[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 2600 Engrossed in Senate (ES)]

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
107th CONGRESS
  2d Session
                                S. 2600

_______________________________________________________________________

                                 AN ACT


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

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Terrorism Risk Insurance Act of 
2002''.

SEC. 2. CONGRESSIONAL FINDINGS AND PURPOSE.

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

SEC. 3. DEFINITIONS.

    In this Act, the following definitions shall apply:
            (1) Act of terrorism.--
                    (A) Certification.--The term ``act of terrorism'' 
                means any act that is certified by the Secretary, in 
                concurrence with the Secretary of State, and the 
                Attorney General of the United States--
                            (i) to be a violent act or an act that is 
                        dangerous to--
                                    (I) human life;
                                    (II) property; or
                                    (III) infrastructure;
                            (ii) to have resulted in damage within the 
                        United States, or outside the United States in 
                        the case of an air carrier or vessel described 
                        in paragraph (3)(A)(ii); and
                            (iii) to have been committed by an 
                        individual or individuals acting on behalf of 
                        any foreign person or foreign interest, as part 
                        of an effort to coerce the civilian population 
                        of the United States or to influence the policy 
                        or affect the conduct of the United States 
                        Government by coercion.
                    (B) Limitation.--No act or event shall be certified 
                by the Secretary as an act of terrorism if--
                            (i) the act or event is committed in the 
                        course of a war declared by the Congress; or
                            (ii) losses resulting from the act or 
                        event, in the aggregate, do not exceed 
                        $5,000,000.
                    (C) Determinations final.--Any certification of, or 
                determination not to certify, an act or event as an act 
                of terrorism under this paragraph shall be final, and 
                shall not be subject to judicial review.
            (2) Business interruption coverage.--The term ``business 
        interruption coverage''--
                    (A) means coverage of losses for temporary 
                relocation expenses and ongoing expenses, including 
                ordinary wages, where--
                            (i) there is physical damage to the 
                        business premises of such magnitude that the 
                        business cannot open for business;
                            (ii) there is physical damage to other 
                        property that totally prevents customers or 
                        employees from gaining access to the business 
                        premises; or
                            (iii) the Federal, State, or local 
                        government shuts down an area due to physical 
                        or environmental damage, thereby preventing 
                        customers or employees from gaining access to 
                        the business premises; and
                    (B) does not include lost profits, other than in 
                the case of a small business concern (as defined in 
                section 3 of the Small Business Act (15 U.S.C. 632) and 
                applicable regulations thereunder) in any case 
                described in clause (i), (ii), or (iii) of subparagraph 
                (A).
            (3) Insured loss.--The term ``insured loss''--
                    (A) means any loss resulting from an act of 
                terrorism that is covered by primary property and 
                casualty insurance, including business interruption 
                coverage, issued by a participating insurance company, 
                if such loss--
                            (i) occurs within the United States; or
                            (ii) occurs to an air carrier (as defined 
                        in section 40102 of title 49, United States 
                        Code) or to a United States flag vessel (or a 
                        vessel based principally in the United States, 
                        on which United States income tax is paid and 
                        whose insurance coverage is subject to 
                        regulation in the United States), regardless of 
                        where the loss occurs; and
                    (B) excludes coverage under any life or health 
                insurance.
            (4) Market share.--
                    (A) In general.--The ``market share'' of a 
                participating insurance company shall be calculated 
                using the total amount of direct written property and 
