[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3210 Enrolled Bill (ENR)]

        H.R.3210

                      One Hundred Seventh Congress

                                 of the

                        United States of America


                          AT THE SECOND SESSION

         Begun and held at the City of Washington on Wednesday,
          the twenty-third day of January, two thousand and two


                                 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Terrorism Risk 
Insurance Act of 2002''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:
Sec. 1. Short title; table of contents.

                  TITLE I--TERRORISM INSURANCE PROGRAM

Sec. 101. Congressional findings and purpose.
Sec. 102. Definitions.
Sec. 103. Terrorism Insurance Program.
Sec. 104. General authority and administration of claims.
Sec. 105. Preemption and nullification of pre-existing terrorism 
          exclusions.
Sec. 106. Preservation provisions.
Sec. 107. Litigation management.
Sec. 108. Termination of Program.

                 TITLE II--TREATMENT OF TERRORIST ASSETS

Sec. 201. Satisfaction of judgments from blocked assets of terrorists, 
          terrorist organizations, and State sponsors of terrorism.

               TITLE III--FEDERAL RESERVE BOARD PROVISIONS

Sec. 301. Certain authority of the Board of Governors of the Federal 
          Reserve System.

                  TITLE I--TERRORISM INSURANCE PROGRAM

SEC. 101. CONGRESSIONAL FINDINGS AND PURPOSE.

    (a) Findings.--The Congress finds that--
        (1) the ability of businesses and individuals to obtain 
    property and casualty insurance at reasonable and predictable 
    prices, in order to spread the risk of both routine and 
    catastrophic loss, is critical to economic growth, urban 
    development, and the construction and maintenance of public and 
    private housing, as well as to the promotion of United States 
    exports and foreign trade in an increasingly interconnected world;
        (2) property and casualty insurance firms are important 
    financial institutions, the products of which allow mutualization 
    of risk and the efficient use of financial resources and enhance 
    the ability of the economy to maintain stability, while responding 
    to a variety of economic, political, environmental, and other risks 
    with a minimum of disruption;
        (3) the ability of the insurance industry to cover the 
    unprecedented financial risks presented by potential acts of 
    terrorism in the United States can be a major factor in the 
    recovery from terrorist attacks, while maintaining the stability of 
    the economy;
        (4) widespread financial market uncertainties have arisen 
    following the terrorist attacks of September 11, 2001, including 
    the absence of information from which financial institutions can 
    make statistically valid estimates of the probability and cost of 
    future terrorist events, and therefore the size, funding, and 
    allocation of the risk of loss caused by such acts of terrorism;
        (5) a decision by property and casualty insurers to deal with 
    such uncertainties, either by terminating property and casualty 
    coverage for losses arising from terrorist events, or by radically 
    escalating premium coverage to compensate for risks of loss that 
    are not readily predictable, could seriously hamper ongoing and 
    planned construction, property acquisition, and other business 
    projects, generate a dramatic increase in rents, and otherwise 
    suppress economic activity; and
        (6) the United States Government should provide temporary 
    financial compensation to insured parties, contributing to the 
    stabilization of the United States economy in a time of national 
    crisis, while the financial services industry develops the systems, 
    mechanisms, products, and programs necessary to create a viable 
    financial services market for private terrorism risk insurance.
    (b) Purpose.--The purpose of this title is to establish a temporary 
Federal program that provides for a transparent system of shared public 
and private compensation for insured losses resulting from acts of 
terrorism, in order to--
        (1) protect consumers by addressing market disruptions and 
    ensure the continued widespread availability and affordability of 
    property and casualty insurance for terrorism risk; and
        (2) allow for a transitional period for the private markets to 
    stabilize, resume pricing of such insurance, and build capacity to 
    absorb any future losses, while preserving State insurance 
    regulation and consumer protections.

SEC. 102. DEFINITIONS.

    In this title, the following definitions shall apply:
        (1) Act of terrorism.--
            (A) Certification.--The term ``act of terrorism'' means any 
        act that is certified by the Secretary, in concurrence with the 
        Secretary of State, and the Attorney General of the United 
        States--
                (i) to be an act of terrorism;
                (ii) to be a violent act or an act that is dangerous 
            to--

                    (I) human life;
                    (II) property; or
                    (III) infrastructure;

                (iii) to have resulted in damage within the United 
            States, or outside of the United States in the case of--

                    (I) an air carrier or vessel described in paragraph 
                (5)(B); or
                    (II) the premises of a United States mission; and

