[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1743 Introduced in Senate (IS)]







107th CONGRESS
  1st Session
                                S. 1743

To create a temporary reinsurance mechanism to enhance the availability 
                        of terrorism insurance.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           November 29, 2001

 Mr. Hollings (for himself, Mrs. Boxer, and Mr. Wyden) introduced the 
 following bill; which was read twice and referred to the Committee on 
                 Commerce, Science, and Transportation

_______________________________________________________________________

                                 A BILL


 
To create a temporary reinsurance mechanism to enhance the availability 
                        of terrorism insurance.

    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 ``National Terrorism 
Reinsurance Fund Act''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. Purpose.
Sec. 4. National terrorism reinsurance program.
Sec. 5. Fund operations.
Sec. 6. Coverage provided.
Sec. 7. Secretary to determine if loss is attributable to terrorism.
Sec. 8. Mandatory coverage by property and casualty insurers for acts 
                            of terrorism.
Sec. 9. Pass-throughs and other rate increases.
Sec. 10. Credit for reinsurance.
Sec. 11. Administrative provisions.
Sec. 12. Inapplicability of certain laws.
Sec. 13. Sunset provision.
Sec. 14. Definitions.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) The terrorist attacks on the World Trade Center and 
        Pentagon on September 11, 2001, have inflicted possibly the 
        largest loss ever incurred by insurers and reinsurers.
            (2) The magnitude of the loss, and its impact on the 
        current capacity of the reinsurance market, threaten the 
        ability of the property and casualty insurance market to 
        provide coverage to building owners, businesses, and American 
        citizens.
            (3) It is necessary to create a temporary reinsurance 
        mechanism to augment the capacity of private insurers to 
        provide insurance for terrorism related risks.

SEC. 3. PURPOSE.

    The purpose of this Act is to facilitate the coverage by property 
and casualty insurers of the peril for losses due to acts of terrorism 
by providing additional reinsurance capacity for loss or damage due to 
acts of terrorism occurring within the United States, its territories, 
and possessions.

SEC. 4. NATIONAL TERRORISM REINSURANCE PROGRAM.

    (a) In General.--The Secretary of Commerce shall establish and 
administer a program to provide reinsurance to participating insurers 
for losses due to acts of terrorism.
    (b) Advisory Committee; Membership.--There is established an 
advisory committee to provide advice and counsel to the Secretary in 
carrying out the program of reinsurance established by the Secretary. 
The advisory committee shall consist of 10 members, as follows:
            (1) 3 representatives of the property and casualty 
        insurance industry, appointed by the Secretary.
            (2) A representative of property and casualty insurance 
        agents, appointed by the Secretary.
            (3) A representative of consumers of property-casualty 
        insurance, appointed by the Secretary.
            (4) A representative of a recognized national credit rating 
        agency, appointed by the Secretary.
            (5) A representative of the banking or real estate 
        industry, appointed by the Secretary.
            (6) 2 representatives of the National Association of 
        Insurance Commissioners, designated by that organization.
            (7) A representative of the Department of the Treasury, 
        designated by the Secretary of the Treasury.
    (c) National Terrorism Reinsurance Fund.--
            (1) Establishment.--To carry out the reinsurance program, 
        the Secretary shall establish a National Terrorism Reinsurance 
        Fund which shall be available, without fiscal year 
        limitations--
                    (A) to make such payments as may, from time to 
                time, be required under reinsurance contracts under 
                this Act;
                    (B) to pay such administrative expenses as may be 
                necessary or appropriate to carry out the purposes of 
                this Act, but such expenses may not exceed $5,000,000 
                for each of fiscal years 2002, 2003, and 2004; and
                    (C) to repay to the Secretary of the Treasury such 
                sums, including interest thereon, as may be borrowed 
                from the Treasury for purposes of this Act.
            (2) Credits to fund.--The Fund shall be credited with--
                    (A) reinsurance premiums, fees, and other charges 
                which may be paid or collected in connection with 
                reinsurance provided under this Act;
                    (B) interest which may be earned on investments of 
                the Fund;
                    (C) receipts from any other source which may, from 
                time to time, be credited to the Fund; and
                    (D) Funds borrowed by the Secretary from the 
                Treasury.
            (3) Investment in obligations issued or guaranteed by 
        united states.--If the Secretary determines that the moneys of 
        the Fund are in excess of current needs, he may request the 
        investment of such amounts as he deems advisable by the 
        Secretary of the Treasury in obligations issued or guaranteed 
        by the United States.
            (4) Loans to fund.--The Secretary of the Treasury shall 
        grant loans to the Fund in the manner and to the extent 
        provided in this Act.
    (d) Underwriting Standards.--In order to carry out the 
responsibilities of the Secretary under this Act and protect the Fund, 
the Secretary shall establish minimum underwriting standards for 
participating insurers.
    (e) Monitoring of Terrorism Insurance Rates.--
            (1) Secretary to establish special committee on rates.--The 
        Secretary shall establish a special committee on rates, the 
        size and membership of which shall be determined by the 
        Secretary, except that the committee shall, at a minimum, 
        include--
                    (A) representatives of providers of insurance for 
                losses due to acts of terrorism;
                    (B) representatives of purchasers of such 
                insurance;
                    (C) at least 2 representatives of NAIC; and
                    (D) at least 2 independent insurance actuaries.
            (2) Duties.--The special committee on rates shall meet at 
        the call of the Secretary and shall--
                    (A) review reports filed with the Secretary by 
                State insurance regulatory authorities;
                    (B) collect data on rate disclosure practices of 
                participating insurers for insurance for covered lines 
                and for losses due to acts of terrorism; and
                    (C) provide such advice and counsel to the 
                Secretary as the Secretary may require.