                casualty insurance premiums for the participating 
                insurance company during the 2-year period preceding 
                the year in which the subject act of terrorism occurred 
                (or during such other period for which adequate data 
                are available, as determined by the Secretary), as a 
                percentage of the aggregate of all such property and 
                casualty insurance premiums industry-wide during that 
                period.
                    (B) Adjustments.--The Secretary may adjust the 
                market share of a participating insurance company under 
                subparagraph (A), as necessary to reflect current 
                market participation of that participating insurance 
                company.
            (5) NAIC.--The term ``NAIC'' means the National Association 
        of Insurance Commissioners.
            (6) Participating insurance company.--The term 
        ``participating insurance company'' means any insurance 
        company, including any subsidiary or affiliate thereof--
                    (A) that--
                            (i) is licensed or admitted to engage in 
                        the business of providing primary insurance in 
                        any State, and was so licensed or admitted on 
                        September 11, 2001; or
                            (ii) is not licensed or admitted as 
                        described in clause (i), if it is an eligible 
                        surplus line carrier listed on the Quarterly 
                        Listing of Alien Insurers of the NAIC, or any 
                        successor thereto;
                    (B) that receives direct premiums for any type of 
                commercial property and casualty insurance coverage or 
                that, not later than 21 days after the date of 
                enactment of this Act, submits written notification to 
                the Secretary of its intent to participate in the 
                Program with regard to personal lines of property and 
                casualty insurance; and
                    (C) that meets any other criteria that the 
                Secretary may reasonably prescribe.
            (7) Participating insurance company deductible.--The term 
        ``participating insurance company deductible'' means--
                    (A) a participating insurance company's market 
                share, multiplied by $10,000,000,000, with respect to 
                insured losses resulting from an act of terrorism 
                occurring during the 1-year period beginning on the 
                date of enactment of this Act; and
                    (B) a participating insurance company's market 
                share, multiplied by $15,000,000,000, with respect to 
                insured losses resulting from an act of terrorism 
                occurring during the 1-year period beginning on the day 
                after the date of expiration of the period described in 
                subparagraph (A), if the Program is extended in 
                accordance with section 6.
            (8) Person.--The term ``person'' means any individual, 
        business or nonprofit entity (including those organized in the 
        form of a partnership, limited liability company, corporation, 
        or association), trust or estate, or a State or political 
        subdivision of a State or other governmental unit.
            (9) Program.--The term ``Program'' means the Terrorism 
        Insured Loss Shared Compensation Program established by this 
        Act.
            (10) Property and casualty insurance.--The term ``property 
        and casualty insurance''--
                    (A) means commercial lines of property and casualty 
                insurance, including workers' compensation insurance;
                    (B) includes personal lines of property and 
                casualty insurance, if a notification is made in 
                accordance with paragraph (6)(B); and
                    (C) does not include--
                            (i) Federal crop insurance issued or 
                        reinsured under the Federal Crop Insurance Act 
                        (7 U.S.C. 1501 et seq.);
                            (ii) private mortgage insurance, as that 
                        term is defined in section 2 of the Homeowners 
                        Protection Act of 1998 (12 U.S.C. 4901); or
                            (iii) financial guaranty insurance.
            (11) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.
            (12) State.--The term ``State'' means any State of the 
        United States, the District of Columbia, the Commonwealth of 
        Puerto Rico, the Commonwealth of the Northern Mariana Islands, 
        American Samoa, Guam, and each of the United States Virgin 
        Islands.
            (13) United states.--The term ``United States'' means the 
        several States, and includes the territorial sea of the United 
        States.
            (14) Rule of construction for dates.--With respect to any 
        reference to a date in this Act, such day shall be construed--
                    (A) to begin at 12:01 a.m. on that date; and
                    (B) to end at midnight on that date.