                (iv) to have been committed by an individual or 
            individuals acting on behalf of any foreign person or 
            foreign interest, as part of an effort to coerce the 
            civilian population of the United States or to influence 
            the policy or affect the conduct of the United States 
            Government by coercion.
            (B) Limitation.--No act shall be certified by the Secretary 
        as an act of terrorism if--
                (i) the act is committed as part of the course of a war 
            declared by the Congress, except that this clause shall not 
            apply with respect to any coverage for workers' 
            compensation; or
                (ii) property and casualty insurance losses resulting 
            from the act, in the aggregate, do not exceed $5,000,000.
            (C) Determinations final.--Any certification of, or 
        determination not to certify, an act as an act of terrorism 
        under this paragraph shall be final, and shall not be subject 
        to judicial review.
            (D) Nondelegation.--The Secretary may not delegate or 
        designate to any other officer, employee, or person, any 
        determination under this paragraph of whether, during the 
        effective period of the Program, an act of terrorism has 
        occurred.
        (2) Affiliate.--The term ``affiliate'' means, with respect to 
    an insurer, any entity that controls, is controlled by, or is under 
    common control with the insurer.
        (3) Control.--An entity has ``control'' over another entity, 
    if--
            (A) the entity directly or indirectly or acting through 1 
        or more other persons owns, controls, or has power to vote 25 
        percent or more of any class of voting securities of the other 
        entity;
            (B) the entity controls in any manner the election of a 
        majority of the directors or trustees of the other entity; or
            (C) the Secretary determines, after notice and opportunity 
        for hearing, that the entity directly or indirectly exercises a 
        controlling influence over the management or policies of the 
        other entity.
        (4) Direct earned premium.--The term ``direct earned premium'' 
    means a direct earned premium for property and casualty insurance 
    issued by any insurer for insurance against losses occurring at the 
    locations described in subparagraphs (A) and (B) of paragraph (5).
        (5) Insured loss.--The term ``insured loss'' means any loss 
    resulting from an act of terrorism (including an act of war, in the 
    case of workers' compensation) that is covered by primary or excess 
    property and casualty insurance issued by an insurer if such loss--
            (A) occurs within the United States; or
            (B) occurs to an air carrier (as defined in section 40102 
        of title 49, United States Code), to a United States flag 
        vessel (or a vessel based principally in the United States, on 
        which United States income tax is paid and whose insurance 
        coverage is subject to regulation in the United States), 
        regardless of where the loss occurs, or at the premises of any 
        United States mission.
        (6) Insurer.--The term ``insurer'' means any entity, including 
    any affiliate thereof--
            (A) that is--
                (i) licensed or admitted to engage in the business of 
            providing primary or excess insurance in any State;
                (ii) not licensed or admitted as described in clause 
            (i), if it is an eligible surplus line carrier listed on 
            the Quarterly Listing of Alien Insurers of the NAIC, or any 
            successor thereto;
                (iii) approved for the purpose of offering property and 
            casualty insurance by a Federal agency in connection with 
            maritime, energy, or aviation activity;
                (iv) a State residual market insurance entity or State 
            workers' compensation fund; or
                (v) any other entity described in section 103(f), to 
            the extent provided in the rules of the Secretary issued 
            under section 103(f);
            (B) that receives direct earned premiums for any type of 
        commercial property and casualty insurance coverage, other than 
        in the case of entities described in sections 103(d) and 
        103(f); and
            (C) that meets any other criteria that the Secretary may 
        reasonably prescribe.
        (7) Insurer deductible.--The term ``insurer deductible'' 
    means--
            (A) for the Transition Period, the value of an insurer's 
        direct earned premiums over the calendar year immediately 
        preceding the date of enactment of this Act, multiplied by 1 
        percent;
            (B) for Program Year 1, the value of an insurer's direct 
        earned premiums over the calendar year immediately preceding 
        Program Year 1, multiplied by 7 percent;
            (C) for Program Year 2, the value of an insurer's direct 
        earned premiums over the calendar year immediately preceding 
        Program Year 2, multiplied by 10 percent;
            (D) for Program Year 3, the value of an insurer's direct 
        earned premiums over the calendar year immediately preceding 
        Program Year 3, multiplied by 15 percent; and
            (E) notwithstanding subparagraphs (A) through (D), for the 
        Transition Period, Program Year 1, Program Year 2, or Program 
        Year 3, if an insurer has not had a full year of operations 
        during the calendar year immediately preceding such Period or 
        Program Year, such portion of the direct earned premiums of the 
        insurer as the Secretary determines appropriate, subject to 
        appropriate methodologies established by the Secretary for 
        measuring such direct earned premiums.
        (8) NAIC.--The term ``NAIC'' means the National Association of 
    Insurance Commissioners.
        (9) Person.--The term ``person'' means any individual, business 
    or nonprofit entity (including those organized in the form of a 
    partnership, limited liability company, corporation, or 
    association), trust or estate, or a State or political subdivision 
    of a State or other governmental unit.
        (10) Program.--The term ``Program'' means the Terrorism 
    Insurance Program established by this title.
        (11) Program years.--
            (A) Transition period.--The term ``Transition Period'' 
        means the period beginning on the date of enactment of this Act 
        and ending on December 31, 2002.
            (B) Program year 1.--The term ``Program Year 1'' means the 
        period beginning on January 1, 2003 and ending on December 31, 
        2003.
            (C) Program year 2.--The term ``Program Year 2'' means the 
        period beginning on January 1, 2004 and ending on December 31, 
        2004.
            (D) Program year 3.--The term ``Program Year 3'' means the 
        period beginning on January 1, 2005 and ending on December 31, 
        2005.
        (12) Property and casualty insurance.--The term ``property and 
    casualty insurance''--
            (A) means commercial lines of property and casualty 
        insurance, including excess insurance, workers' compensation 
        insurance, and surety insurance; and
            (B) does not include--
                (i) Federal crop insurance issued or reinsured under 
            the Federal Crop Insurance Act (7 U.S.C. 1501 et seq.), or 
            any other type of crop or livestock insurance that is 
            privately issued or reinsured;
                (ii) private mortgage insurance (as that term is 
            defined in section 2 of 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.); or
                (vii) reinsurance or retrocessional reinsurance.
        (13) Secretary.--The term ``Secretary'' means the Secretary of 
    the Treasury.
        (14) State.--The term ``State'' means any State of the United 
    States, the District of Columbia, the Commonwealth of Puerto Rico, 
    the Commonwealth of the Northern Mariana Islands, American Samoa, 
    Guam, each of the United States Virgin Islands, and any territory 
    or possession of the United States.
        (15) United states.--The term ``United States'' means the 
    several States, and includes the territorial sea and the 
    continental shelf of the United States, as those terms are defined 
    in the Violent Crime Control and Law Enforcement Act of 1994 (18 
    U.S.C. 2280, 2281).
        (16) Rule of construction for dates.--With respect to any 
    reference to a date in this title, such day shall be construed--
            (A) to begin at 12:01 a.m. on that date; and
            (B) to end at midnight on that date.

SEC. 103. TERRORISM INSURANCE PROGRAM.

