[Congressional Record Volume 148, Number 78 (Thursday, June 13, 2002)]
[Senate]
[Pages S5472-S5501]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TERRORISM RISK INSURANCE ACT OF 2002
The PRESIDING OFFICER. Under the previous order, the Senate will now
proceed to the consideration of S. 2600, which the clerk will report.
The senior assistant bill clerk read as follows:
A bill (S. 2600) to ensure the continued financial capacity
of insurers to provide coverage for risks from terrorism.
The PRESIDING OFFICER. The Senator from Connecticut.
Mr. DODD. Mr. President, I want to shortly yield to my colleague, the
chairman of the Banking Committee, for an opening statement he may wish
to make on this bill.
Mr. President, just for the order of business, we will probably take
a few minutes with some opening statements this morning on the bill,
although I think over the months there has been a lot of knowledge
about what is involved. I know the Presiding Officer has an amendment
and is interested in the subject matter. I think Senator Kyl may have
an amendment he wants to offer fairly soon. Senator Gramm from Texas,
obviously, is very familiar with the bill.
My hope is that colleagues who have amendments would, first of all,
let us know what their amendments are. That would be helpful. I do know
what many of them are already. There may be others. So I would ask
staffs of Members of both parties if they would get to the ranking
member or the manager of the bill the amendments from both sides so
everyone has an idea what we are looking at over today and possibly
tomorrow and/or however long it takes to get this done.
My hope is they would be relevant amendments, that we would stick
with the subject matter at hand rather than using this vehicle to bring
up extraneous matters.
With that said, let me turn to the chairman of the full committee. I
thank him. I will make a longer statement in a few minutes myself. But
I certainly thank the majority leader, Senator Daschle. I want to thank
the minority leader. Senator Gramm has been deeply involved.
Certainly the chairman of the committee, Senator Sarbanes, has been
involved in this issue from the very beginning. Going back to last
fall, when we tried to sort this out, he made a Herculean effort to
bring it together. When we do these things, it becomes difficult
because we get 97 other people, as I mentioned yesterday, who all have
something they want to add to the discussion and debate. As a result of
that, a good effort did not work out as well as we wanted initially,
but I think a better effort may prevail as a result of more people
being involved.
So while we have lost some time, I think the product we are putting
before the Senate today is actually a stronger proposal.
With that, I will turn to my colleague from Maryland.
Mr. REID. Will the Senator from Maryland yield to the Senator from
Nevada to make a brief statement?
Mr. SARBANES addressed the Chair.
The PRESIDING OFFICER. The Senator from Maryland.
Mr. SARBANES. I yield to the Senator from Nevada.
Mr. REID. Mr. President, I, on behalf of Senator Daschle, alert
everyone, as Senator Dodd has done, that we want to have ample
opportunity for everyone to offer any relevant amendments. We think it
is very important that if people believe this bill isn't what it should
be, they have an opportunity to make it better. But I hope that
everyone understands we are not going to wait forever to move on
cloture if it appears people are stalling, trying to kill the bill,
through amendment or otherwise.
There will be ample time for amendments, I repeat. But we are not
going to stand around here for hours at a time in wasteful time. We
have so much to do.
The last week before the July recess we have to spend on the Defense
authorization bill. We have to do that. And that leaves next week to
complete everything else that needs to be done.
So I say to everyone, if they have amendments, come over and offer
them. Senator Sarbanes and Senator Dodd have worked on this legislation
for months. We almost had it done before Christmas of last year.
Senator Dodd and I have offered numerous unanimous consent requests so
we could move forward on this more quickly.
So I repeat, for the third time, as I did when the Senate opened this
morning, we want to have a bill that comes out of the Senate, and we
are going to get one, one way or the other. We hope it would be done
with people cooperating, trying to improve the legislation; when they
offer an amendment, and it does not pass, or it is tabled, that they do
not start crying and say: Well, I am going to kill the bill then.
This legislative process is what it is. This legislation is
important. We are going to do everything we can to move it
expeditiously.