SEC. 4. TERRORISM INSURED LOSS SHARED COMPENSATION PROGRAM.

    (a) Establishment of Program.--
            (1) In general.--There is established in the Department of 
        the Treasury the Terrorism Insured Loss Shared Compensation 
        Program.
            (2) Authority of the secretary.--Notwithstanding any other 
        provision of State or Federal law, the Secretary shall 
        administer the Program, and shall pay the Federal share of 
        compensation for insured losses in accordance with subsection 
        (e).
    (b) Conditions for Federal Payments.--No payment may be made by the 
Secretary under subsection (e), unless--
            (1) a person that suffers an insured loss, or a person 
        acting on behalf of that person, files a claim with a 
        participating insurance company;
            (2) the participating insurance company provides clear and 
        conspicuous disclosure to the policyholder of the premium 
        charged for insured losses covered by the Program and the 
        Federal share of compensation for insured losses under the 
        Program--
                    (A) in the case of any policy covering an insured 
                loss that is issued on or after the date of enactment 
                of this Act, on a separate line item in the policy, at 
                the time of offer, purchase, and renewal of the policy; 
                and
                    (B) in the case of any policy that is issued before 
                the date of enactment of this Act, as a line item 
                described in subparagraph (A), not later than 90 days 
                after that date of enactment;
            (3) the participating insurance company processes the claim 
        for the insured loss in accordance with its standard business 
        practices, and any reasonable procedures that the Secretary may 
        prescribe; and
            (4) the participating insurance company submits to the 
        Secretary, in accordance with such reasonable procedures as the 
        Secretary may establish--
                    (A) a claim for payment of the Federal share of 
                compensation for insured losses under the Program;
                    (B) written verification and certification--
                            (i) of the underlying claim; and
                            (ii) of all payments made for insured 
                        losses; and
                    (C) certification of its compliance with the 
                provisions of this subsection.
    (c) Mandatory Participation; Mandatory Availability.--Each 
insurance company that meets the definition of a participating 
insurance company under section 3--
            (1) shall participate in the Program;
            (2) shall make available in all of its property and 
        casualty insurance policies (in all of its participating 
        lines), coverage for insured losses; and
            (3) shall make available property and casualty insurance 
        coverage for insured losses that does not differ materially 
        from the terms, amounts, and other coverage limitations 
        applicable to losses arising from events other than acts of 
        terrorism.
    (d) Participation by Self Insured Entities.--
            (1) Determination by the secretary.--The Secretary may, in 
        consultation with the NAIC, establish procedures to allow 
        participation in the Program by municipalities and other 
        governmental or quasi-governmental entities (and by any other 
        entity, as the Secretary deems appropriate) operating through 
        self insurance arrangements that were in existence on September 
        11, 2001, but only if the Secretary makes a determination with 
        regard to participation by any such entity before the 
        occurrence of an act of terrorism in which the entity incurs an 
        insured loss.
            (2) Participation.--If the Secretary makes a determination 
        to allow an entity described in paragraph (1) to participate in 
        the Program, all reports, conditions, requirements, and 
        standards established by this Act for participating insurance 
        companies shall apply to any such entity, as determined to be 
        appropriate by the Secretary.
    (e) Shared Insurance Loss Coverage.--
            (1) Federal share.--
                    (A) In general.--Subject to the cap on liability 
                under paragraph (2) and the limitation under paragraph 
                (6), the Federal share of compensation under the 
                Program to be paid by the Secretary for insured losses 
                resulting from an act of terrorism occurring during the 
                1-year period beginning on the date of enactment of 
                this Act--
                            (i) shall be equal to 80 percent of that 
                        portion of the amount of aggregate insured 
                        losses that--
                                    (I) exceeds the participating 
                                insurance company deductibles required 
                                to be paid for those insured losses; 
                                and
                                    (II) does not exceed 
                                $10,000,000,000; and
                            (ii) shall be equal to 90 percent of that 
                        portion of the amount of aggregate insured 
                        losses that--
                                    (I) exceeds the participating 
                                insurance company deductibles required 
                                to be paid for those insured losses; 
                                and
                                    (II) exceeds $10,000,000,000.
                    (B) Extension period.--If the Program is extended 
                in accordance with section 6, the Federal share of 
                compensation under the Program to be paid by the 
                Secretary for insured losses resulting from an act of 
                terrorism occurring during the 1-year period beginning 
                on the day after the date of expiration of the period 
                described in subparagraph (A), shall be calculated in 
                accordance with clauses (i) and (ii) of subparagraph 
                (A), subject to the cap on liability in paragraph (2) 
                and the limitation under paragraph (6).
                    (C) Pro rata share.--If, during the period 
                described in subparagraph (A) (or during the period 
                described in subparagraph (B), if the Program is 
                extended in accordance with section 6), the aggregate 
                insured losses for that period exceed $10,000,000,000, 
                the Secretary shall determine the pro rata share for 
                each participating insurance company of the Federal 
                share of compensation for insured losses calculated 
                under subparagraph (A).
                    (D) Prohibition on duplicative compensation.--The 
                Federal share of compensation for insured losses under 
                the Program shall be reduced by the amount of 
                compensation provided by the Federal Government for 
                those insured losses under any other Federal insurance 
                or reinsurance program.
            (2) Cap on annual liability.--Notwithstanding paragraph 
        (1), or any other provision of Federal or State law, if the 
        aggregate insured losses exceed $100,000,000,000 during any 
        period referred to in subparagraph (A) or (B) of paragraph 
        (1)--
                    (A) the Secretary shall not make any payment under 
                this Act for any portion of the amount of such losses 
                that exceeds $100,000,000,000; and
                    (B) participating insurance companies shall not be 
                liable for the payment of any portion of the amount 
                that exceeds $100,000,000,000.
            (3) Notice to congress.--The Secretary shall notify the 
        Congress if estimated or actual aggregate insured losses exceed 
        $100,000,000,000 in any period described in paragraph (1), and 
        the Congress shall determine the procedures for and the source 
        of any such excess payments.
            (4) Final netting.--The Secretary shall have sole 
        discretion to determine the time at which claims relating to 
        any insured loss or act of terrorism shall become final.
            (5) Determinations final.--Any determination of the 
        Secretary under this subsection shall be final, and shall not 
        be subject to judicial review.
            (6) In-force reinsurance agreements.--For policies covered 
        by reinsurance contracts in force on the date of enactment of 
        this Act, until the in-force reinsurance contract is renewed, 
        amended, or has reached its 1-year anniversary date, any 
        Federal share of compensation due to a participating insurance 
        company for insured losses during the effective period of the 
        Program shall be shared--
                    (A) with all reinsurance companies to which the 
                participating insurance company has ceded some share of 
                the insured loss pursuant to an in-force reinsurance 
                contract; and
                    (B) in a manner that distributes the Federal share 
                of compensation for insured losses between the 
                participating insurance company and the reinsurance 
                company or companies in the same proportion as the 
                insured losses would have been distributed if the 
                Program did not exist.