    (a) Establishment of Program.--
        (1) In general.--There is established in the Department of the 
    Treasury the Terrorism Insurance Program.
        (2) Authority of the secretary.--Notwithstanding any other 
    provision of State or Federal law, the Secretary shall administer 
    the Program, and shall pay the Federal share of compensation for 
    insured losses in accordance with subsection (e).
        (3) Mandatory participation.--Each entity that meets the 
    definition of an insurer under this title shall participate in the 
    Program.
    (b) Conditions for Federal Payments.--No payment may be made by the 
Secretary under this section with respect to an insured loss that is 
covered by an insurer, unless--
        (1) the person that suffers the insured loss, or a person 
    acting on behalf of that person, files a claim with the insurer;
        (2) the insurer provides clear and conspicuous disclosure to 
    the policyholder of the premium charged for insured losses covered 
    by the Program and the Federal share of compensation for insured 
    losses under the Program--
            (A) in the case of any policy that is issued before the 
        date of enactment of this Act, not later than 90 days after 
        that date of enactment;
            (B) in the case of any policy that is issued within 90 days 
        of the date of enactment of this Act, at the time of offer, 
        purchase, and renewal of the policy; and
            (C) in the case of any policy that is issued more than 90 
        days after the date of enactment of this Act, on a separate 
        line item in the policy, at the time of offer, purchase, and 
        renewal of the policy;
        (3) the insurer processes the claim for the insured loss in 
    accordance with appropriate business practices, and any reasonable 
    procedures that the Secretary may prescribe; and
        (4) the insurer submits to the Secretary, in accordance with 
    such reasonable procedures as the Secretary may establish--
            (A) a claim for payment of the Federal share of 
        compensation for insured losses under the Program;
            (B) written certification--
                (i) of the underlying claim; and
                (ii) of all payments made for insured losses; and
            (C) certification of its compliance with the provisions of 
        this subsection.
    (c) Mandatory Availability.--
        (1) Initial program periods.--During the period beginning on 
    the first day of the Transition Period and ending on the last day 
    of Program Year 2, each entity that meets the definition of an 
    insurer under section 102--
            (A) shall make available, in all of its property and 
        casualty insurance policies, coverage for insured losses; and
            (B) shall make available property and casualty insurance 
        coverage for insured losses that does not differ materially 
        from the terms, amounts, and other coverage limitations 
        applicable to losses arising from events other than acts of 
        terrorism.
        (2) Program year 3.--Not later than September 1, 2004, the 
    Secretary shall, based on the factors referred to in section 
    108(d)(1), determine whether the provisions of subparagraphs (A) 
    and (B) of paragraph (1) should be extended through Program Year 3.
    (d) State Residual Market Insurance Entities.--
        (1) In general.--The Secretary shall issue regulations, as soon 
    as practicable after the date of enactment of this Act, that apply 
    the provisions of this title to State residual market insurance 
    entities and State workers' compensation funds.
        (2) Treatment of certain entities.--For purposes of the 
    regulations issued pursuant to paragraph (1)--
            (A) a State residual market insurance entity that does not 
        share its profits and losses with private sector insurers shall 
        be treated as a separate insurer; and
            (B) a State residual market insurance entity that shares 
        its profits and losses with private sector insurers shall not 
        be treated as a separate insurer, and shall report to each 
        private sector insurance participant its share of the insured 
        losses of the entity, which shall be included in each private 
        sector insurer's insured losses.
        (3) Treatment of participation in certain entities.--Any 
    insurer that participates in sharing profits and losses of a State 
    residual market insurance entity shall include in its calculations 
    of premiums any premiums distributed to the insurer by the State 
    residual market insurance entity.
    (e) Insured Loss Shared Compensation.--
        (1) Federal share.--
            (A) In general.--The Federal share of compensation under 
        the Program to be paid by the Secretary for insured losses of 
        an insurer during the Transition Period and each Program Year 
        shall be equal to 90 percent of that portion of the amount of 
        such insured losses that exceeds the applicable insurer 
        deductible required to be paid during such Transition Period or 
        such Program Year.
            (B) Prohibition on duplicative compensation.--The Federal 
        share of compensation for insured losses under the Program 
        shall be reduced by the amount of compensation provided by the 
        Federal Government to any person under any other Federal 
        program for those insured losses.
        (2) Cap on annual liability.--
            (A) In general.--Notwithstanding paragraph (1) or any other 
        provision of Federal or State law, if the aggregate insured 
        losses exceed $100,000,000,000, during the period beginning on 
        the first day of the Transition Period and ending on the last 
        day of Program Year 1, or during Program Year 2 or Program Year 
        3 (until such time as the Congress may act otherwise with 
        respect to such losses)--
                (i) the Secretary shall not make any payment under this 
            title for any portion of the amount of such losses that 
            exceeds $100,000,000,000; and
                (ii) no insurer that has met its insurer deductible 
            shall be liable for the payment of any portion of that 
            amount that exceeds $100,000,000,000.
            (B) Insurer share.--For purposes of subparagraph (A), the 
        Secretary shall determine the pro rata share of insured losses 
        to be paid by each insurer that incurs insured losses under the 
        Program.
        (3) Notice to congress.--The Secretary shall notify the 
    Congress if estimated or actual aggregate insured losses exceed 
    $100,000,000,000 during the period beginning on the first day of 
    the Transition Period and ending on the last day of Program Year 1, 
    or during Program Year 2 or Program Year 3, and the Congress shall 
    determine the procedures for and the source of any payments for 
    such excess insured losses.
        (4) Final netting.--The Secretary shall have sole discretion to 
    determine the time at which claims relating to any insured loss or 
    act of terrorism shall become final.
        (5) Determinations final.--Any determination of the Secretary 
    under this subsection shall be final, unless expressly provided, 
    and shall not be subject to judicial review.
        (6) Insurance marketplace aggregate retention amount.--For 
    purposes of paragraph (7), the insurance marketplace aggregate 
    retention amount shall be--
            (A) for the period beginning on the first day of the 
        Transition Period and ending on the last day of Program Year 1, 
        the lesser of--
                (i) $10,000,000,000; and
                (ii) the aggregate amount, for all insurers, of insured 
            losses during such period;
            (B) for Program Year 2, the lesser of--
                (i) $12,500,000,000; and
                (ii) the aggregate amount, for all insurers, of insured 
            losses during such Program Year; and
            (C) for Program Year 3, the lesser of--
                (i) $15,000,000,000; and
                (ii) the aggregate amount, for all insurers, of insured 
            losses during such Program Year.
        (7) Recoupment of federal share.--
            (A) Mandatory recoupment amount.--For purposes of this 
        paragraph, the mandatory recoupment amount for each of the 
        periods referred to in subparagraphs (A), (B), and (C) of 
        paragraph (6) shall be the difference between--
                (i) the insurance marketplace aggregate retention 
            amount under paragraph (6) for such period; and
                (ii) the aggregate amount, for all insurers, of insured 
            losses during such period that are not compensated by the 
            Federal Government because such losses--

                    (I) are within the insurer deductible for the 
                insurer subject to the losses; or
                    (II) are within the portion of losses of the 
                insurer that exceed the insurer deductible, but are not 
                compensated pursuant to paragraph (1).

