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







107th CONGRESS
  1st Session
                                H. R. 3210

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


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            November 1, 2001

   Mr. Oxley (for himself, Mr. Baker, Mrs. Roukema, Mr. Bachus, Mrs. 
Kelly, Mr. Bentsen, Mr. Royce, Mr. Maloney of Connecticut, Mr. Lucas of 
 Oklahoma, Mr. Pomeroy, Mr. Ney, Mr. Barr of Georgia, Mr. Gillmor, Mr. 
 Weldon of Florida, Mr. Ryun of Kansas, Mr. Riley, Mr. Jones of North 
Carolina, Mr. Ose, Mrs. Biggert, Mr. Green of Wisconsin, Mr. Shays, Mr. 
 Shadegg, Mr. Fossella, Mr. Gary G. Miller of California, Mr. Cantor, 
   Mr. Grucci, Mr. Ferguson, Mr. Rogers of Michigan, Mr. Tiberi, Mr. 
Foley, and Mr. Issa) introduced the following bill; which was referred 
    to the Committee on Financial Services, and in addition to the 
   Committees on Ways and Means, and the Budget, for a period to be 
subsequently determined by the Speaker, in each case for consideration 
  of such provisions as fall within the jurisdiction of the committee 
                               concerned

_______________________________________________________________________

                                 A BILL


 
   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. Designation of Administrators.
Sec. 4. Submission of premium information to Administrator.
Sec. 5. Triggering determination and covered period.
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. Reserve for terrorism coverage under commercial lines of 
                            business.
Sec. 11. State preemption.
Sec. 12. Consistent State guidelines for coverage for acts of 
                            terrorism.
Sec. 13. Consultation with State insurance regulators and NAIC.
Sec. 14. Sovereign immunity protections.
Sec. 15. Study of potential effects of terrorism on life insurance 
                            industry.
Sec. 16. Definitions.
Sec. 17. Extension of program.
Sec. 18. 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;
            (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 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 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 loan 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; and
            (10) in addition, it is necessary to repeal portions of the 
        tax law which prohibit the insurance market from developing the 
        necessary reserves to handle possible future losses due to acts 
        of terrorism.

SEC. 3. DESIGNATION OF ADMINISTRATORS.

    (a) In General.--Not later than December 1, 2001, the President 
shall designate a Federal officer or officers to act as the 
Administrator or Administrators responsible for carrying out this Act 
and the responsibilities under this Act to be carried out by each such 
officer.
    (b) Sense of Congress.--It is the sense of the Congress that in 
determining the Administrator responsible for making any 
determinations, for purposes of this Act, as to whether a loss was 
caused by an act of terrorism and whether such loss was caused by one 
or multiple such events, pursuant to section 5(b), the President should 
consider the appropriate role of the Assistant to the President for 
Homeland Security.

SEC. 4. SUBMISSION OF PREMIUM INFORMATION TO ADMINISTRATOR.

    To the extent such information is not otherwise available to the 
Administrators, the appropriate Administrator may require each insurer 
to submit, to the appropriate Administrator or to the NAIC, a statement 
specifying the aggregate premium amount of coverage written by such 
insurer for properties and persons in the United States under each line 
of commercial property and casualty insurance sold by such insurer 
during such periods as the appropriate Administrator may provide.

SEC. 5. TRIGGERING DETERMINATION AND COVERED PERIOD.