The PRESIDING OFFICER. The Senator from Maryland.
Mr. SARBANES. Mr. President, I commend my colleague, Senator Dodd,
for his leadership on this very important issue. I have joined with him
in cosponsoring the legislation he has introduced, S. 2600, which is
now before the body. I thank Senator Daschle and Senator Reid for
moving the Senate to this issue, and we appreciate the willingness of
the other side of the aisle to cooperate in that endeavor.
This bill is now open to amendment, and we hope as we move forward
today, in short order, that those who have amendments will be offering
them and that we will be able to consider them as we address the
important issue contained in the legislation.
This legislation is designed to ensure the continued financial
capacity of insurers to provide coverage for risks from terrorism. It
obviously stems from the attacks of September 11 which raised a very
large question about the future availability of property and casualty
insurance for terrorism risk.
Shortly after those attacks, the administration, interacting with the
Congress, put forward certain ideas for addressing this issue, and
there has been an effort to try to deal with this issue over the
intervening months. It is a difficult and complex question. A number of
questions have been raised with respect to it. Hearings have been held
by more than one committee in the Congress on both the House and the
Senate side. The Banking Committee held hearings in late October in
which the witnesses who appeared acknowledged the need for legislation
and agreed that the future availability and affordability of terrorism
insurance would be placed in jeopardy absent congressional action.
Many have outlined the potential negative consequences for the U.S.
economy from the financial instability which would arise if terrorism
insurance were not available.
That view is reflected in the congressional findings on which the
Terrorism Insurance Act rests. Let me quote briefly from those
findings. It is very important to lay the basis as to why we are trying
to move this legislation. I quote:
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 the cost of future terrorist events and,
therefore, the size, funding, and allocation of the risk of
loss caused by such acts of terrorism.
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, and generate a
dramatic increase in rents and otherwise suppress economic
activity.
The findings go on to say:
The United States Government should provide temporary
financial compensation to insured parties, contributing to
the stabilization of the U.S. 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.
That basically sets out the problem we are trying to address with
this legislation.
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There is recent evidence that property and casualty insurers are
excluding terrorism coverage from the policies they write. The U.S.
General Accounting Office recently analyzed the terrorism insurance
market and found that, and I quote:
. . . some sectors of the economy--notably real estate and
commercial lending--are beginning to experience difficulties
because some properties and businesses are unable to find
sufficient terrorism coverage, at any price.
Furthermore, where terrorism insurance is available, it is often
expensive and significantly limited in both the amount and the scope of
the coverage.
The consequence of all of this is that you have a number of
properties currently either uninsured or underinsured. And the
potential consequences of this situation, if left unaddressed, are
cause for serious concern. That is why we are here today.
In the event of another attack, a widespread lack of insurance
coverage could hinder recovery efforts as property owners struggle to
meet the costs of rebuilding without the support of insurance. As the
GAO noted, property owners ``lack the ability to spread such risks
among themselves the way insurers do,'' and, as a result, I am quoting
the GAO:
. . . another terrorist attack similar to that experienced
on September 11th could have significant economic effects on
the marketplace and the public at large. These effects could
include bankruptcies, layoffs, and loan defaults.
The GAO also found that even in the absence of further terrorist
activity, even in the absence of it, inadequate insurance coverage
could have an adverse effect on the willingness of lenders to finance
new construction projects as well as the sale of existing property.
Already the GAO found:
[s]ome examples of large projects canceling or experiencing
delays have surfaced with a lack of terrorism coverage being
cited as a principal contributing factor.
The GAO concluded that ``the resulting economic drag could slow
economic recovery and growth,'' even if the terrorist attack does not
materialize.
So we have a problem either way. If the terrorist attack should
materialize, the lack of coverage would markedly hinder recovery
efforts. But even if it doesn't, you have an economic drag taking place
because of the unwillingness of lenders to finance new construction
projects as well as the sale of existing projects.