            (B) No mandatory recoupment if uncompensated losses exceed 
        insurance marketplace retention.--Notwithstanding subparagraph 
        (A), if the aggregate amount of uncompensated insured losses 
        referred to in clause (ii) of such subparagraph for any period 
        referred to in subparagraph (A), (B), or (C) of paragraph (6) 
        is greater than the insurance marketplace aggregate retention 
        amount under paragraph (6) for such period, the mandatory 
        recoupment amount shall be $0.
            (C) Mandatory establishment of surcharges to recoup 
        mandatory recoupment amount.--The Secretary shall collect, for 
        repayment of the Federal financial assistance provided in 
        connection with all acts of terrorism (or acts of war, in the 
        case of workers compensation) occurring during any of the 
        periods referred to in subparagraph (A), (B), or (C) of 
        paragraph (6), terrorism loss risk-spreading premiums in an 
        amount equal to any mandatory recoupment amount for such 
        period.
            (D) Discretionary recoupment of remainder of financial 
        assistance.--To the extent that the amount of Federal financial 
        assistance provided exceeds any mandatory recoupment amount, 
        the Secretary may recoup, through terrorism loss risk-spreading 
        premiums, such additional amounts that the Secretary believes 
        can be recouped, based on--
                (i) the ultimate costs to taxpayers of no additional 
            recoupment;
                (ii) the economic conditions in the commercial 
            marketplace, including the capitalization, profitability, 
            and investment returns of the insurance industry and the 
            current cycle of the insurance markets;
                (iii) the affordability of commercial insurance for 
            small- and medium-sized businesses; and
                (iv) such other factors as the Secretary considers 
            appropriate.
        (8) Policy surcharge for terrorism loss risk-spreading 
    premiums.--
            (A) Policyholder premium.--Any amount established by the 
        Secretary as a terrorism loss risk-spreading premium shall--
                (i) be imposed as a policyholder premium surcharge on 
            property and casualty insurance policies in force after the 
            date of such establishment;
                (ii) begin with such period of coverage during the year 
            as the Secretary determines appropriate; and
                (iii) be based on a percentage of the premium amount 
            charged for property and casualty insurance coverage under 
            the policy.
            (B) Collection.--The Secretary shall provide for insurers 
        to collect terrorism loss risk-spreading premiums and remit 
        such amounts collected to the Secretary.
            (C) Percentage limitation.--A terrorism loss risk-spreading 
        premium (including any additional amount included in such 
        premium on a discretionary basis pursuant to paragraph (7)(D)) 
        may not exceed, on an annual basis, the amount equal to 3 
        percent of the premium charged for property and casualty 
        insurance coverage under the policy.
            (D) Adjustment for urban and smaller commercial and rural 
        areas and different lines of insurance.--
                (i) Adjustments.--In determining the method and manner 
            of imposing terrorism loss risk-spreading premiums, 
            including the amount of such premiums, the Secretary shall 
            take into consideration--

                    (I) the economic impact on commercial centers of 
                urban areas, including the effect on commercial rents 
                and commercial insurance premiums, particularly rents 
                and premiums charged to small businesses, and the 
                availability of lease space and commercial insurance 
                within urban areas;
                    (II) the risk factors related to rural areas and 
                smaller commercial centers, including the potential 
                exposure to loss and the likely magnitude of such loss, 
                as well as any resulting cross-subsidization that might 
                result; and
                    (III) the various exposures to terrorism risk for 
                different lines of insurance.

                (ii) Recoupment of adjustments.--Any mandatory 
            recoupment amounts not collected by the Secretary because 
            of adjustments under this subparagraph shall be recouped 
            through additional terrorism loss risk-spreading premiums.
            (E) Timing of premiums.--The Secretary may adjust the 
        timing of terrorism loss risk-spreading premiums to provide for 
        equivalent application of the provisions of this title to 
        policies that are not based on a calendar year, or to apply 
        such provisions on a daily, monthly, or quarterly basis, as 
        appropriate.
    (f) Captive Insurers and Other Self-Insurance Arrangements.--The 
Secretary may, in consultation with the NAIC or the appropriate State 
regulatory authority, apply the provisions of this title, as 
appropriate, to other classes or types of captive insurers and other 
self-insurance arrangements by municipalities and other entities (such 
as workers' compensation self-insurance programs and State workers' 
compensation reinsurance pools), but only if such application is 
determined before the occurrence of an act of terrorism in which such 
an entity incurs an insured loss and all of the provisions of this 
title are applied comparably to such entities.
    (g) Reinsurance to Cover Exposure.--
        (1) Obtaining coverage.--This title may not be construed to 
    limit or prevent insurers from obtaining reinsurance coverage for 
    insurer deductibles or insured losses retained by insurers pursuant 
    to this section, nor shall the obtaining of such coverage affect 
    the calculation of such deductibles or retentions.
        (2) Limitation on financial assistance.--The amount of 
    financial assistance provided pursuant to this section shall not be 
    reduced by reinsurance paid or payable to an insurer from other 
    sources, except that recoveries from such other sources, taken 
    together with financial assistance for the Transition Period or a 
    Program Year provided pursuant to this section, may not exceed the 
    aggregate amount of the insurer's insured losses for such period. 
    If such recoveries and financial assistance for the Transition 
    Period or a Program Year exceed such aggregate amount of insured 
    losses for that period and there is no agreement between the 
    insurer and any reinsurer to the contrary, an amount in excess of 
    such aggregate insured losses shall be returned to the Secretary.
    (h) Group Life Insurance Study.--
        (1) Study.--The Secretary shall study, on an expedited basis, 
    whether adequate and affordable catastrophe reinsurance for acts of 
    terrorism is available to life insurers in the United States that 
    issue group life insurance, and the extent to which the threat of 
    terrorism is reducing the availability of group life insurance 
    coverage for consumers in the United States.
        (2) Conditional Coverage.--To the extent that the Secretary 
    determines that such coverage is not or will not be reasonably 
    available to both such insurers and consumers, the Secretary shall, 
    in consultation with the NAIC--
            (A) apply the provisions of this title, as appropriate, to 
        providers of group life insurance; and
            (B) provide such restrictions, limitations, or conditions 
        with respect to any financial assistance provided that the 
        Secretary deems appropriate, based on the study under paragraph 
        (1).
    (i) Study and Report.--
        (1) Study.--The Secretary, after consultation with the NAIC, 
    representatives of the insurance industry, and other experts in the 
    insurance field, shall conduct a study of the potential effects of 
    acts of terrorism on the availability of life insurance and other 
    lines of insurance coverage, including personal lines.
        (2) Report.--Not later than 9 months after the date of 
    enactment of this Act, the Secretary shall submit a report to the 
    Congress on the results of the study conducted under paragraph (1).