    (a) In General.--For purposes of this Act, a ``triggering 
determination'' is a determination by the appropriate Administrator 
that the insured losses resulting from the event of an act of terrorism 
occurring during the covered period (as such term is defined in 
subsection (b)), or the aggregate insured losses resulting from 
multiple events of acts of terrorism all occurring during the covered 
period, meet the requirements under either of the following paragraphs:
            (1) Industry-wide loss test.--Such industry-wide losses 
        exceed $1,000,000,000.
            (2) Capital surplus and industry aggregate test.--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 
                appropriate Administrator); and
                    (B) 10 percent of the commercial property and 
                casualty premiums written by such commercial insurer;
        except that this paragraph shall not apply to any commercial 
        insurer that has been making commercial property and casualty 
        insurance coverage available for less than 4 years as of the 
        date of the determination under this subsection.
    (b) Covered Period.--For purposes of this Act, the ``covered 
period'' is the period beginning on the date of the enactment of this 
Act and ending on January 1, 2003.
    (c) Determinations Regarding Events.--For purposes of subsection 
(a), the appropriate Administrator shall have the sole authority for 
determining whether--
            (1) an occurrence or event was caused by an act of 
        terrorism;
            (2) insured losses from acts of terrorism were caused by 
        one or multiple events or occurrences; and
            (3) whether 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 
appropriate Administrator 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.--Subject to subsection (c), with respect to a 
triggering determination, the amount of financial assistance made 
available under this section to each commercial insurer shall be equal 
to 90 percent of the amount of the insured losses of the insurer as a 
result of the triggering event involved.
    (c) Aggregate Limitation.--The aggregate amount of financial 
assistance provided pursuant to this section may not exceed 
$100,000,000,000.
    (d) Limitations.--The appropriate Administrator 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 appropriate Administrator and surcharges remitted to the 
appropriate Administrator 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 financial assistance made available under 
section 6 in connection with such determination.
    (b) Aggregate Assessment.--Pursuant to a triggering determination, 
the appropriate Administrator shall determine the aggregate amount to 
be assessed among all commercial insurers, which shall be equal to 90 
percent of the lesser of--
            (1) the amount of industry-wide losses resulting from the 
        triggering event involved; and
            (2) $20,000,000,000.
    (c) Allocation of Assessment.--
            (1) In general.--The appropriate Administrator shall 
        allocate the aggregate assessment amount determined under 
        subsection (b) among all commercial insurers. The portion of 
        the aggregate assessment amount that is allocated as an 
        assessment on each commercial insurer shall be based on the 
        percentage, written by that insurer, of the aggregate written 
        premium, for all commercial insurers, for the calendar year 
        preceding the assessment.
            (2) Payment requirement.--Upon notification by the 
        appropriate Administrator of an assessment under this section, 
        each commercial insurer shall be required to pay to the 
        appropriate Administrator, in the manner provided under section 
        9 by the appropriate Administrator, the amount equal to the 
        assessment on such commercial insurer (subject to the 
        limitation under paragraph (3)).
            (3) Annual limitation on amount allocated to each 
        commercial insurer.--
                    (A) In general.--Of any assessments under this 
                section on a commercial insurer, the portion required 
                to be paid by any commercial insurer during a calendar 
                year shall not exceed the amount that is equal to 3 
                percent of the aggregate written premium for such 
                insurer for the preceding calendar year.
                    (B) Multiple payments.--If any amounts required to 
                be repaid under this section for a calendar year are 
                limited by operation of subparagraph (A), the 
                appropriate Administrator shall provide that all such 
                remaining amounts shall be reallocated among all 
                commercial insurers (in the manner provided in 
                paragraph (1)) over such immediately succeeding 
                calendar years, and repaid over such years, as may be 
                necessary to provide for full payment of such remaining 
                amounts, except that the limitation under subparagraph 
                (A) shall apply to the amounts paid in any such 
                successive calendar years.
                    (C) Administrative flexibility.--
                            (i) Timing of assessments.--Assessments 
                        under this section in connection with a 
                        triggering demonstration shall be made, to the 
                        extent that the appropriate Administrator 
                        considers practicable and appropriate, at the 
                        beginning of the calendar year immediately 
                        following the triggering determination.
                            (ii) Estimates and corrections.--If the 
                        appropriate Administrator makes an assessment 
                        at a time other than provided under clause (i), 
                        the appropriate Administrator may--
                                    (I) require commercial insurers to 
                                estimate their aggregate written 
                                premiums for the year in which the 
                                assessment is made; and
                                    (II) make a subsequent refund or 
                                require additional payments to correct 
                                such estimation at the end of the 
                                calendar year.
            (4) Deferral of contributions.--The appropriate 
        Administrator may defer the payment of part or all of the 
        assessment required under paragraph (2) to be paid by a 
        commercial insurer, but only to the extent that the appropriate 
        Administrator determines that such deferral is necessary to 
        avoid the likely insolvency of the commercial insurer.

SEC. 8. TERRORISM LOSS REPAYMENT SURCHARGE.

    (a) Imposition and Collection.--If, pursuant to a triggering 
determination, the appropriate Administrator determines that the 
aggregate amount of industry-wide losses resulting from the triggering 
event involved exceeds $20,000,000,000, the appropriate Administrator 
shall--
            (1) establish and impose a policyholder premium surcharge, 
        as provided under this section, 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; and
            (2) provide for commercial insurers to collect such 
        surcharge and remit amounts collected to the appropriate 
        Administrator.
    (b) Amount and Duration.--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 appropriate 
Administrator determines is necessary to recover the aggregate amount 
of financial assistance provided under section 6 to cover insured 
losses resulting from the triggering event that exceed $20,000,000,000.
    (c) Other Terms.--The surcharge under this section shall--
            (1) be based on a percentage of the amount of 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).

SEC. 9. ADMINISTRATION OF ASSESSMENTS AND SURCHARGES.

