[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1744 Introduced in Senate (IS)]







107th CONGRESS
  1st Session
                                S. 1744

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


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           November 29, 2001

  Mr. McCain introduced the following bill; which was read twice and 
   referred to the Committee on Commerce, Science, and Transportation

_______________________________________________________________________

                                 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 
Insurance 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. Submission of premium information to Secretary of Commerce.
Sec. 4. Individual company retention.
Sec. 5. Federal cost-sharing for commercial insurers.
Sec. 6. Terrorism loss repayment surcharge.
Sec. 7. Administration of surcharges.
Sec. 8. State preemption.
Sec. 9. Consistent State guidelines for coverage for acts of terrorism.
Sec. 10. Consultation with State insurance regulators and NAIC.
Sec. 11. Limitation on punitive damages.
Sec. 12. Definitions.
Sec. 13. 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 the largest losses for a 
        man-made event 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, by, among other 
        things, 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, 
        and, 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;
            (7) it is necessary in the short-term, however, to provide 
        Federal assistance and to create a temporary industry risk 
        sharing program to ensure the continued availability of 
        commercial property and casualty insurance and reinsurance for 
        terrorism-related risks;
            (8) 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
            (9) Federal involvement in the provision of commercial 
        terrorism insurance should be short-term and should provide 
        appropriate incentives for insurance companies and the 
        commercial property insurance industry to continue providing 
        terrorism insurance while minimizing terrorism risk and 
        protecting American taxpayers.

SEC. 3. SUBMISSION OF PREMIUM INFORMATION TO THE SECRETARY.

    To the extent such information is not otherwise available to the 
Secretary, the Secretary may require each insurer to submit, to the 
Secretary or to the NAIC, a statement specifying the 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 
Secretary may provide.

SEC. 4. INDIVIDUAL COMPANY RETENTION.

    (a) In General.--For purposes of this Act, a ``triggering 
determination'' is a determination by the Secretary that a commercial 
insurer's annual insured losses for covered lines resulting from acts 
of terrorism occurring in calendar year 2002 or 2003 exceed the greater 
of--
            (1) $10,000,000; or
            (2) 5 percent of the commercial insurer's gross direct 
        written premiums on covered lines for the preceding calendar 
        year.
    (b) Determinations Regarding Events.--For purposes of subsection 
(a), the Secretary shall have the sole authority to determine whether--
            (1) an act of terrorism occurred; and
            (2) it occurred during calendar year 2002 or 2003.

SEC. 5. FEDERAL COST-SHARING FOR COMMERCIAL INSURERS.

    (a) In General.--The Secretary shall provide financial assistance, 
pursuant to a triggering determination, 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 80 percent of the amount of the covered losses of the insurer as a 
result of the acts of terrorism.
    (c) Aggregate Limitation.--The aggregate amount of financial 
assistance provided pursuant to this section may not exceed 
$100,000,000,000.
    (d) Limitations.--The Secretary may establish limitations 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 6 to collect surcharges.
    (e) Repayment.--Financial assistance made available under this 
section shall be repaid through surcharges collected by commercial 
insurers under section 6 and remitted to the Secretary. Any such 
amounts collected or remitted shall be deposited into the general fund 
of the Treasury. The aggregate amount of financial assistance repaid 
pursuant to this subsection may not exceed--
            (1) $50,000,000,000, plus market rate interest for 
        assistance provided for acts of terrorism occurring in calendar 
        year 2002; and
            (2) $50,000,000,000 for acts of terrorism occurring in 
        calendar year 2003.
    (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. 6. TERRORISM LOSS REPAYMENT SURCHARGE.

    (a) Imposition and Collection.--If, pursuant to a triggering 
determination, the Secretary Provides Federal assistance to commercial 
insurers under this Act, the Secretary shall--
            (1) establish and impose a policyholder premium surcharge, 
        as provided under this section, on commercial insurers' covered 
        lines of insurance written after such determination, for the 
        purpose of repaying financial assistance made available under 
        section 5 in connection with such triggering determination; and
            (2) provide for commercial insurers to collect such 
        surcharge and remit amounts collected to the Secretary.
    (b) Amount and Duration.--The surcharge under this section shall be 
established in such amount, and shall apply to covered lines of 
insurance written during such period, as the Secretary determines is 
necessary to recover the aggregate amount of financial assistance 
provided under section 5 subject to the limitation in section 5(e).
    (c) Limitation on Surcharge.--The surcharge applied to any 
policyholder under this section--
            (1) may not exceed 6 percent of the policyholder's annual 
        premium for covered lines of insurance; and
            (2) shall be imposed with respect to all covered lines of 
        insurance written during the period referred to in subsection 
        (b).

SEC. 7. ADMINISTRATION OF ASSESSMENTS AND SURCHARGES.