SEC. 104. GENERAL AUTHORITY AND ADMINISTRATION OF CLAIMS.

    (a) General Authority.--The Secretary shall have the powers and 
authorities necessary to carry out the Program, including authority--
        (1) to investigate and audit all claims under the Program; and
        (2) to prescribe regulations and procedures to effectively 
    administer and implement the Program, and to ensure that all 
    insurers and self-insured entities that participate in the Program 
    are treated comparably under the Program.
    (b) Interim Rules and Procedures.--The Secretary may issue interim 
final rules or procedures specifying the manner in which--
        (1) insurers may file and certify claims under the Program;
        (2) the Federal share of compensation for insured losses will 
    be paid under the Program, including payments based on estimates of 
    or actual insured losses;
        (3) the Secretary may, at any time, seek repayment from or 
    reimburse any insurer, based on estimates of insured losses under 
    the Program, to effectuate the insured loss sharing provisions in 
    section 103; and
        (4) the Secretary will determine any final netting of payments 
    under the Program, including payments owed to the Federal 
    Government from any insurer and any Federal share of compensation 
    for insured losses owed to any insurer, to effectuate the insured 
    loss sharing provisions in section 103.
    (c) Consultation.--The Secretary shall consult with the NAIC, as 
the Secretary determines appropriate, concerning the Program.
    (d) Contracts for Services.--The Secretary may employ persons or 
contract for services as may be necessary to implement the Program.
    (e) Civil Penalties.--
        (1) In general.--The Secretary may assess a civil monetary 
    penalty in an amount not exceeding the amount under paragraph (2) 
    against any insurer that the Secretary determines, on the record 
    after opportunity for a hearing--
            (A) has failed to charge, collect, or remit terrorism loss 
        risk-spreading premiums under section 103(e) in accordance with 
        the requirements of, or regulations issued under, this title;
            (B) has intentionally provided to the Secretary erroneous 
        information regarding premium or loss amounts;
            (C) submits to the Secretary fraudulent claims under the 
        Program for insured losses;
            (D) has failed to provide the disclosures required under 
        subsection (f); or
            (E) has otherwise failed to comply with the provisions of, 
        or the regulations issued under, this title.
        (2) Amount.--The amount under this paragraph is the greater of 
    $1,000,000 and, in the case of any failure to pay, charge, collect, 
    or remit amounts in accordance with this title or the regulations 
    issued under this title, such amount in dispute.
        (3) Recovery of amount in dispute.--A penalty under this 
    subsection for any failure to pay, charge, collect, or remit 
    amounts in accordance with this title or the regulations under this 
    title shall be in addition to any such amounts recovered by the 
    Secretary.
    (f) Submission of Premium Information.--
        (1) In general.--The Secretary shall annually compile 
    information on the terrorism risk insurance premium rates of 
    insurers for the preceding year.
        (2) Access to information.--To the extent that such information 
    is not otherwise available to the Secretary, the Secretary may 
    require each insurer to submit to the NAIC terrorism risk insurance 
    premium rates, as necessary to carry out paragraph (1), and the 
    NAIC shall make such information available to the Secretary.
        (3) Availability to congress.--The Secretary shall make 
    information compiled under this subsection available to the 
    Congress, upon request.
    (g) Funding.--
        (1) Federal payments.--There are hereby appropriated, out of 
    funds in the Treasury not otherwise appropriated, such sums as may 
    be necessary to pay the Federal share of compensation for insured 
    losses under the Program.
        (2) Administrative expenses.--There are hereby appropriated, 
    out of funds in the Treasury not otherwise appropriated, such sums 
    as may be necessary to pay reasonable costs of administering the 
    Program.

SEC. 105. PREEMPTION AND NULLIFICATION OF PRE-EXISTING TERRORISM 
              EXCLUSIONS.

    (a) General Nullification.--Any terrorism exclusion in a contract 
for property and casualty insurance that is in force on the date of 
enactment of this Act shall be void to the extent that it excludes 
losses that would otherwise be insured losses.
    (b) General Preemption.--Any State approval of any terrorism 
exclusion from a contract for property and casualty insurance that is 
in force on the date of enactment of this Act, shall be void to the 
extent that it excludes losses that would otherwise be insured losses.
    (c) Reinstatement of Terrorism Exclusions.--Notwithstanding 
subsections (a) and (b) or any provision of State law, an insurer may 
reinstate a preexisting provision in a contract for property and 
casualty insurance that is in force on the date of enactment of this 
Act and that excludes coverage for an act of terrorism only--
        (1) if the insurer has received a written statement from the 
    insured that affirmatively authorizes such reinstatement; or
        (2) if--
            (A) the insured fails to pay any increased premium charged 
        by the insurer for providing such terrorism coverage; and
            (B) the insurer provided notice, at least 30 days before 
        any such reinstatement, of--
                (i) the increased premium for such terrorism coverage; 
            and
                (ii) the rights of the insured with respect to such 
            coverage, including any date upon which the exclusion would 
            be reinstated if no payment is received.