SEC. 5. FUND OPERATIONS.

    (a) Funding by Premium.--
            (1) In general.--For the year beginning January 1, 2002, 
        and each subsequent year of operation, participating insurers 
        shall pay into the Fund an annual reinsurance contract premium 
        of not less than 3 percent of their respective gross direct 
        written premiums for covered lines for the calendar year. The 
        annual premium shall be paid in installments at the end of each 
        calendar quarter. The reinsurance contract premium and any 
        annual assessment may be recovered by a participating insurer 
        from its covered lines policyholders as a direct surcharge 
        calculated as a uniform percentage of premium.
            (2) Additional credit risk premium.--If the Secretary 
        determines that a participating insurer has a credit rating 
        that is lower than the second from highest credit rating 
        awarded by nationally recognized credit rating agencies, the 
        Secretary may charge an additional credit risk premium, of up 
        to 0.5 percent of gross direct written premiums for covered 
        lines received by that insurer, to compensate the Fund for 
        credit risk associated with providing reinsurance to that 
        insurer.
    (b) Initial Capital.--
            (1) Loan.--The Fund shall have an initial capital of 
        $2,000,000,000, which the Secretary shall borrow from the 
        Treasury of the United States. Upon application by the 
        Secretary, the Secretary of the Treasury shall transfer that 
        amount to the Fund, out of amounts in the Treasury not 
        otherwise appropriated, at standard market rates.
            (2) Repayment of start-up loan.--The Secretary shall use 
        premiums received from assessments in calendar year 2002 to 
        repay the loan provided to the Fund under paragraph (1).
    (c) Shortfall Loans.--
            (1) In general.--If the Secretary determines that the 
        balance in the accounts of the Fund is insufficient to cover 
        anticipated claims, administrative expenses, and maintain 
        adequate reserves for any other reason, after taking into 
        account premiums assessed under subsection (a) and any other 
        amounts receivable, the Secretary shall borrow from the 
        Treasury an amount sufficient to satisfy the obligations of the 
        Fund and to maintain a positive balance of $2,000,000,000 in 
        the accounts of the Fund. Upon application by the Secretary, 
        the Secretary of the Treasury shall transfer to the Fund, out 
        of amounts in the Treasury not otherwise appropriated, the 
        requested amount as an interest-bearing loan.
            (2) Interest rate.--The rate of interest on any loan made 
        to the Fund under paragraph (1) shall be established by the 
        Secretary of the Treasury and based on the weighted average 
        credit rating of the Fund before the loss that made the loan 
        necessary.
            (3) $50 billion loan limit.--Notwithstanding any other 
        provision of this Act, the total amount of loans outstanding at 
        any time from the Treasury to the Fund may not exceed the 
        amount by which $50,000,000,000 exceeds the Fund's assets.
            (4) Repayment of loans by assessment.--Any loan under 
        paragraph (1) shall be repaid from reserves of the Fund, 
        assessments of participating insurers, or a combination 
        thereof. If an assessment is necessary, the maximum annual 
        assessment under this subsection shall be not more than 3 
        percent of the direct written premium for covered lines. The 
        reinsurance contract premium and any annual assessment may be 
        recovered by a participating insurer from its covered lines 
        policyholders as a direct surcharge calculated as a uniform 
        percentage of premium.