Most people seem to believe that in time, the insurance industry will
be able to underwrite the terrorist risk. But they don't now, at this
point, have the experience and the factual basis on which to make those
calculations. In the meantime, a short-term Federal backstop for
terrorism insurance would help to stabilize the marketplace and
forestall the potential negative consequences which I have just quoted,
identified by the GAO.
The legislation we have before us, which Senator Dodd has brought to
the body, works off of the proposals that were developed by the
administration late last year. This Terrorism Risk Insurance Act
establishes a shared compensation program that will split the cost of
property and casualty claims from any acts of terrorism during the next
year between the Federal Government and the insurance industry.
The act would terminate at the end of the year, unless the Treasury
Secretary determines that the program should be in place for an
additional year. So it is, by its very definition, short term. The
premise of it is that over that period of time the insurance industry
will be able to develop the knowledge, the expertise, and the
capability to underwrite the terrorist risk. Under this legislation,
the definition of an act of terrorism will be uniform across the
country. Insurance companies providing commercial property and casualty
insurance are required to participate in the program; voluntary
participation is allowed with respect to personal lines of property and
casualty insurance. Participating insurance companies must offer
terrorism insurance coverage in all of their property and casualty
policies for all participating lines. Each participating insurance
company will be responsible for paying a deductible before Federal
assistance becomes available. So the first dollar will come from the
insurance industry.
In the first year of the program, the amount of the deductible is
determined by dividing $10 billion among participating insurance
companies based on their market share. If the Secretary calls for a
second year, the deductible will be determined by dividing $15 billion
among participating insurance companies based on their market share.
For losses above the companies' deductibles, but not exceeding $10
billion, the Federal Government will pay 80 percent, and the companies
will pay 20 percent. For any portion of total losses that exceeds $10
billion, the Government will cover 90 percent and the companies will
cover 10 percent.
Losses covered by the program will be capped at $100 billion. Above
this amount, it will be up to Congress to determine the procedures for
and the source of any payments.
This framework provides to the insurance industry the ability to
calculate at the top level what they may have to cover in damage.
Therefore, it gives them the ability to calculate what the premiums
ought to be and to structure a properly arranged financial system. We
do that, of course, by providing that above certain levels the Federal
Government will assume 80 or 90 percent--depending on the figure--of
the losses.
I think this is a fairly simple program. We have had a lot of complex
suggestions made to us--some extremely complex, I may say. I think this
is pretty straightforward on its face. It is limited in its duration.
One of the guiding principles in the bill that I think is important
is that, to the extent possible, State insurance law should not be
overridden. We seek to respect the role of the State insurance
commissioners as the appropriate regulators of policy terms and rates.
We are anxious to try to keep the State insurance commissioners in the
picture. That is where the responsibility has heretofore been. There is
not an effort in this bill to make any radical change in that existing
arrangement.
In conclusion, I think the Congress needs to act on this issue. We
run the risk of serious damage to our economy. I know there are many
steps between now and final enactment of the legislation. We look
forward to continuing to consult with the administration over this
matter, as we have been doing. But, again, I commend Senator Dodd for
his extraordinary work in crafting the bill that is before us and
getting it before the Senate.
Yesterday some reference was made to some of the procedural problems
that we encountered on the way to the floor. But through the actions of
Senator Daschle and the concurrence of Senator Lott, we are here now
with the legislation before us, and the Senate now has an opportunity
to address this very important issue. I hope we will now be able to
consider amendments on their merits, dispose of them, and then move to
final action on this legislation.
Again, I underscore the fine work that Senator Dodd has done on this
legislation from the very beginning and, certainly, in bringing us to
this point today.
I yield the floor.
Mr. DODD. Mr. President, I thank my colleague from Maryland very
much. As I said a few moments ago, but for his involvement as chairman
of the Banking Committee, we would not have been able to produce this
product. He is an original sponsor, along with Senator Schumer and
Senator Corzine, of S. 2600. I would like to do this.