SEC. 106. PRESERVATION PROVISIONS.

    (a) State Law.--Nothing in this title shall affect the jurisdiction 
or regulatory authority of the insurance commissioner (or any agency or 
office performing like functions) of any State over any insurer or 
other person--
        (1) except as specifically provided in this title; and
        (2) except that--
            (A) the definition of the term ``act of terrorism'' in 
        section 102 shall be the exclusive definition of that term for 
        purposes of compensation for insured losses under this title, 
        and shall preempt any provision of State law that is 
        inconsistent with that definition, to the extent that such 
        provision of law would otherwise apply to any type of insurance 
        covered by this title;
            (B) during the period beginning on the date of enactment of 
        this Act and ending on December 31, 2003, rates and forms for 
        terrorism risk insurance covered by this title and filed with 
        any State shall not be subject to prior approval or a waiting 
        period under any law of a State that would otherwise be 
        applicable, except that nothing in this title affects the 
        ability of any State to invalidate a rate as excessive, 
        inadequate, or unfairly discriminatory, and, with respect to 
        forms, where a State has prior approval authority, it shall 
        apply to allow subsequent review of such forms; and
            (C) during the period beginning on the date of enactment of 
        this Act and for so long as the Program is in effect, as 
        provided in section 108, including authority in subsection 
        108(b), books and records of any insurer that are relevant to 
        the Program shall be provided, or caused to be provided, to the 
        Secretary, upon request by the Secretary, notwithstanding any 
        provision of the laws of any State prohibiting or limiting such 
        access.
    (b) Existing Reinsurance Agreements.--Nothing in this title shall 
be construed to alter, amend, or expand the terms of coverage under any 
reinsurance agreement in effect on the date of enactment of this Act. 
The terms and conditions of such an agreement shall be determined by 
the language of that agreement.

SEC. 107. LITIGATION MANAGEMENT.

    (a) Procedures and Damages.--
        (1) In general.--If the Secretary makes a determination 
    pursuant to section 102 that an act of terrorism has occurred, 
    there shall exist a Federal cause of action for property damage, 
    personal injury, or death arising out of or resulting from such act 
    of terrorism, which shall be the exclusive cause of action and 
    remedy for claims for property damage, personal injury, or death 
    arising out of or relating to such act of terrorism, except as 
    provided in subsection (b).
        (2) Preemption of state actions.--All State causes of action of 
    any kind for property damage, personal injury, or death arising out 
    of or resulting from an act of terrorism that are otherwise 
    available under State law are hereby preempted, except as provided 
    in subsection (b).
        (3) Substantive law.--The substantive law for decision in any 
    such action described in paragraph (1) shall be derived from the 
    law, including choice of law principles, of the State in which such 
    act of terrorism occurred, unless such law is otherwise 
    inconsistent with or preempted by Federal law.
        (4) Jurisdiction.--For each determination described in 
    paragraph (1), not later than 90 days after the occurrence of an 
    act of terrorism, the Judicial Panel on Multidistrict Litigation 
    shall designate 1 district court or, if necessary, multiple 
    district courts of the United States that shall have original and 
    exclusive jurisdiction over all actions for any claim (including 
    any claim for loss of property, personal injury, or death) relating 
    to or arising out of an act of terrorism subject to this section. 
    The Judicial Panel on Multidistrict Litigation shall select and 
    assign the district court or courts based on the convenience of the 
    parties and the just and efficient conduct of the proceedings. For 
    purposes of personal jurisdiction, the district court or courts 
    designated by the Judicial Panel on Multidistrict Litigation shall 
    be deemed to sit in all judicial districts in the United States.
        (5) Punitive damages.--Any amounts awarded in an action under 
    paragraph (1) that are attributable to punitive damages shall not 
    count as insured losses for purposes of this title.
    (b) Exclusion.--Nothing in this section shall in any way limit the 
liability of any government, an organization, or person who knowingly 
participates in, conspires to commit, aids and abets, or commits any 
act of terrorism with respect to which a determination described in 
subsection (a)(1) was made.
    (c) Right of Subrogation.--The United States shall have the right 
of subrogation with respect to any payment or claim paid by the United 
States under this title.
    (d) Relationship to Other Law.--Nothing in this section shall be 
construed to affect--
        (1) any party's contractual right to arbitrate a dispute; or
        (2) any provision of the Air Transportation Safety and System 
    Stabilization Act (Public Law 107-42; 49 U.S.C. 40101 note.).
    (e) Effective Period.--This section shall apply only to actions 
described in subsection (a)(1) that arise out of or result from acts of 
terrorism that occur or occurred during the effective period of the 
Program.

SEC. 108. TERMINATION OF PROGRAM.

    (a) Termination of Program.--The Program shall terminate on 
December 31, 2005.
    (b) Continuing Authority to Pay or Adjust Compensation.--Following 
the termination of the Program, the Secretary may take such actions as 
may be necessary to ensure payment, recoupment, reimbursement, or 
adjustment of compensation for insured losses arising out of any act of 
terrorism occurring during the period in which the Program was in 
effect under this title, in accordance with the provisions of section 
103 and regulations promulgated thereunder.
    (c) Repeal; Savings Clause.--This title is repealed on the final 
termination date of the Program under subsection (a), except that such 
repeal shall not be construed--
        (1) to prevent the Secretary from taking, or causing to be 
    taken, such actions under subsection (b) of this section, paragraph 
    (4), (5), (6), (7), or (8) of section 103(e), or subsection (a)(1), 
    (c), (d), or (e) of section 104, as in effect on the day before the 
    date of such repeal, or applicable regulations promulgated 
    thereunder, during any period in which the authority of the 
    Secretary under subsection (b) of this section is in effect; or
        (2) to prevent the availability of funding under section 104(g) 
    during any period in which the authority of the Secretary under 
    subsection (b) of this section is in effect.
    (d) Study and Report on the Program.--
        (1) Study.--The Secretary, in consultation with the NAIC, 
    representatives of the insurance industry and of policy holders, 
    other experts in the insurance field, and other experts as needed, 
    shall assess the effectiveness of the Program and the likely 
    capacity of the property and casualty insurance industry to offer 
    insurance for terrorism risk after termination of the Program, and 
    the availability and affordability of such insurance for various 
    policyholders, including railroads, trucking, and public transit.
        (2) Report.--The Secretary shall submit a report to the 
    Congress on the results of the study conducted under paragraph (1) 
    not later than June 30, 2005.