SEC. 5. GENERAL AUTHORITY AND ADMINISTRATION OF CLAIMS.

    (a) General Authority.--The Secretary shall have the powers and 
authorities necessary to carry out the Program, including authority--
            (1) to investigate and audit all claims under the Program; 
        and
            (2) to prescribe regulations and procedures to implement 
        the Program.
    (b) Interim Rules and Procedures.--The Secretary shall issue 
interim final rules or procedures specifying the manner in which--
            (1) participating insurance companies may file, verify, and 
        certify claims under the Program;
            (2) the Secretary shall publish or otherwise publicly 
        announce the applicable percentage of insured losses that is 
        the responsibility of participating insurance companies and the 
        percentage that is the responsibility of the Federal Government 
        under the Program;
            (3) the Federal share of compensation for insured losses 
        will be paid under the Program, including payments based on 
        estimates of or actual aggregate insured losses;
            (4) the Secretary may, at any time, seek repayment from or 
        reimburse any participating insurance company, based on 
        estimates of insured losses under the Program, to effectuate 
        the insured loss sharing provisions contained in section 4;
            (5) each participating insurance company that incurs 
        insured losses shall pay its pro rata share of insured losses, 
        in accordance with section 4; and
            (6) the Secretary will determine any final netting of 
        payments for actual insured losses under the Program, including 
        payments owed to the Federal Government from any participating 
        insurance company and any Federal share of compensation for 
        insured losses owed to any participating insurance company, to 
        effectuate the insured loss sharing provisions contained in 
        section 4.
    (c) Subrogation Rights.--The United States shall have the right of 
subrogation with respect to any payment made by the United States under 
the Program.
    (d) Contracts for Services.--The Secretary may employ persons or 
contract for services as may be necessary to implement the Program.
    (e) Civil Penalties.--The Secretary may assess civil money 
penalties for violations of this Act or any rule, regulation, or order 
issued by the Secretary under this Act relating to the submission of 
false or misleading information for purposes of the Program, or any 
failure to repay any amount required to be reimbursed under regulations 
or procedures described in section 5(b). The authority granted under 
this subsection shall continue during any period in which the 
Secretary's authority under section 6(d) is in effect.