Bill Nelson, my colleague from Florida, wants to be heard on the
bill. Senator Schumer is here as well. I gather some others are ready
to come over to offer the lead amendment. That will be the manner in
which we will probably proceed. I know Senator Schumer has an ongoing
Judiciary Committee meeting. I want to accommodate Members.
I will yield to my colleague from New York, with the indulgence of my
colleague from Florida, to allow him to make opening comments, and then
I will turn to Senator Nelson. I will make comments myself later so
other Members can go back to the hearings, and then we will deal with
the amendment process.
The PRESIDING OFFICER. The Senator from New York is recognized.
Mr. SCHUMER. Mr. President, I thank my colleague from Connecticut. I
will have more to say in a general nature, and I will probably do that
during the amendatory process.
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First, I thank our chairman of the Banking Committee, Senator
Sarbanes, as well as Senator Dodd, and he, in particular, for his
leadership on this issue; it has been second to none.
We desperately need this bill. I also thank the White House for their
involvement. They have recognized the problem and have stepped to the
plate. I recognize Senator Lott, as well as many of my colleagues on
the other side who see this as a problem. I will make a couple of brief
points.
First, this is vitally needed--desperately in my city. We have
example after example of projects not being prefinanced, several
defaulting, and projects delayed or not undertaken because of the
inability of people to get terrorism insurance. Lenders will not yield,
will not give loans to projects of large economic agglomeration,
whether they be in large cities or places such as Disneyland, Disney
World, and Hoover Dam, unless we solve this problem. It has already
begun to slow down the economy.
As the chairman said, construction workers are being laid off and
construction jobs are declining. This is a sore on the economy. It is
an open cut. Every day that we don't solve it, more blood comes out of
the wound.
In my city and in my State, this is essential. Obviously, we were the
nexus of the terrorist attack on 9-11. Insurance rates are going
through the roof. Some of that is not caused by the lack of terrorism
insurance, but some of it is. It is vital that we solve this problem.
Just the other day we got a call from a developer refinancing an
average office tower on Third Avenue, with a $3 million increase in
insurance. Another friend owns smaller properties. A third of his
cashflow will be eaten up by insurance. He will not build or
rehabilitate another building. So this is an issue of jobs. It is
vital--vital to America, vital particularly to our large cities,
including New York.
I will make one final point, and I will make the balance of my points
later. Each of us has other things that we would like to do. Each of us
may have our own proposal--a different type of proposal. We could
probably come up with a hundred solutions to this problem. I had a
proposal supported by Secretary O'Neill that would have gone much
further. It would be easy to stand here and say this solution is not
the whole solution.
If each of us pushes in our own direction, we will get no bill. The
same is true for those who wish to make this a test of tort reform.
Please, please, I plead with my colleagues, do not have this proposal
wrecked on the shoals of tort reform as so many other proposals. The
Patients' Bill of Rights comes to mind. Yes, we can have a fight on
tort reform. There are strongly held views. It ought not be on this
bill. It will sink this bill.
I argue to my friends, anyone who tries to put the burden of tort
reform on this proposal, this proposal's shoulders are not broad enough
to carry that. If you do, you will sink the bill. You will hurt our
economy.
In conclusion, Mr. President, this is a test in our post 9-11 world:
Can this body deal in a bipartisan way with complicated issues that are
vital to our future even if the immediate impact is not seen? That
relates to a whole lot of other issues as well. We have to be in a new
frame of mind. We have to come together. This is crucial legislation,
even though it is not on the lips of the average American citizen, and
I urge my colleagues to support it.
I once again thank my colleague from Connecticut for his graciousness
in yielding me a couple of moments. I will speak at length under the
amendatory process. I thank him for his leadership, as well as our
chairman and Senator Daschle for bringing this bill to the floor. It is
at the 11th hour. It is not too late yet. It will be if we do not get
this bill done in the next few days.
Mr. DODD. Mr. President, I thank the Senator from New York.
How much time does the Senator from Florida request for general
comment on the bill?