                TITLE II--TREATMENT OF TERRORIST ASSETS

SEC. 201. SATISFACTION OF JUDGMENTS FROM BLOCKED ASSETS OF TERRORISTS, 
              TERRORIST ORGANIZATIONS, AND STATE SPONSORS OF TERRORISM.

    (a) In General.--Notwithstanding any other provision of law, and 
except as provided in subsection (b), in every case in which a person 
has obtained a judgment against a terrorist party on a claim based upon 
an act of terrorism, or for which a terrorist party is not immune under 
section 1605(a)(7) of title 28, United States Code, the blocked assets 
of that terrorist party (including the blocked assets of any agency or 
instrumentality of that terrorist party) shall be subject to execution 
or attachment in aid of execution in order to satisfy such judgment to 
the extent of any compensatory damages for which such terrorist party 
has been adjudged liable.
    (b) Presidential Waiver.--
        (1) In general.--Subject to paragraph (2), upon determining on 
    an asset-by-asset basis that a waiver is necessary in the national 
    security interest, the President may waive the requirements of 
    subsection (a) in connection with (and prior to the enforcement of) 
    any judicial order directing attachment in aid of execution or 
    execution against any property subject to the Vienna Convention on 
    Diplomatic Relations or the Vienna Convention on Consular 
    Relations.
        (2) Exception.--A waiver under this subsection shall not apply 
    to--
            (A) property subject to the Vienna Convention on Diplomatic 
        Relations or the Vienna Convention on Consular Relations that 
        has been used by the United States for any nondiplomatic 
        purpose (including use as rental property), or the proceeds of 
        such use; or
            (B) the proceeds of any sale or transfer for value to a 
        third party of any asset subject to the Vienna Convention on 
        Diplomatic Relations or the Vienna Convention on Consular 
        Relations.
    (c) Special Rule for Cases Against Iran.--Section 2002 of the 
Victims of Trafficking and Violence Protection Act of 2000 (Public Law 
106-386; 114 Stat. 1542), as amended by section 686 of Public Law 107-
228, is further amended--
        (1) in subsection (a)(2)(A)(ii), by striking ``July 27, 2000, 
    or January 16, 2002'' and inserting ``July 27, 2000, any other date 
    before October 28, 2000, or January 16, 2002'';
        (2) in subsection (b)(2)(B), by inserting after ``the date of 
    enactment of this Act'' the following: ``(less amounts therein as 
    to which the United States has an interest in subrogation pursuant 
    to subsection (c) arising prior to the date of entry of the 
    judgment or judgments to be satisfied in whole or in part 
    hereunder)'';
        (3) by redesignating subsections (d), (e), and (f) as 
    subsections (e), (f), and (g), respectively; and
        (4) by inserting after subsection (c) the following new 
    subsection (d):
    ``(d) Distribution of Account Balances and Proceeds Inadequate to 
Satisfy Full Amount of Compensatory Awards Against Iran.--
        ``(1)  Prior judgments.--
            ``(A) In general.--In the event that the Secretary 
        determines that 90 percent of the amounts available to be paid 
        under subsection (b)(2) are inadequate to pay the total amount 
        of compensatory damages awarded in judgments issued as of the 
        date of the enactment of this subsection in cases identified in 
        subsection (a)(2)(A) with respect to Iran, the Secretary shall, 
        not later than 60 days after such date, make payment from such 
        amounts available to be paid under subsection (b)(2) to each 
        party to which such a judgment has been issued in an amount 
        equal to a share, calculated under subparagraph (B), of 90 
        percent of the amounts available to be paid under subsection 
        (b)(2) that have not been subrogated to the United States under 
        this Act as of the date of enactment of this subsection.
            ``(B) Calculation of payments.--The share that is payable 
        to a person under subparagraph (A), including any person issued 
        a final judgment as of the date of enactment of this subsection 
        in a suit filed on a date added by the amendment made by 
        section 686 of Public Law 107-228, shall be equal to the 
        proportion that the amount of unpaid compensatory damages 
        awarded in a final judgment issued to that person bears to the 
        total amount of all unpaid compensatory damages awarded to all 
        persons to whom such judgments have been issued as of the date 
        of enactment of this subsection in cases identified in 
        subsection (a)(2)(A) with respect to Iran.
        ``(2) Subsequent judgment.--
            ``(A) In general.--The Secretary shall pay to any person 
        awarded a final judgment after the date of enactment of this 
        subsection, in the case filed on January 16, 2002, and 
        identified in subsection (a)(2)(A) with respect to Iran, an 
        amount equal to a share, calculated under subparagraph (B), of 
        the balance of the amounts available to be paid under 
        subsection (b)(2) that remain following the disbursement of all 
        payments as provided by paragraph (1). The Secretary shall make 
        such payment not later than 30 days after such judgment is 
        awarded.
            ``(B) Calculation of payments.--To the extent that funds 
        are available, the amount paid under subparagraph (A) to such 
        person shall be the amount the person would have been paid 
        under paragraph (1) if the person had been awarded the judgment 
        prior to the date of enactment of this subsection.
        ``(3) Additional payments.--
            ``(A) In general.--Not later than 30 days after the 
        disbursement of all payments under paragraphs (1) and (2), the 
        Secretary shall make an additional payment to each person who 
        received a payment under paragraph (1) or (2) in an amount 
        equal to a share, calculated under subparagraph (B), of the 
        balance of the amounts available to be paid under subsection 
        (b)(2) that remain following the disbursement of all payments 
        as provided by paragraphs (1) and (2).
            ``(B) Calculation of payments.--The share payable under 
        subparagraph (A) to each such person shall be equal to the 
        proportion that the amount of compensatory damages awarded that 
        person bears to the total amount of all compensatory damages 
        awarded to all persons who received a payment under paragraph 
        (1) or (2).
        ``(4) Statutory construction.--Nothing in this subsection shall 
    bar, or require delay in, enforcement of any judgment to which this 
    subsection applies under any procedure or against assets otherwise 
    available under this section or under any other provision of law.
        ``(5) Certain rights and claims not relinquished.--Any person 
    receiving less than the full amount of compensatory damages awarded 
    to that party in a judgment to which this subsection applies shall 
    not be required to make the election set forth in subsection 
    (a)(2)(B) or, with respect to subsection (a)(2)(D), the election 
    relating to relinquishment of any right to execute or attach 
    property that is subject to section 1610(f)(1)(A) of title 28, 
    United States Code, except that such person shall be required to 
    relinquish rights set forth--
            ``(A) in subsection (a)(2)(C); and
            ``(B) in subsection (a)(2)(D) with respect to enforcement 
        against property that is at issue in claims against the United 
        States before an international tribunal or that is the subject 
        of awards by such tribunal.
        ``(6) Guidelines for establishing claims of a right to 
    payment.--The Secretary may promulgate reasonable guidelines 
    through which any person claiming a right to payment under this 
    section may inform the Secretary of the basis for such claim, 
    including by submitting a certified copy of the final judgment 
    under which such right is claimed and by providing commercially 
    reasonable payment instructions. The Secretary shall take all 
    reasonable steps necessary to ensure, to the maximum extent 
    practicable, that such guidelines shall not operate to delay or 
    interfere with payment under this section.''.
    (d) Definitions.--In this section, the following definitions shall 
apply:
        (1) Act of terrorism.--The term ``act of terrorism'' means--
            (A) any act or event certified under section 102(1); or
            (B) to the extent not covered by subparagraph (A), any 
        terrorist activity (as defined in section 212(a)(3)(B)(iii) of 
        the Immigration and Nationality Act (8 U.S.C. 
        1182(a)(3)(B)(iii))).
        (2) Blocked asset.--The term ``blocked asset'' means--
            (A) any asset seized or frozen by the United States under 
        section 5(b) of the Trading With the Enemy Act (50 U.S.C. App. 
        5(b)) or under sections 202 and 203 of the International 
        Emergency Economic Powers Act (50 U.S.C. 1701; 1702); and
            (B) does not include property that--
                (i) is subject to a license issued by the United States 
            Government for final payment, transfer, or disposition by 
            or to a person subject to the jurisdiction of the United 
            States in connection with a transaction for which the 
            issuance of such license has been specifically required by 
            statute other than the International Emergency Economic 
            Powers Act (50 U.S.C. 1701 et seq.) or the United Nations 
            Participation Act of 1945 (22 U.S.C. 287 et seq.); or
                (ii) in the case of property subject to the Vienna 
            Convention on Diplomatic Relations or the Vienna Convention 
            on Consular Relations, or that enjoys equivalent privileges 
            and immunities under the law of the United States, is being 
            used exclusively for diplomatic or consular purposes.
        (3) Certain property.--The term ``property subject to the 
    Vienna Convention on Diplomatic Relations or the Vienna Convention 
    on Consular Relations'' and the term ``asset subject to the Vienna 
    Convention on Diplomatic Relations or the Vienna Convention on 
    Consular Relations'' mean any property or asset, respectively, the 
    attachment in aid of execution or execution of which would result 
    in a violation of an obligation of the United States under the 
    Vienna Convention on Diplomatic Relations or the Vienna Convention 
    on Consular Relations, as the case may be.
        (4) Terrorist party.--The term ``terrorist party'' means a 
    terrorist, a terrorist organization (as defined in section 
    212(a)(3)(B)(vi) of the Immigration and Nationality Act (8 U.S.C. 
    1182(a)(3)(B)(vi))), or a foreign state designated as a state 
    sponsor of terrorism under section 6(j) of the Export 
    Administration Act of 1979 (50 U.S.C. App. 2405(j)) or section 620A 
    of the Foreign Assistance Act of 1961 (22 U.S.C. 2371).

