
                execution against any property subject to the Vienna 
                Convention on Diplomatic Relations or the Vienna 
                Convention on Consular Relations.
                    (B) A waiver under this paragraph shall not apply 
                to--
                            (i) property subject to the Vienna 
                        Convention on Diplomatic Relations or the 
                        Vienna Convention on Consular Relations that 
                        has been used for any nondiplomatic purpose 
                        (including use as rental property), the 
                        proceeds of such use; or
                            (ii) any asset subject to the Vienna 
                        Convention on Diplomatic Relations or the 
                        Vienna Convention on Consular Relations that is 
                        sold or otherwise transferred for value to a 
                        third party, the proceeds of such sale or 
                        transfer.
            (3) Definitions.--In this subsection:
                    (A) The term ``terrorist party'' means a terrorist, 
                a terrorist organization, or a foreign state designated 
                as a state sponsor of terrorism under section 6(j) of 
                the Export Administration Act of 1979 (50 U.S.C. App. 
                2405(j)) or section 620A of the Foreign Assistance Act 
                of 1961 (22 U.S.C. 2371).
                    (B) The term ``frozen assets'' means assets seized 
                or frozen by the United States in accordance with law.
                    (C) The term ``property subject to the Vienna 
                Convention on Diplomatic Relations or the Vienna 
                Convention on Consular Relations'' and the term ``asset 
                subject to the Vienna Convention on Diplomatic 
                Relations or the Vienna Convention on Consular 
                Relations'' mean any property or asset, respectively, 
                the attachment in aid of execution or execution of 
                which would result in a violation of an obligation of 
                the United States under the Vienna Convention on 
                Diplomatic Relations or the Vienna Convention on 
                Consular Relations, as the case may be.

SEC. 16. STUDY OF POTENTIAL EFFECTS OF TERRORISM ON LIFE INSURANCE 
              INDUSTRY.

    (a) Establishment.--Not later than 30 days after the date of 
enactment of this Act, the President shall establish a commission (in 
this section referred to as the ``Commission'') to study and report on 
the potential effects of an act or acts of terrorism on the life 
insurance industry in the United States and the markets served by such 
industry.
    (b) Membership and Operations.--
            (1) Appointment.--The Commission shall consist of 7 
        members, as follows:
                    (A) The Secretary of the Treasury or the designee 
                of the Secretary.
                    (B) The Chairman of the Board of Governors of the 
                Federal Reserve System or the designee of the Chairman.
                    (C) The Assistant to the President for Homeland 
                Security.
                    (D) 4 members appointed by the President, who shall 
                be--
                            (i) a representative of direct underwriters 
                        of life insurance within the United States;
                            (ii) a representative of reinsurers of life 
                        insurance within the United States;
                            (iii) an officer of the NAIC; and
                            (iv) a representative of insurance agents 
                        for life underwriters.
            (2) Operations.--The chairperson of the Commission shall 
        determine the manner in which the Commission shall operate, 
        including funding, staffing, and coordination with other 
        governmental entities.
    (c) Study.--The Commission shall conduct a study of the life 
insurance industry in the United States, which shall identify and make 
recommendations regarding--
            (1) possible actions to encourage, facilitate, and sustain 
        the provision, by the life insurance industry in the United 
        States, of coverage for losses due to death or disability 
        resulting from an act or acts of terrorism, including in the 
        face of threats of such acts; and
            (2) possible actions or mechanisms to sustain or supplement 
        the ability of the life insurance industry in the United States 
        to cover losses due to death or disability resulting from an 
        act or acts of terrorism in the event that--
                    (A) such acts significantly affect mortality 
                experience of the population of the United States over 
                any period of time;
                    (B) such losses jeopardize the capital and surplus 
                of the life insurance industry in the United States as 
                a whole; or
                    (C) other consequences from such acts occur, as 
                determined by the Commission, that may significantly 
                affect the ability of the life insurance industry in 
                the United States to independently cover such losses.
    (d) Recommendations.--The Commission may make a recommendation 
pursuant to subsection (c) only upon the concurrence of a majority of 
the members of the Commission.
    (e) Report.--Not later than 120 days after the date of enactment of 
this Act, the Commission shall submit to the House of Representatives 
and the Senate a report describing the results of the study and any 
recommendations developed under subsection (c).
    (f) Termination.--The Commission shall terminate 60 days after 
submission of the report pursuant to subsection (e).