SEC. 6. TERMINATION OF PROGRAM; DISCRETIONARY EXTENSION.

    (a) Termination of Program.--
            (1) In general.--The Program shall terminate 1 year after 
        the date of enactment of this Act, unless the Secretary--
                    (A) determines, after considering the report and 
                finding required by this section, that the Program 
                should be extended for one additional year, beginning 
                on the day after the date of expiration of the initial 
                1-year period of the Program; and
                    (B) promptly notifies the Congress of such 
                determination and the reasons therefor.
            (2) Determination final.--The determination of the 
        Secretary under paragraph (1) shall be final, and shall not be 
        subject to judicial review.
            (3) Termination after extension.--If the Program is 
        extended under paragraph (1), the Program shall terminate 1 
        year after the date of commencement of such extension period.
    (b) Report to Congress.--Not later than 9 months after the date of 
enactment of this Act, the Secretary shall submit a report to 
Congress--
            (1) regarding--
                    (A) the availability of insurance coverage for acts 
                of terrorism;
                    (B) the affordability of such coverage, including 
                the effect of such coverage on premiums; and
                    (C) the capacity of the insurance industry to 
                absorb future losses resulting from acts of terrorism, 
                taking into account the profitability of the insurance 
                industry; and
            (2) that considers--
                    (A) the impact of the Program on each of the 
                factors described in paragraph (1); and
                    (B) the probable impact on such factors and on the 
                United States economy if the Program terminates 1 year 
                after the date of enactment of this Act.
    (c) Finding Required.--A determination under subsection (a) to 
extend the Program shall be based on a finding by the Secretary that--
                    (1) widespread market uncertainties continue to 
                disrupt the ability of insurance companies to price 
                insurance coverage for losses resulting from acts of 
                terrorism, thereby resulting in the continuing 
                unavailability of affordable insurance for consumers; 
                and
                    (2) extending the Program for an additional year 
                would likely encourage economic stabilization and 
                facilitate a transition to a viable market for private 
                terrorism risk insurance.
    (d) Continuing Authority To Pay or Adjust Compensation.--Following 
the termination of the Program under subsection (a), the Secretary may 
take such actions as may be necessary to ensure payment, reimbursement, 
or adjustment of compensation for insured losses arising out of any act 
of terrorism occurring during the period in which the Program was in 
effect under this Act, in accordance with the provisions of section 4 
and regulations promulgated thereunder.
    (e) Repeal; Savings Clause.--This Act is repealed at midnight on 
the final termination date of the Program under subsection (a), except 
that such repeal shall not be construed--
            (1) to prevent the Secretary from taking, or causing to be 
        taken, such actions under subsection (d) of this section and 
        sections 4(e)(4), 4(e)(5), 5(a)(1), 5(c), 5(d), and 5(e) (as in 
        effect on the day before the date of such repeal), and 
        applicable regulations promulgated thereunder, during any 
        period in which the authority of the Secretary under subsection 
        (d) of this section is in effect; or
            (2) to prevent the availability of funding under section 
        9(b) during any period in which the authority of the Secretary 
        under subsection (d) of this section is in effect.
    (f) Sense of the Congress.--It is the sense of the Congress that 
the Secretary should make any determination under subsection (a) in 
sufficient time to enable participating insurance companies to include 
coverage for acts of terrorism in their policies for the second year of 
the Program, if the Program is extended in accordance with this 
section.
    (g) Study and Report on Scope of the Program.--
            (1) Study.--The Secretary, after consultation with the 
        NAIC, representatives of the insurance industry, and other 
        experts in the insurance field, shall conduct a study of the 
        potential effects of acts of terrorism on the availability of 
        life insurance and other lines of insurance coverage.
            (2) Report.--Not later than 9 months after the date of 
        enactment of this Act, the Secretary shall submit a report to 
        the Congress on the results of the study conducted under 
        paragraph (1).
    (h) Reports Regarding Terrorism Risk Insurance Premiums.--
            (1) Report to the naic.--Beginning 6 months after the date 
        of enactment of this Act, and every 6 months thereafter, each 
        participating insurance company shall submit a report to the 
        NAIC that states the premium rates charged by that 
        participating insurance company during the preceding 6-month 
        period for insured losses covered by the Program, and includes 
        an explanation of and justification for those rates.
            (2) Reports forwarded.--The NAIC shall promptly forward 
        copies of each report submitted under paragraph (1) to the 
        Secretary, the Secretary of Commerce, the Chairman of the 
        Federal Trade Commission, and the Comptroller General of the 
        United States.
            (3) Agency reports to congress.--
                    (A) In general.--The Secretary, the Secretary of 
                Commerce, and the Chairman of the Federal Trade 
                Commission shall submit joint reports to Congress and 
                the Comptroller General of the United States 
                summarizing and evaluating the reports forwarded under 
                paragraph (2).
                    (B) Timing.--The reports required under 
                subparagraph (A) shall be submitted--
                            (i) 9 months after the date of enactment of 
                        this Act; and
                            (ii) 12 months after the date of submission 
                        of the first report under clause (i).
            (4) GAO evaluation and report.--
                    (A) Evaluation.--The Comptroller General of the 
                United States shall evaluate each report submitted 
                under paragraph (3), and upon request, the Secretary, 
                the Secretary of Commerce, the Chairman of the Federal 
                Trade Commission, and the NAIC shall provide to the 
                Comptroller all documents, records, and any other 
                information that the Comptroller deems necessary to 
                carry out such evaluation.
                    (B) Report to congress.--Not later than 90 days 
                after receipt of each report submitted under paragraph 
                (3), the Comptroller General of the United States shall 
                submit to Congress a report of the evaluation required 
                by subparagraph (A).