    (a) Manner and Method.--The Secretary shall provide for the manner 
and method of imposing, collecting, and remitting surcharges under 
section 6, including the timing and procedures of making such 
surcharges, notifying commercial insurers of surcharge requirements, 
collecting surcharges through commercial insurers, and refunding or 
crediting of any excess amounts remitted.
    (b) Effect of Surcharges on Urban and Smaller Commercial and Rural 
Areas and Different Lines of Insurance.--In determining the method and 
manner of imposing surcharges under section 6, and the amount thereof, 
the Secretary shall take into consideration--
            (1) the economic impact of any such surcharges on 
        commercial centers of urban areas, including the effect on 
        commercial rents and commercial insurance premiums, 
        particularly rents and premiums charged  to small businesses, 
and the availability of lease space and commercial insurance within 
urban areas;
            (2) 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
            (3) the various exposures to terrorism risk for different 
        lines of commercial property and casualty insurance.
    (c) Timing of Coverages and Assessments.--The Secretary may adjust 
the timing of coverages and assessments provided under this Act to 
provide for equivalent application of the provisions of this Act to 
commercial insurers and policies that are not based on a calendar year.
    (d) Application to Self-Insurance Arrangements.--The Secretary may, 
in consultation with the NAIC, apply the provisions of this Act, as 
appropriate, to self-insurance arrangements by municipalities and other 
public 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.

SEC. 8. 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 Secretary.
    (b) File and Use.--With respect only to covered lines of 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. 9. CONSISTENT STATE GUIDELINES FOR COVERAGE FOR ACTS OF TERRORISM.

    (a) Sense of Congress Regarding Covered Perils.--It is the sense of 
the Congress that--
            (1) the NAIC, in consultation with the Secretary, should 
        develop appropriate definitions for acts of terrorism 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 Secretary should 
        advocate and promote the development of definitions and 
        standards that are appropriate for purposes of this Act; and
            (4) after consultation with the NAIC, the Secretary should 
        adopt definitions for acts of terrorism and standards for 
        determinations that are appropriate for this Act.
    (b) Guidelines Regarding Disclosure of Pricing and Terms of 
Coverage.--
            (1) Sense of congress.--It is the sense of the Congress 
        that the States should require, by laws or regulations 
        governing the provision of commercial property and casualty 
        insurance that includes coverage for acts of terrorism, that 
        the price of any such terrorism coverage, including the costs 
        of any terrorism related assessments or surcharges under this 
        Act, be separately disclosed.
            (2) Adoption of national guidelines.--If the Secretary 
        determines that the States have not enacted laws or adopted 
        regulations adequately providing for the disclosures described 
        in paragraph (1) within a reasonable period of time after the 
        date of the enactment of this Act, the Secretary shall, after 
        consultation with the NAIC, adopt guidelines on a national 
        basis requiring such disclosure in a manner that supersedes any 
        State law regarding such disclosure.

SEC. 10. CONSULTATION WITH STATE INSURANCE REGULATORS AND NAIC.

    The Secretary shall consult with the State insurance regulators and 
the NAIC in carrying out this Act. The Secretary may take such actions, 
including entering into such agreements and providing such technical 
and organizational assistance to insurers and State insurance 
regulators, as may be necessary to provide for the distribution of 
financial assistance under section 5 and the collection and remitting 
of surcharges under section 6.

SEC. 11. LIMITATION ON PUNITIVE DAMAGES.

    (a) In General.--In any claim brought in any court for damages 
arising from an act of terrorism, as determined by the Secretary, no 
punitive damages may be awarded.
    (b) Exception.--The preceding sentence does not apply to a 
defendant who committed the act of terrorism or knowingly conspired to 
commit that act.

SEC. 12. DEFINITIONS.

    For purposes of this Act, the following definitions shall apply:
            (1) Act of terrorism.--
                    (A) In general.--The term ``act of terrorism'' 
                means any act that the Secretary determines meets the 
                requirements under subparagraph (B), as such 
                requirements are further defined and specified by the 
                Secretary in consultation with the NAIC.
                    (B) Requirements.--An act meets the requirements of 
                this subparagraph if the act--
                            (i) is unlawful;
                            (ii) causes harm to a person, property, or 
                        entity, in the United States;
                            (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 Secretary 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) Covered line.--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:
                    (A) Fire.
                    (B) Allied lines.
                    (C) Commercial multiple peril.
                    (D) Ocean marine.
                    (E) Inland marine.
                    (F) Workers compensation.
                    (G) Products liability.
                    (H) Commercial auto no-fault (personal injury 
                protection), other commercial auto liability, or 
                commercial auto physical damage.
                    (I) Aircraft (all peril).
                    (J) Fidelity and surety.
                    (K) Burglary and theft.
                    (L) Boiler and machinery.
            (3) Covered losses.--The term ``covered losses'' means 
        direct incurred losses from an act of terrorism for covered 
        lines in excess of the participating insurer's retention, 
        defense, and cost containment expenses.
            (4) NAIC.--The term ``NAIC'' means the National Association 
        of Insurance Commissioners.
            (5) Secretary.--The term ``Secretary'' means the Secretary 
        of Commerce.
            (6) 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.
            (7) State insurance regulator.--The term ``State insurance 
        regulator'' means, with respect to a State, the principal 
        insurance regulatory authority of the State.

SEC. 13. REGULATIONS.

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