SEC. 6. COVERAGE PROVIDED.

    (a) In General.--The Fund shall provide reinsurance for losses 
resulting from acts of terrorism covered by reinsurance contracts 
entered into between the Fund and participating insurers that write 
covered lines of insurance within the meaning of section 14(5)(A) or 
that have elected, under section 14(5)(C), to voluntarily include 
another line of insurance.
    (b) Retention.--The Fund shall reimburse participating insurers for 
losses resulting from acts of terrorism on direct losses in any 
calendar year in excess of 10 percent of a participating insurer's 
average gross direct written premiums and policyholders' surplus for 
covered lines for the most recently ended calendar year for which data 
are available, based on each participating insurer's annual statement 
for that calendar year as reported to NAIC.
    (c) Reimbursement Amount.--If a participating insurer demonstrates 
to the satisfaction of the Secretary that it has paid claims for losses 
resulting from acts of terrorism equal to or in excess of the amount of 
retention required by subsection (b), then the Fund shall reimburse the 
participating insurer for--
            (1) 90 percent of its covered losses in calendar year 2002; 
        and
            (2) a percentage of its covered losses in calendar years 
        beginning after calendar year 2002 equal to--
                    (A) 90 percent if the insurer pays an assessment 
                equal to 4 percent of the insurer's average gross 
                direct written premiums and policyholders' surplus for 
                the most recently ended calendar year;
                    (B) 80 percent if the insurer pays an assessment 
                equal to 3 percent of the insurer's average gross 
                direct written premiums and policyholders' surplus for 
                the most recently ended calendar year; and
                    (C) 70 percent if the insurer pays an assessment 
                equal to 2 percent of the insurer's average gross 
                direct written premiums and policyholders' surplus for 
                the most recently ended calendar year.
    (d) $50,000,000,000 Limit.--Except as provided in subsection (e), 
the Fund may not reimburse participating insurers for covered losses in 
excess of a total Fund reimbursement amount for all participating 
insurers of $50,000,000,000.
    (e) Losses Exceeding $50,000,000,000 Limit.--If the Secretary 
determines that reimbursable losses in a calendar year from an event 
exceed $50,000,000,000, the Secretary--
            (1) shall pay, out of amounts in the Treasury not otherwise 
        appropriated--
                    (A) 90 percent of the covered losses occurring in 
                calendar year 2002 in excess, in the aggregate, of 
                $50,000,000,000 but not in excess of $100,000,000; and
                    (B) 80 percent of the covered losses occurring in 
                calendar year 2003 or 2004 in excess, in the aggregate, 
                of $50,000,000,000 but not in excess of $100,000,000; 
                and
            (2) shall notify the Congress of that determination and 
        transmit to the Congress recommendations for responding to the 
        insufficiency of available amounts to cover reimbursable 
        losses.
    (f) Reports to State Regulator; Certification.--
            (1) Reporting terrorism coverage.--A participating insurer 
        shall--
                    (A) report the amount of its terrorism insurance 
                coverage to the insurance regulatory authority for each 
                State in which it does business; and
                    (B) obtain a certification from the State that it 
                is not providing terrorism insurance coverage in excess 
                of its capacity under State solvency requirements.
            (2) Reports to secretary.--The State regulator shall 
        furnish a copy of the certification received under paragraph 
        (1) to the Secretary.

SEC. 7. SECRETARY TO DETERMINE IF LOSS IS ATTRIBUTABLE TO TERRORISM.

    (a) Initial Determination.--If a participating insurer files a 
claim for reimbursement from the Fund, the Secretary shall make an 
initial determination as to whether the losses or expected losses were 
caused by an act of terrorism.
    (b) Notice and Hearing.--The Secretary shall give public notice of 
the initial determination and afford all interested parties an 
opportunity to be heard on the question of whether the losses or 
expected losses were caused by an act of terrorism.
    (c) Final Determination.--Within 30 days after the Secretary's 
initial determination, the Secretary shall make a final determination 
as to whether the losses or expected losses were caused by an act of 
terrorism.
    (d) Standard of Review.--The Secretary's determination shall be 
upheld upon judicial review if based upon substantial evidence.

SEC. 8. MANDATORY COVERAGE BY PROPERTY AND CASUALTY INSURERS FOR ACTS 
              OF TERRORISM.