Mr. NELSON of Florida. Yes, I would like to make an opening statement
and have 10, 15 minutes.
Mr. DODD. Why don't I say 10 minutes? The Senator from New Jersey
wants to be heard. I need to be heard. We have other Members who want
to be heard. This will keep the process moving. If the Senator gets to
10 minutes and there is something that has to be said, I will add a few
more minutes.
Mr. NELSON of Florida. Would the Senator like me to defer and let the
Senator from New Jersey proceed? Once I get on a roll, I do not want to
stop.
Mr. DODD. We do not want you to stop. We do not want you on too long
a roll. We want a 10-minute roll.
Mr. NELSON of Florida. I understand the Senator wants to limit my
roll, and I do not want you to limit my roll.
Mr. DODD. That is R-O-L-L, not R-O-L-E.
I yield 10 minutes to the Senator from Florida.
Mr. NELSON of Florida. Mr. President, something this important should
not have a limit of 10 minutes. I accept the good nature of the prime
sponsor of the bill. Basically, we are here talking about making
insurance available and affordable. After September 11, we ended up
having something that was neither: not available nor affordable. As a
matter of fact, one only has to look to the front page of the
Washington Post today. This is chronicling what has happened:
Insurance rates rise in DC. They soar downtown. Coverage
more limited since September 11.
That is the headline from today's Washington Post. It points out that
in the downtown area, there is a hiking of rates. One example given by
the Washington Post is 160 percent. I can give innumerable examples--
and I will in the course of this debate--of multiple hundreds of
percent in rate hikes, and thus that brings us to this point of
considering this legislation.
I want the sponsor of the bill, Senator Dodd, to listen. I want to
direct something to him so that he knows my good faith.
I was sitting in the chair presiding last evening when this matter
was brought up. A unanimous consent request was presented. Even though
I was seated in the chair, in my capacity as a Senator from Florida I
could have objected. I did not object because of the good faith he and
I both have over the issue, that this is an issue that ought to be
hashed out, it ought to be discussed, it ought to be thoroughly
debated, and then the amendatory process can work its will in the
Senate. It is in that atmosphere of good faith that I go forward.
I think the bill offered by the Senator from Connecticut is
significantly flawed, although I think it is a good-faith attempt. It
is trying to address a problem, and the problem is what we all know of
September 11. But several things have happened since September 11 in
the insurance marketplace. The marketplace has responded. Capital is
flowing big time into the reinsurance companies, reinsurance being an
insurance for insurance companies against catastrophe; in this case,
the terrorism risk.
In the aftermath of September 11, when we thought this was going to
be a problem endemic to the whole country on any kind of commercial
building or large structure that might be a target of terrorists, what
we have found in the 8 or 9 months since is that the marketplace has
responded. Reinsurance companies have provided the coverage, and the
cost of that reinsurance for this kind of catastrophe has been coming
down and down as more money has flowed into the reinsurance
marketplace. As a result, we do not have to kill a bumble bee with a
big stinger with a sledgehammer. Instead of us having a bill that
applies across the board, what we ought to be doing is rifleshooting
where the problems are.
The Senator from New York just stated several examples. Certainly his
constituency of Manhattan is a place where they are having difficulty
getting insurance for tall buildings. So, too, would be large
structures such as a football stadium, a baseball stadium. So, too,
would be in my home State major identifiable high-visibility targets,
such as the crowds that go to Disney World, major tourist attractions.
Airports would clearly be another one, and I can go down the line.
That does not mean that every little commercial building, every
medium-sized commercial building, every strip mall, every air-
conditioned mall, in fact, cannot get terrorism insurance, because they
can. The marketplace has responded.
We are coming to the floor with a bill that is fatally flawed because
it is
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overreaching the problem, and the problem is certain types of buildings
that need coverage from terrorism. Let's examine that.