    (a) Manner and Method.--The appropriate Administrator 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 or surcharge requirements, collecting payments from and 
surcharges through commercial insurers, and refunding of any excess 
amounts paid or crediting such amounts against future assessments.
    (b) Timing of Coverages and Assessments.--The appropriate 
Administrator 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) Application to Self-Insurance Arrangements.--The appropriate 
Administrator 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.
    (d) Adjustment.--The appropriate Administrator may adjust the 
assessments charged under section 7 or the percentage imposed under the 
surcharge under section 8 at any time, as the appropriate Administrator 
considers appropriate to protect the national interest, which may 
include avoiding unreasonable economic disruption or excessive market 
instability.

SEC. 10. RESERVE FOR TERRORISM COVERAGE UNDER COMMERCIAL LINES OF 
              BUSINESS.

    (a) In General.--Section 832 of the Internal Revenue Code of 1986 
(relating to insurance company taxable income) is amended by adding at 
the end the following new subsection:
    ``(h) Terrorism Reserve for Commercial Lines of Business.--In the 
case of an insurance company subject to tax under section 831(a)--
            ``(1) Inclusion for decreases, and deduction for increases, 
        in balance of reserve.--
                    ``(A) Decrease treated as gross income.--If for any 
                taxable year--
                            ``(i) the opening balance for the terrorism 
                        commercial business reserve exceeds
                            ``(ii) the closing balance for such 
                        reserve,
                such excess shall be included in gross income under 
                subsection (b)(1)(F).
                    ``(B) Increase treated as deduction.--If for any 
                taxable year--
                            ``(i) the closing balance for the terrorism 
                        commercial business reserve exceeds
                            ``(ii) the opening balance for such 
                        reserve,
                such excess shall be taken into account as a deduction 
                under subsection (c)(14).
            ``(2) Terrorism commercial business reserve.--For purposes 
        of this section, the term `terrorism commercial business 
        reserve' means amounts held in a segregated account (or other 
        separately identifiable arrangement or account) which are set 
        aside exclusively--
                    ``(A) to mature or liquidate, either by payment or 
                reinsurance, future unaccrued claims arising from 
                declared terrorism losses under commercial lines of 
                business, and
                    ``(B) if so directed by the insurance commissioner 
                of any State, to pay other claims as part of a plan of 
                the company to avoid insolvency.
            ``(3) Limitation on amount of reserve.--
                    ``(A) In general.--If the closing balance of any 
                terrorism commercial business reserve for any taxable 
                year exceeds such reserve's limit for such year--
                            ``(i) such excess shall be included in 
                        gross income under subsection (b)(1)(F) for the 
                        following taxable year, and
                            ``(ii) if such excess is distributed during 
                        such following taxable year, the opening 
                        balance of such reserve for such following 
                        taxable year shall be determined without regard 
                        to such excess.
                    ``(B) Reserve limit.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A), a reserve's limit for any 
                        taxable year is such reserve's allocable share 
                        of the national limit for the calendar year in 
                        which such taxable year begins.
                            ``(ii) National limit.--The national limit 
                        is $40,000,000,000 ($13,340,000,000 for 2002).
                            ``(iii) Allocation of limit.--
                                    ``(I) In general.--A reserve's 
                                allocable share of the national limit 
                                for any calendar year is the amount 
                                which bears the same ratio to the 
                                national limit for such year as the 
                                company's net written premiums for 
                                commercial lines of business bears to 
                                such net written premiums for all 
                                companies for commercial line of 
                                business.
                                    ``(II) Exclusion of premiums for 
                                insurance not covering declared 
                                terrorism losses and for reinsurance.--
                                Subclause (I) shall be applied without 
                                regard to premiums for insurance which 
                                does not cover declared terrorism 
                                losses and premiums for reinsurance.
                                    ``(III) Determination of net 
                                written premiums.--Except as otherwise 
                                provided in this section, all 
                                determinations under this subsection 
                                shall be made on the basis of the 
                                amounts required to be set forth on the 
                                annual statement approved by the 
                                National Association of Insurance 
                                Commissioners.
                            ``(iv) Inflation adjustment of limit.--In 
                        the case of any calendar year after 2002, the 
                        $40,000,000,000 amount in clause (ii) shall be 
                        increased by an amount equal to the product 
                        of--
                                    ``(I) such dollar amount, and
                                    ``(II) the cost-of-living 
                                adjustment determined under subsection 
                                (f)(3) for such calendar year, 
                                determined by substituting `calendar 
                                year 2001' for `calendar year 1992' in 
                                subparagraph (B) thereof.
                        If any amount after adjustment under the 
                        preceding sentence is not a multiple of 
                        $1,000,000, such amount shall be rounded to the 
                        nearest multiple of $1,000,000.
            ``(4) Declared terrorism losses.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `declared terrorism 
                losses' means, with respect to a taxable year--
                            ``(i) the amount of losses and loss 
                        adjustment expenses incurred in commercial 
                        lines of business that are attributable to 1 or 
                        more declared terrorism events, plus
                            ``(ii) any nonrecoverable assessments, 
                        surcharges, or other liabilities that are borne 
                        by the company and are attributable to such 
                        events.
                    ``(B) Declared terrorism event.--The term `declared 
                terrorism event' means any event declared by the 
                President to be an act of terrorism against the United 
                States for purposes of this section.
            ``(5) Regulations.--The Secretary shall prescribe such 
        regulations as may be appropriate to carry out this subsection, 
        and shall prescribe such regulations after consultation with 
        the National Association of Insurance Commissioners.''
    (b) Conforming Amendments.--
            (1) Paragraph (1) of section 832(b) of such Code is amended 
        by striking ``and'' at the end of subparagraph (D), by striking 
        the period at the end of subparagraph (E) and inserting in lieu 
        thereof ``, and'', and by adding at the end the following new 
        subparagraph:
                    ``(F) each net decrease in reserves which is 
                required by paragraph (1) or (3) of subsection (h) to 
                be taken into account under this subparagraph.''
            (2) Subsection (c) of section 832 of such Code is amended 
        by striking ``and'' at the end of paragraph (12), by striking 
        the period at the end of paragraph (13) and inserting in lieu 
        thereof ``; and'', and by adding at the end the following new 
        paragraph:
            ``(14) each net increase in reserves which is required by 
        subsection (h)(1) to be taken into account under this 
        paragraph.''
    (c) Effective Date.--The amendments made by this subsection shall 
apply to taxable years beginning after December 31, 2001.