    (a) In General.--An insurer that provides lines of coverage 
described in section 14(5)(A) or 14(5)(B) may not--
            (1) exclude or limit coverage in those lines for losses 
        from acts of terrorism in the United States, its territories, 
        and possessions in property and casualty insurance policy 
        forms; or
            (2) deny or cancel coverage solely due to the risk of 
        losses from acts of terrorism in the United States.
    (b) Terms and Conditions.--Insurance against losses from acts of 
terrorism in the United States shall be covered with the same 
deductibles, limits, terms, and conditions as the standard provisions 
of the policy for non-catastrophic perils.

SEC. 9. PASS-THROUGHS AND OTHER RATE INCREASES.

    (a) Limitation on Rate Increases for Covered Risks.--Except as 
provided in subsection (b), a participating insurer that provides lines 
of coverage described in section 14(5)(A) or 14(5)(B) may not increase 
annual rates on covered risks during any period in which the insurer 
participates in the Fund by a percent in excess of the sum of--
            (1) the percent used to determine the insurer's assessment 
        under section 5(a)(1); and
            (2) if there is an assessment against the insurer under 
        section 5(c)(4), a percent equivalent to the percent assessment 
        of the insurer's gross direct written premium for covered 
        lines.
    (b) Terrorism-Related Increases in Excess of Pass-Throughs.--
            (1) Reports by insurers.--Not less than 30 days before the 
        date on which a participating insurer increases the premium 
        rate for insurance on any covered line of insurance described 
        in section 14(5) based, in whole or in part, on risk associated 
        with insurance against losses due to acts of terrorism, the 
        insurer shall file a report with the State insurance regulatory 
        authority for the State in which the premium increase is 
        effective that--
                    (A) explains the need for the increased premium; 
                and
                    (B) identifies the portion of the increase properly 
                attributable to risk associated with insurance offered 
                by that insurer against losses due to acts of 
                terrorism; and
                    (C) demonstrates, by substantial evidence, why that 
                portion of the increase is warranted.
            (2) Reports by state regulators.--Within 15 days after a 
        State insurance regulatory authority receives a report from an 
        insurer required by paragraph (1), the authority--
                    (A) shall transmit a copy of the report to the 
                Secretary;
                    (B) may include a determination with respect to 
                whether an insurer has met the requirement of paragraph 
                (1)(C); and
                    (C) may include with the report any commentary or 
                analysis it deems appropriate.

SEC. 10. CREDIT FOR REINSURANCE.

    Each State shall afford an insurer obtaining reinsurance from the 
Fund credit for such reinsurance on the same basis and to the same 
extent that credit for reinsurance would be available to that insurer 
under applicable State law when reinsurance is obtained from an 
assuming insurer licensed or accredited in that State.

SEC. 11. ADMINISTRATIVE PROVISIONS; REPORTS AND ANALYSIS.

    (a) In General.--In carrying out this Act, the Secretary may--
            (1) issue such rules and regulations as may be necessary to 
        administer this Act;
            (2) enter into reinsurance contracts, adjust and pay claims 
        as provided in this Act, and carry out the activities necessary 
        to implement this Act;
            (3) set forth the coverage provided by the Fund to 
        accomplish the purposes of this Act;
            (4) provide for an audit of the books and records of the 
        Fund by the General Accounting Office;
            (5) take appropriate action to collect premiums or 
        assessments under this Act; and
            (6) audit the reports, claims, books, and records of 
        participating insurers.
    (b) Reports From Insurers.--Participating insurers shall submit 
reports on a quarterly or other basis (as required by the Secretary) to 
the Secretary, the Federal Trade Commission, and the General Accounting 
Office setting forth rates, premiums, risk analysis, coverage, 
reserves, claims made for reimbursement from the Fund, and such 
additional financial and actuarial information as the Secretary may 
require regarding lines of coverage described in section 14(5)(A) or 
14(5)(B).
    (c) FTC Analysis and Enforcement.--The Federal Trade Commission 
shall review the reports submitted under subsection (b), treating the 
information contained in the reports as privileged and confidential, 
for the purpose of determining whether any insurer is engaged in unfair 
methods of competition or unfair or deceptive acts or practices in or 
affecting commerce (within the meaning of section 5 of the Federal 
Trade Commission Act (15 U.S.C. 45)).
    (d) GAO Review.--The Comptroller General shall provide for review 
and analysis of the reports submitted under subsection (b), and, if 
necessary, provide of audit of reimbursement claims filed by insurers 
with the Fund.
    (e) Reports by Secretary.--No later than March 31st of each 
calendar year, the Secretary shall transmit to the Senate Committee on 
Commerce, Science, and Technology and the House of Representatives 
Committee on Commerce an annual report on insurance rate increases for 
the preceding calendar year in the United States based upon the reports 
received by the Secretary under this Act. The Secretary may include in 
the report a recommendation for legislation to impose Federal 
regulation of insurance rates on covered lines of insurance if the 
Secretary determines that premium rates for insurance on covered lines 
of insurance are--
            (1) unreasonable; and
            (2) attributable to insurance for losses from acts of 
        terrorism.