SEC. 17. RAILROAD AND TRUCKING INSURANCE STUDY.

    The Secretary of the Treasury shall conduct a study to determine 
how the Federal Government can address a possible crisis in the 
availability and affordability of railroad and trucking insurance by 
making such insurance for acts of terrorism available on commercially 
reasonable terms. Not later than 120 days after the date of the 
enactment of this Act the Secretary shall submit to the Congress a 
report regarding the results and conclusions of the study.

SEC. 18. STUDY OF REINSURANCE POOL SYSTEM FOR FUTURE ACTS OF TERRORISM.

    (a) Study.--The Secretary, the Board of Governors of the Federal 
Reserve System, and the Comptroller General of the United States shall 
jointly conduct a study on the advisability and effectiveness of 
establishing a reinsurance pool system relating to future acts of 
terrorism to replace the program provided for under this Act.
    (b) Consultation.--In conducting the study under subsection (a), 
the Secretary, the Board of Governors of the Federal Reserve System, 
and the Comptroller General shall consult with (1) academic experts, 
(2) the United Nations Secretariat for Trade and Development, (3) 
representatives from the property and casualty insurance industry, (4) 
representatives from the reinsurance industry, (5) the NAIC, and (6) 
such consumer organizations as the Secretary considers appropriate.
    (c) Report.--Not later than 6 months after the date of the 
enactment of this Act, the Secretary, the Board of Governors of the 
Federal Reserve System, and the Comptroller General shall jointly 
submit a report to the Congress on the results of the study under 
subsection (a).

SEC. 19. DEFINITIONS.