SEC. 7. PRESERVATION OF STATE LAW.

    Nothing in this Act shall affect the jurisdiction or regulatory 
authority of the insurance commissioner (or any agency or office 
performing like functions) of any State over any participating 
insurance company or other person--
            (1) except as specifically provided in this Act; and
            (2) except that--
                    (A) the definition of the term ``act of terrorism'' 
                in section 3 shall be the exclusive definition of that 
                term for purposes of compensation for insured losses 
                under this Act, and shall preempt any provision of 
                State law that is inconsistent with that definition, to 
                the extent that such provision of law would otherwise 
                apply to any type of insurance covered by this Act;
                    (B) during the period beginning on the date of 
                enactment of this Act and ending at midnight on 
                December 31, 2002, rates for terrorism risk insurance 
                covered by this Act and filed with any State shall not 
                be subject to prior approval or a waiting period, under 
                any law of a State that would otherwise be applicable, 
                except that nothing in this Act affects the ability of 
                any State to invalidate a rate as excessive, 
                inadequate, or unfairly discriminatory; and
                    (C) during the period beginning on the date of 
                enactment of this Act and for so long as the Program is 
                in effect, as provided in section 6 (including any 
                period during which the authority of the Secretary 
                under section 6(d) is in effect), books and records of 
                any participating insurance company that are relevant 
                to the Program shall be provided, or caused to be 
                provided, to the Secretary or the designee of the 
                Secretary, upon request by the Secretary or such 
                designee, notwithstanding any provision of the laws of 
                any State prohibiting or limiting such access.