SEC. 12. INAPPLICABILITY OF CERTAIN LAWS.

    (a) In General.--State laws relating to insurance rates, insurance 
policy forms, insurance rates on any covered lines of insurance 
described in section 14(5)(A) or 14(5)(B), insurer financial 
requirements, and insurer licensing do not apply to contracts entered 
into by the Fund. The Fund is not subject to State tax and is exempt 
from Federal income tax. The reinsurance contract premium paid and 
assessments collected by insurers shall not be subject to local, State, 
or Federal tax. The reinsurance contract premium and assessments 
recovered from policyholders shall not be subject to local, State, or 
Federal tax.
    (b) Exception for Unfair Trade Practice Laws.--Notwithstanding 
subsection (a), nothing in this Act supersedes or preempts a State law 
that prohibits unfair methods of competition in commerce, unfair or 
deceptive acts or practices in commerce, or unfair insurance claims 
practices.

SEC. 13. SUNSET PROVISION.

    (a) Assessment and Collection of Premiums.--The Secretary shall 
continue the premium assessment and collection operations of the Fund 
under this Act as long as loans due from the Fund to the United States 
Treasury are outstanding.
    (b) Provision of Reinsurance.--The Secretary shall suspend other 
operations of the Fund for new contract years on the close of business 
on December 31, 2004, and may suspend the offering of reinsurance 
contracts for new contract years at any time before that date if the 
Secretary determines that the reinsurance provided by the Fund is no 
longer needed for covered lines due to market conditions.
    (c) Review of Private Reinsurance Availability.--The Secretary 
shall review the cost and availability of private reinsurance for acts 
of terrorism at least annually and shall report the findings and any 
recommendations to Congress by June 1 of each year the Fund is in 
operation.
    (d) Dissolution of Fund.--
            (1) Distribution for reserves.--When the Secretary 
        determines that all Fund operations have been terminated, the 
        Secretary shall dissolve the Fund. Any unencumbered Fund assets 
        remaining after the satisfaction of all outstanding claims, 
        loans from the Treasury, and other liabilities of the Fund 
        shall be distributed, on a pro rata basis based on premiums 
        paid, to any insurer that--
                    (A) participated in the Fund during its operation; 
                and
                    (B) demonstrates, to the satisfaction of the 
                Secretary, that any amount received as a distribution 
                from the Fund will be permanently credited to a reserve 
                account maintained by that insurer against claims for 
                industrywide aggregate losses of $2,000,000,000 from--
                            (i) acts of terrorism in the United States; 
                        or
                            (ii) the effects of earthquakes, volcanic 
                        eruptions, tsunamis, or hurricanes.
            (2) Retention requirement for tapping reserve.--Amounts 
        credited to a reserve under paragraph (a) may not be used by an 
        insurer to pay claims until the insurer has paid claims for 
        losses resulting from acts or events described in paragraph 
        (1)(B) in excess of 10 percent of that insurer's average gross 
        direct written premiums and policyholders' surplus for covered 
        lines for the most recently ended calendar year for which data 
        are available.
            (3) Officer and director penalties for misuse of 
        reserves.--Any officer or director of an insurer who knowingly 
        authorizes or directs the use of any amount received from the 
        Fund under paragraph (1) for any purpose other than an 
        appropriate use of amounts in the reserve to which the amount 
        is credited shall be guilty of a Class E felony and sentenced 
        in accordance with the provisions of section 3551 of title 18, 
        United States Code.
            (4) Residual distribution to treasury.--Any unencumbered 
        Fund assets remaining after the distribution under paragraph 
        (1) shall be covered into the Treasury of the United States as 
        miscellaneous receipts.

SEC. 14. DEFINITIONS.