What kind of terrorism? Most insurance policies already have an
exclusion for chemical, biological, and nuclear devastation. So if
those insurance policies are not covering chemical, biological, and
nuclear terrorism, what kinds of terrorism are we talking about that an
insurance company would cover? We are talking about the use of
conventional weapons; what we so horribly learned on September 11,
which is the use of an airplane or the use of explosives as they tried
to do in the early nineties at the basement of the World Trade Center.
Those are the things about which we are talking.
When one takes the application of conventional explosives and applies
it to commercial buildings, does the insurance marketplace today
respond with the coverage? My contention is, yes, it does. The
insurance marketplace is not going to respond to chemical terrorism,
biological terrorism, or nuclear terrorism because that is already
exempted in most policies, with the result that the bill is
overreaching because of it trying to apply to the whole country when,
in fact, we have certain structures that are indeed threatened and the
marketplace cannot respond to that. That is the first flaw of this
bill.
The second flaw of this bill is that it contains no provision to
protect consumers from rate gouging. It is not there. I am going to
offer an amendment later on in the process that will limit the rate
increases, that will have the Secretary of the Treasury, after
consultation with the insurance commissioners of the 50 States, through
their organization, the National Association of Insurance
Commissioners, set a range of where the rates should be. That, by the
way, is very similar to what the insurance commissioners do in the 50
States on commercial policies. They set a range or a band of where that
insurance rate premium ought to be.
The problem with terrorism insurance is, the insurance commissioners
have difficulty figuring out what ought to be the rates, because the
traditional way of determining if a rate is actuarially sound is by
experience and by data, and we do not have hardly any experience except
for what happened on September 11. Therefore, that is why I am going to
offer an amendment later on that is going to point out that the best
way of determining what the rise in rates ought to be to cover the
terrorism risk would be through the advice to the Secretary of the
Treasury who is prominent in Senator Dodd's bill as being the place of
limiting the rate hikes. The fatal flaw is this bill overreaches and
this bill does not have any provision to protect consumers for rate
gouging.
I see the Presiding Officer is starting to twist in the seat as if my
10-minute time limit is up, which is exactly what I thought was going
to happen, but I am just getting into my speech.
The PRESIDING OFFICER. The Senator is correct.
Mr. NELSON of Florida. I am going to need to stop----
Mr. DODD. I say to the Senator, there are other Members who want to
be heard.
Mr. NELSON of Florida. I do not want to hold up the Senator from New
Jersey. Why don't I stop and I will come back after he finishes his
statement.
Mr. DODD. Fine. Any Senator can speak for as long as they want. There
are no limits under this bill. If the Senator wants to talk, go ahead
and talk. I am trying to move the process along. I know the Senator has
an amendment he wants to offer on the subject matter itself, so I will
be glad to yield to him a few more minutes now if he would like to
finish up rather than break the flow of his remarks. I am trying to see
to it that we do not delay the process any longer than we have to, so
we can get to amendments and vote on them and then go on to other
business.
Mr. NELSON of Florida. I assure the Senator, as he knows, I am going
to be heard on this subject. I have not even started to talk about the
amendment. I will hold that until I actually offer the amendment, but I
do not want to hold up the Senator from New Jersey if he needs to go
back to committee. Why don't I sit down and I will seek recognition
right after he finishes.
Mr. DODD. I must say to my colleague, I am going to be heard on the
bill itself after he gets finished. Then I presume someone may show up
on the other side. We have not heard from anybody on the other side. We
have been dominating the debate, so I caution my colleague that he may
find himself waiting a little bit.
Mr. NELSON of Florida. I ask unanimous consent that I have another 10
minutes.
Mr. DODD. That is fine.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. NELSON of Florida. I thank the Senator from Connecticut.
So where are we? Why do we need a bill such as this? I think there is
a legitimate question that the risk of terrorism is something that
heretofore among insurance companies was not covered. Basically, we
never anticipated what happened. Now we have this threat facing us.