SEC. 11. 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 the regulations issued by the Administrators.
    (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.--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. This subsection 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.

SEC. 12. 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 appropriate 
        Administrator, should develop appropriate definitions for acts 
        of terrorism and appropriate standards for making 
        determinations regarding events or 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 appropriate 
        Administrator 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 appropriate 
        Administrator should adopt 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 appropriate Administrator 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 appropriate 
        Administrator determines that such guidelines have not been so 
        developed and adopted, the appropriate Administrator shall 
        consider adopting, and may adopt, such guidelines on a national 
        basis in a manner that would supercede 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 appropriate 
        Administrator 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 appropriate 
        Administrator shall, after consultation with the NAIC, adopt 
        guidelines on a national basis requiring such disclosure in a 
        manner that supercedes any State law regarding such disclosure.

SEC. 13. CONSULTATION WITH STATE INSURANCE REGULATORS AND NAIC.

    The Administrators shall consult with the State insurance 
regulators and the NAIC in carrying out this Act. The Administrators 
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.

SEC. 14. SOVEREIGN IMMUNITY PROTECTIONS.

    (a) Federal Cause of Action for Damages From Terrorist Acts 
Resulting in Triggering Determination.--
            (1) In general.--If a triggering determination occurs 
        requiring an assessment under section 7 or a surcharge under 
        section 8, there shall exist a Federal cause of action, which 
        shall be the exclusive remedy, for damages claimed pursuant to, 
        or in connection with, any acts of terrorism that caused the 
        insured losses resulting in such triggering determination.
            (2) 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 act of terrorism 
        occurred, unless such law is inconsistent with or preempted by 
        Federal law.
            (3) Jurisdiction.--Pursuant to each triggering 
        determination, 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 brought pursuant to this subsection that arise 
        out of the triggering event involved.
            (4) Offset for relief payments.--Any recovery by a 
        plaintiff in an action under this subsection shall be offset by 
        the amount, if any, received by the plaintiff from the United 
        States pursuant to any emergency or disaster relief program, or 
        from any other collateral source, for compensation of losses 
        related to the act of terrorism involved.
    (b) Damages in Actions Regarding Insurance Claims.--In an action 
brought under this section for damages claimed by an insured pursuant 
to, or in connection with, any commercial property and casualty 
insurance providing coverage for acts of terrorism that resulted in a 
triggering determination:
            (1) Prohibition of punitive damages.--No punitive damages 
        intended to punish or deter may be awarded.
            (2) Noneconomic damages.--
                    (A) In general.--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 claimant.
                    (B) Definition.--For purposes of subparagraph (A), 
                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 of any kind or nature.
    (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) Protective Orders.--The United States or any appropriate 
Administrator carrying out responsibilities under this Act may seek 
protective orders or assert privileges ordinarily available to the 
United States to protect against the disclosure of classified 
information, including the invocation of the military and State secrets 
privilege

SEC. 15. 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 5 
        members, as follows:
                    (A) The appropriate Administrator, as designated by 
                the President.
                    (C) 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 
        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 loses 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 as provided for in subsection (e).