              TITLE III--FEDERAL RESERVE BOARD PROVISIONS

SEC. 301. CERTAIN AUTHORITY OF THE BOARD OF GOVERNORS OF THE FEDERAL 
              RESERVE SYSTEM.

    Section 11 of the Federal Reserve Act (12 U.S.C. 248) is amended by 
adding at the end the following new subsection:
    ``(r)(1) Any action that this Act provides may be taken only upon 
the affirmative vote of 5 members of the Board may be taken upon the 
unanimous vote of all members then in office if there are fewer than 5 
members in office at the time of the action.
    ``(2)(A) Any action that the Board is otherwise authorized to take 
under section 13(3) may be taken upon the unanimous vote of all 
available members then in office, if--
        ``(i) at least 2 members are available and all available 
    members participate in the action;
        ``(ii) the available members unanimously determine that--
            ``(I) unusual and exigent circumstances exist and the 
        borrower is unable to secure adequate credit accommodations 
        from other sources;
            ``(II) action on the matter is necessary to prevent, 
        correct, or mitigate serious harm to the economy or the 
        stability of the financial system of the United States;
            ``(III) despite the use of all means available (including 
        all available telephonic, telegraphic, and other electronic 
        means), the other members of the Board have not been able to be 
        contacted on the matter; and
            ``(IV) action on the matter is required before the number 
        of Board members otherwise required to vote on the matter can 
        be contacted through any available means (including all 
        available telephonic, telegraphic, and other electronic means); 
        and
        ``(iii) any credit extended by a Federal reserve bank pursuant 
    to such action is payable upon demand of the Board.
    ``(B) The available members of the Board shall document in writing 
the determinations required by subparagraph (A)(ii), and such written 
findings shall be included in the record of the action and in the 
official minutes of the Board, and copies of such record shall be 
provided as soon as practicable to the members of the Board who were 
not available to participate in the action and to the Chairman of the 
Committee on Banking, Housing, and Urban Affairs of the Senate and to 
the Chairman of the Committee on Financial Services of the House of 
Representatives.''.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.