SEC. 8. SENSE OF THE CONGRESS REGARDING CAPACITY BUILDING.

    It is the sense of the Congress that the insurance industry should 
build capacity and aggregate risk to provide affordable property and 
casualty insurance coverage for terrorism risk.

SEC. 9. AUTHORIZATION OF APPROPRIATIONS; PAYMENT AUTHORITY.

    (a) Administrative Expenses.--There are authorized to be 
appropriated to the Secretary, out of funds in the Treasury not 
otherwise appropriated, such sums as may be necessary for 
administrative expenses of the Program, to remain available until 
expended.
    (b) Payment Authority.--This Act constitutes payment authority in 
advance of appropriation Acts, and represents the obligation of the 
Federal Government to provide for the Federal share of compensation for 
insured losses under the Program.

SEC. 10. PROCEDURES FOR CIVIL ACTIONS.

    (a) Federal Cause of Action.--
            (1) In general.--There shall exist a Federal cause of 
        action for property damage, personal injury, or death arising 
        out of or resulting from an act of terrorism, which shall be 
        the exclusive cause of action and remedy for claims for such 
        property damage, personal injury, or death, except as provided 
        in subsection (d).
            (2) Preemption of state actions.--All State causes of 
        action of any kind for property damage, personal injury, or 
        death arising out of or resulting from an act of terrorism that 
        are otherwise available under State law, are hereby preempted, 
        except as provided in subsection (d).
    (b) Governing Law.--The substantive law for decision in an action 
described in subsection (a)(1) shall be derived from the law, including 
applicable choice of law principles, of the State in which the act of 
terrorism giving rise to the action occurred, except to the extent 
that--
            (1) the law, including choice of law principles, of another 
        State is determined to be applicable to the action by the 
        district court hearing the action; or
            (2) otherwise applicable State law (including that 
        determined pursuant to paragraph (1), is inconsistent with or 
        otherwise preempted by Federal law.
    (c) Punitive Damages.--Any amounts awarded in a civil action 
described in subsection (a)(1) that are attributable to punitive 
damages shall not count as insured losses for purposes of this Act.
    (d) Claims Against Terrorists.--Nothing in this section shall in 
any way be construed to limit the ability of any plaintiff to seek any 
form of recovery from any person, government, or other entity that was 
a participant in, or aider and abettor of, any act of terrorism.
    (e) Effective Period.--This section shall apply only to actions 
described in subsection (a)(1) arising out of or resulting from acts of 
terrorism that occur during the effective period of the Program, 
including, if applicable, any extension period provided for under 
section 6.

SEC. 11. SATISFACTION OF JUDGMENTS FROM FROZEN ASSETS OF TERRORISTS, 
              TERRORIST ORGANIZATIONS, AND STATE SPONSORS OF TERRORISM.