SEC. 16. 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 appropriate Administrator 
                determines meets the requirements under subparagraph 
                (B), as such requirements are further defined and 
                specified by the appropriate Administrator 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;
                            (iii) is committed by a group of persons or 
                        associations who--
                                    (I) are not a government of a 
                                foreign country or the de facto 
                                government of a foreign country; and
                                    (II) are recognized by the 
                                Department of State or the appropriate 
                                Administrator as a terrorist group or 
                                have conspired with such a group or the 
                                group's agents or surrogates; and
                            (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 by 
                        coercion.
            (2) Appropriate administrators.--The term ``appropriate 
        Administrator'' means, with respect to any function or 
        responsibility of the Federal Government under this Act, the 
        Federal officer designated by the President pursuant to section 
        3 as responsible for carrying out such function or 
        responsibility.
            (3) 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.
            (4) 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 for persons or 
        properties in the United States under all lines of commercial 
        property and casualty insurance.
            (5) Commercial insurance.--The term ``commercial 
        insurance'' means property and casualty insurance that is not 
        insurance for homeowners, tenants, private passenger nonfleet 
        automobiles, mobile homes, or other insurance for personal, 
        family, or household needs.
            (6) 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 is engaged in the 
        business of providing commercial property and casualty 
        insurance for persons or properties in the United States. Such 
        term includes any affiliates of a commercial insurer.
            (7) Commercial property and casualty insurance.--The term 
        ``commercial property and casualty insurance'' means property 
        and casualty insurance that is commercial insurance.
            (8) 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 appropriate Administrator 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.
            (9) Covered period.--The term ``covered period'' has the 
        meaning given such term in section 5(b).
            (10) Industry-wide losses.--The term ``industry-wide 
        losses'' means the aggregate insured losses sustained by all 
        insurers, from coverage written for persons or properties in 
        the United States, under all lines of commercial property and 
        casualty insurance.
            (11) Insured loss.--The term ``insured loss'' means any 
        loss in the United States covered by commercial property and 
        casualty insurance.
            (12) Insurer.--The term ``insurer'' means any corporation, 
        association, society, order, firm, company, mutual, 
        partnership, individual, aggregation of individuals, or any 
        other legal entity that is engaged in the business of providing 
        property and casualty insurance for persons or properties in 
        the United States. Such term includes any affiliates of an 
        insurer.
            (13) NAIC.--The term ``NAIC'' means the National 
        Association of Insurance Commissioners.
            (14) Property and casualty insurance.--The term ``property 
        and casualty insurance'' means insurance against--
                    (A) loss of or damage to property;
                    (B) loss of income or extra expense incurred 
                because of loss of or damage to property; and
                    (C) third party liability claims caused by 
                negligence or imposed by statute or contract.
        Such term does not include health or life insurance.
            (15) 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.
            (16) State insurance regulator.--The term ``State insurance 
        regulator'' means, with respect to a State, the principal 
        insurance regulatory authority of the State.
            (17) Triggering determination.--The term ``triggering 
        determination'' has the meaning given such term in section 
        5(a).
            (18) Triggering event.--The term ``triggering event'' 
        means, with respect to a triggering determination, the event of 
        an act of terrorism, or the events of such acts, that caused 
        the insured losses resulting in such triggering determination.
            (19) United states.--The term ``United States'' means, 
        collectively, the States (as such term is defined in this 
        section).

SEC. 17. EXTENSION OF PROGRAM.

    (a) Authority.--If the appropriate Administrator determines that 
action under this section is necessary to ensure the adequate 
availability in the United States of commercial property and casualty 
insurance coverage for acts of terrorism, the appropriate Administrator 
may provide that the provisions of this Act shall continue to apply 
with respect to a period or periods, as established by the 
Administrator, that begin after the expiration of the covered period 
specified in section 5(b) and end before January 1, 2005.
    (b) Covered Period.--If the appropriate Administrator exercises the 
authority under subsection (a), notwithstanding section 5(b) and 
section 16(9), the period or periods established by the appropriate 
Administrator shall be considered to be the covered period for purposes 
of this Act.

SEC. 18. REGULATIONS.

    The appropriate Administrators shall issue any regulations 
necessary to carry out this Act.
                                 <all>