    In this Act:
            (1) Secretary.--Except where otherwise specifically 
        provided, the term ``Secretary'' means the Secretary of 
        Commerce.
            (2) NAIC.--The term ``NAIC'' means the National Association 
        of Insurance Commissioners.
            (3) Fund.--The term ``Fund'' means the National Terrorism 
        Reinsurance Fund established under section 4.
            (4) Participating insurer.--The term ``participating 
        insurer'' means every property and casualty insurer writing on 
        a direct basis a covered line or lines of insurance in any 
        jurisdiction of the United States, its territories, or 
        possessions, including residual market insurers.
            (5) Covered line.--
                    (A) In general.--The term ``covered line'' means 
                any one or a combination of the following, written on a 
                direct basis, as reported by property and casualty 
                insurers in required financial reports on Statutory 
                Page 14 of the NAIC Annual Statement Blank:
                            (i) Fire.
                            (ii) Allied lines.
                            (iii) Commercial multiple peril.
                            (iv) Ocean marine.
                            (v) Inland marine.
                            (vi) Workers compensation.
                            (vii) Products liability.
                            (viii) Commercial auto no-fault (personal 
                        injury protection), other commercial auto 
                        liability, or commercial auto physical damage.
                            (ix) Aircraft (all peril).
                            (x) Fidelity and surety.
                            (xi) Burglary and theft.
                            (xii) Boiler and machinery.
                            (xiii) Any other line of insurance that is 
                        reported by property and casualty insurers in 
                        required financial reports on Statutory Page 14 
                        of the NAIC Annual Statement Blank which is 
                        voluntarily elected by an participating insurer 
                        to be included in its reinsurance contract with 
                        the Fund.
                    (B) Other lines.--For purposes of clause (xiii), 
                the lines of business that may be voluntarily selected 
                are the following:
                            (i) Farmowners multiple peril.
                            (ii) Homeowners multiple peril.
                            (iii) Mortgage guaranty.
                            (iv) Financial guaranty.
                            (v) Private passenger automobile insurance.
                    (C) Election.--The election to voluntarily include 
                another line of insurance, if made, must apply to all 
                affiliated insurers that are members of an insurer 
                group. Any voluntary election is on a one-time basis 
                and is irrevocable.
            (6) Losses.--The term ``losses'' means direct incurred 
        losses from an act of terrorism for covered lines, plus defense 
        and cost containment expenses. Notwithstanding the preceding 
        sentence, a loss shall not be recognized as a loss for the 
        purpose of determining the amount of an insurer's retention or 
        reimbursement under this Act unless the claim for the loss has 
        been paid within 12 months after the terrorism event occurs and 
        other loss adjustments.
            (7) Covered losses.--The term ``covered losses'' means 
        direct losses in excess of the participating insurer's 
        retention.
            (8) Terrorism; act of terrorism.--
                    (A) In general.--The terms ``terrorism'' and ``act 
                of terrorism'' mean any act, certified by the Secretary 
                in concurrence with the Secretary of State and the 
                Attorney General, as a violent act or act dangerous to 
                human life, property or infrastructure, within the 
                United States, its territories and possessions, that is 
                committed by an individual or individuals acting on 
                behalf of foreign agents or foreign interests (other 
                than a foreign government) as part of an effort to 
                coerce or intimidate the civilian population of the 
                United States or to influence the policy or affect the 
                conduct of the United States government.
                    (B) Acts of war.--No act shall be certified as an 
                act of terrorism if the act is committed in the course 
                of a war declared by the Congress of the United States 
                or by a foreign government.
                    (C) Finality of certification.--Any certification, 
                or determination not to certify, by the Secretary under 
                subparagraph (A) is final and not subject to judicial 
                review.
            (9) Insurer.--
                    (A) In general.--The term ``insurer'' means an 
                entity writing covered lines on a direct basis and 
                licensed as a property and casualty insurer, risk 
                retention group, or other entity authorized by law as a 
                residual market mechanism providing property or 
                casualty coverage in at least one jurisdiction of the 
                United States, its territories, or possessions.
                    (B) Voluntary participation.--A State workers' 
                compensation, auto, or property insurance Fund may 
                voluntarily participate as an insurer.
            (10) Contract year.--The term ``contract year'' means the 
        period of time that obligations exist between a participating 
        insurer and the Fund for a given annual reinsurance contract.
            (11) Retention.--The term ``retention'' means the level of 
        direct losses retained by a participating insurer for which the 
        insurer is not entitled to reimbursement by the Fund.
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