    (a) In General.--Notwithstanding any other provision of law, and 
except as provided in subsection (b), in every case in which a person 
has obtained a judgment against a terrorist party on a claim based upon 
an act of terrorism or for which a terrorist party is not immune under 
section 1605(a)(7) of title 28, United States Code, the blocked assets 
of that terrorist party (including the blocked assets of any agency or 
instrumentality of that terrorist party) shall be subject to execution 
or attachment in aid of execution in order to satisfy such judgment to 
the extent of any compensatory damages for which such terrorist party 
has been adjudged liable.
    (b) Presidential Waiver.--
            (1) In general.--Subject to paragraph (2), upon determining 
        on an asset-by-asset basis that a waiver is necessary in the 
        national security interest, the President may waive the 
        requirements of subsection (a) in connection with (and prior to 
        the enforcement of) any judicial order directing attachment in 
        aid of execution or execution against any property subject to 
        the Vienna Convention on Diplomatic Relations or the Vienna 
        Convention on Consular Relations.
            (2) Exception.--A waiver under this subsection shall not 
        apply to--
                    (A) property subject to the Vienna Convention on 
                Diplomatic Relations or the Vienna Convention on 
                Consular Relations that has been used by the United 
                States for any nondiplomatic purpose (including use as 
                rental property), or the proceeds of such use; or
                    (B) the proceeds of any sale or transfer for value 
                to a third party of any asset subject to the Vienna 
                Convention on Diplomatic Relations or the Vienna 
                Convention on Consular Relations.
    (c) Special Rule for Cases Against Iran.--Section 2002 of the 
Victims of Trafficking and Violence Protection Act of 2000 (Public Law 
106-386; 114 Stat. 1542) is amended--
            (1) in subsection (a)(2)(A)(ii), by inserting after ``July 
        27, 2000'' the following: ``or before October 28, 2000,'';
            (2) in subsection (b)(2)(B), by inserting after ``the date 
        of enactment of this Act'' the following: ``(less amounts 
        therein as to which the United States has an interest in 
        subrogation pursuant to subsection (c) arising prior to the 
        date of entry of the judgment or judgments to be satisfied in 
        whole or in part hereunder).'';
            (3) by redesignating subsections (d), (e), and (f) as 
        subsections (e), (f), and (g), respectively; and
            (4) by inserting after subsection (c) the following new 
        subsection (d):
    ``(d) Distribution of Foreign Military Sales Funds Inadequate to 
Satisfy Full Amount of Compensatory Awards Against Iran.--
            ``(1)(A) In the event that the Secretary determines that 
        the amounts available to be paid under subsection (b)(2) are 
        inadequate to pay the entire amount of compensatory damages 
        awarded in judgments issued as of the date of the enactment of 
        this subsection in cases identified in subsection (a)(2)(A), 
        the Secretary shall, not later than 60 days after such date, 
        make payment from the account specified in subsection (b)(2) to 
        each party to which such judgment has been issued a share of 
        the amounts in that account which are not subject to 
        subrogation to the United States under this Act.
            ``(B) The amount so paid to each such person shall be 
        calculated by the proportion that the amount of compensatory 
        damages awarded in a judgment issued to that particular person 
        bears to the total amount of all compensatory damages awarded 
        to all persons to whom judgments have been issued in cases 
        identified in subsection (a)(2)(A) as of the date referred to 
        in subparagraph (A).
            ``(2) Nothing herein shall bar, or require delay in, 
        enforcement of any judgment to which this subsection applies 
        under any procedure or against assets otherwise available under 
        this section or under any other provision of law.
            ``(3) Any person receiving less than the full amount of 
        compensatory damages awarded to that party in judgments to 
        which this subsection applies shall not be required to make the 
        election set forth in subsection (a)(2)(C) in order to qualify 
        for payment hereunder.''.
    (d) Definitions.--In this section:
            (1) The term ``terrorist party'' means a terrorist, a 
        terrorist organization, or a foreign state designated as a 
        state sponsor of terrorism under section 6(j) of the Export 
        Administration Act of 1979 (50 U.S.C. App. 2405(j)) or section 
        620A of the Foreign Assistance Act of 1961 (22 U.S.C. 2371).
            (2) The term ``blocked asset'' means any asset seized or 
        frozen by the United States in accordance with law, or 
        otherwise held by the United States without claim of ownership 
        by the United States.
            (3) The term ``property subject to the Vienna Convention on 
        Diplomatic Relations or the Vienna Convention on Consular 
        Relations'' and the term ``asset subject to the Vienna 
        Convention on Diplomatic Relations or the Vienna Convention on 
        Consular Relations'' mean any property or asset, respectively, 
        the attachment in aid of execution or execution of which would 
        result in a violation of an obligation of the United States 
        under the Vienna Convention on Diplomatic Relations or the 
        Vienna Convention on Consular Relations, as the case may be.

            Passed the Senate June 18, 2002.

            Attest:

                                                             Secretary.
107th CONGRESS

  2d Session

                                S. 2600

_______________________________________________________________________

                                 AN ACT

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