    For purposes of this Act, the following definitions shall apply:
            (1) Act of terrorism.--
                    (A) In general.--The term ``act of terrorism'' 
                means any act that the Secretary determines meets the 
                requirements under subparagraph (B), as such 
                requirements are further defined and specified by the 
                Secretary in consultation with the NAIC.
                    (B) Requirements.--An act meets the requirements of 
                this subparagraph if the act--
                            (i) is unlawful;
                            (ii) causes harm to a person, property, or 
                        entity, in the United States, or in the case of 
                        a domestic United States air carrier or 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), in or outside the United 
                        States;
                            (iii) is committed by a person or group of 
                        persons or associations who are recognized, 
                        either before or after such act, by the 
                        Department of State or the Secretary as an 
                        international terrorist group or have conspired 
                        with such a group or the group's agents or 
                        surrogates;
                            (iv) has as its purpose to overthrow or 
                        destabilize the government of any country, or 
                        to influence the policy or affect the conduct 
                        of the government of the United States or any 
                        segment of the economy of United States, by 
                        coercion; and
                            (v) is not considered an act of war, except 
                        that this clause shall not apply with respect 
                        to any coverage for workers compensation.
            (2) Affiliate.--The term ``affiliate'' means, with respect 
        to an insurer, any company that controls, is controlled by, or 
        is under common control with the insurer.
            (3) Aggregate written premium.--The term ``aggregate 
        written premium'' means, with respect to a year, the aggregate 
        premium amount of all commercial property and casualty 
        insurance coverage written during such year under all lines of 
        commercial property and casualty insurance.
            (4) Commercial insurer.--The term ``commercial insurer'' 
        means any corporation, association, society, order, firm, 
        company, mutual, partnership, individual, aggregation of 
        individuals, or any other legal entity that provides commercial 
        property and casualty insurance. Such term includes any 
        affiliates of a commercial insurer.
            (5) Commercial property and casualty insurance.--
                    (A) In general.--The term ``commercial property and 
                casualty insurance'' means insurance or reinsurance, or 
                retrocessional reinsurance, for persons or properties 
                in the United States against--
                            (i) loss of or damage to property;
                            (ii) loss of income or extra expense 
                        incurred because of loss of or damage to 
                        property;
                            (iii) third party liability claims caused 
                        by negligence or imposed by statute or 
                        contract, including workers compensation; or
                            (iv) loss resulting from debt or default of 
                        another.
                    (B) Exclusions.--Such term does not include--
                            (i) insurance for homeowners, tenants, 
                        private passenger nonfleet automobiles, mobile 
                        homes, or other insurance for personal, family, 
                        or household needs;
                            (ii) insurance for professional liability, 
                        including medical malpractice, errors and 
                        omissions, or directors' and officers' 
                        liability; or
                            (iii) health or life insurance.
            (6) Control.--A company has control over another company 
        if--
                    (A) the company directly or indirectly or acting 
                through one or more other persons owns, controls, or 
                has power to vote 25 percent or more of any class of 
                voting securities of the other company;
                    (B) the company controls in any manner the election 
                of a majority of the directors or trustees of the other 
                company; or
                    (C) the Secretary determines, after notice and 
                opportunity for hearing, that the company directly or 
                indirectly exercises a controlling influence over the 
                management or policies of the other company.
            (7) Covered period.--The term ``covered period'' has the 
        meaning given such term in section 20.
            (8) Industry-wide losses.--The term ``industry-wide 
        losses'' means the aggregate insured losses sustained by all 
        insurers from coverage written under all lines of commercial 
        property and casualty insurance.
            (9) Insured loss.--The term ``insured loss'' means any 
        loss, net of reinsurance and retrocessional reinsurance, 
        covered by commercial property and casualty insurance.
            (10) NAIC.--The term ``NAIC'' means the National 
        Association of Insurance Commissioners.
            (11) Net premium.--The term ``net premium'' means, with 
        respect a commercial insurer and a year, the aggregate premium 
        amount collected by such commercial insurer for all commercial 
        property and casualty insurance coverage written during such 
        year under all lines of commercial property and casualty 
        insurance by such commercial insurer, less any premium paid by 
        such commercial insurer to other commercial insurers to insure 
        or reinsure those risks.
            (12) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.
            (13) State.--The term ``State'' means the States of the 
        United States, the District of Columbia, the Commonwealth of 
        Puerto Rico, the Commonwealth of the Northern Mariana Islands, 
        Guam, the Virgin Islands, American Samoa, and any other 
        territory or possession of the United States.
            (14) State insurance regulator.--The term ``State insurance 
        regulator'' means, with respect to a State, the principal 
        insurance regulatory authority of the State.
            (15) Triggering determination.--The term ``triggering 
        determination'' has the meaning given such term in section 
        5(a).
            (16) Triggering event.--The term ``triggering event'' 
        means, with respect to a triggering determination, the 
        occurrence of an act of terrorism, or the occurrence of such 
        acts, that caused the insured losses resulting in such 
        triggering determination.
            (17) United states.--The term ``United States'' means, 
        collectively, the States (as such term is defined in this 
        section).

SEC. 20. COVERED PERIOD AND EXTENSION OF PROGRAM.

    (a) Covered Period.--Except to the extent provided otherwise under 
subsection (b), for purposes of this Act, the term ``covered period'' 
means the period beginning on the date of the enactment of this Act and 
ending on January 1, 2003.
    (b) Extension of Program.--If the Secretary determines that 
extending the covered period is necessary to ensure the adequate 
availability in the United States of commercial property and casualty 
insurance coverage for acts of terrorism, the Secretary may, subject to 
subsection (c), extend the covered period by not more than two years.
    (c) Report.--The Secretary may exercise the authority under 
subsection (b) to extend the covered period only if the Secretary 
submits a report to the Congress providing notice of and setting forth 
the reasons for such extension.

SEC. 21. REGULATIONS.

    The Secretary shall issue any regulations necessary to carry out 
this Act.

            Passed the House of Representatives November 29, 2001.

            Attest:

                                                                 Clerk.
107th CONGRESS

  1st Session

                               H. R. 3210

_______________________________________________________________________

                                 AN ACT

   To ensure the continued financial capacity of insurers to provide 
                   coverage for risks from terrorism.