The Senator's bill, in fact, says that because terrorism is such, as
we would say in the South, an odoriferous act or one that is so
repugnant, akin to an act of war, that the Federal Government has a
basis for stepping in and insuring part of the risk. Thus, the
Senator's bill, through a process of either an 80/20 split or a 90/10
split with the higher figure of 80 or 90 percent being picked up by the
Federal Government of the terrorism risk, thus that is then a
protection for insurance companies or it is another means of insuring
against the terrorism risk.
I think that is reasonable. I think when we deal with this mass of
losses it is very difficult to insure against in certain areas. But if
we look at how this vast but strong economy, this free marketplace that
provides insurance, and insurance against catastrophe, has responded,
it has responded for most cases except the ones we have enumerated.
Any responsible legislation should explicitly require assurances of
reasonable premium rates, as we respond to this new kind of risk. That
is lacking in this bill, and the evidence continues to mount that
insurers are unjustifiably increasing the premium prices, and they are
going to continue to do so even with a substantial Government backstop
that is being provided in this bill.
I, again, call attention to a story in this morning's Washington Post
where it talks about how the insurance rates have gone up in downtown
Washington. Again, it is not because of the chemical, biological, or
nuclear threat. The article talks about the ``dirty'' nuclear bomb.
That is not going to be covered under these insurance policies. These
insurance policies have increased rates presumably to cover the
terrorism risk only from the conventional kinds of explosives.
I have received a note that Senator Corzine has to leave now, so I
yield to the Senator so he can make his remarks.
Mr. DODD addressed the Chair.
The PRESIDING OFFICER. The Senator from Connecticut.
Mr. DODD. Let me say to my colleague from New Jersey, I thank him for
cosponsoring the bill. He has been an invaluable asset in putting this
proposal together. Senator Corzine is a new Member of this body but, as
all of us in this Chamber know, and his constituents know, he spent a
very distinguished career in the area of finance and was the leader of
one of our great leading investment banks in the world and brings a
wealth of experience and knowledge into any subject matter but
particularly ones involving a subject matter as complicated as the
issue of this bill, terrorism insurance. So I wanted to express
publicly to him my sincere sense of gratitude for his tireless efforts,
going back many months now, in dealing with this issue. He has very
valuable suggestions and input that has contributed to this product. We
would not have put together, I think, as good a bill as I think we have
without his input and his involvement. So I wanted to express my
gratitude to him and I look forward to working with him.
Mr. NELSON of Florida. Mr. President, do I still have the floor?
The PRESIDING OFFICER. The Senator has the floor.
Mr. NELSON of Florida. I would propose that to accommodate the
Senator, since he has to leave, we yield some
[[Page S5476]]
time to him with me still retaining the floor so I can finish my
remarks. I am trying to be accommodating, but I still have not
completed my remarks.
Mr. DODD. That is fine.
Mr. NELSON of Florida. With that understanding, I yield to the
Senator from New Jersey.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from New Jersey.
Mr. CORZINE. Mr. President, I rise today to join my colleagues in
support of S. 2600.
Let me begin, by applauding the majority leader and Senator Dodd for
exerting the necessary leadership, and doing what needed to be done to
bring this bill to the floor. Now, it is time for all Members of the
Senate to recognize the urgent need before us, and move to act on this
bill.
The tragic events of September 11 highlighted the enormous exposure
that insurance companies would face in the event of future terrorist
attacks.
In this time, when we receive different terrorist alerts almost
weekly, and we are faced with the uncertain nature of future attacks,
many insurers and reinsurance firms have concluded that terrorism is no
longer an insurable risk.
As a result, late last year, many insurers announced that they would
no longer provide coverage for terrorism-related losses. Without access
to reinsurance coverage, primary insurance companies now find
themselves subject to the full exposure of terrorism risk.
This issue is not new. Many of us first learned about them in October
of last year. And it left many concerned. While we all knew that it
would be impossible to predict the true impact of the lack of terrorism
insurance on our Nation's economy, there was overwhelming agreement
among scholars, economists, and participants in our economy--that this
issue had the potential to pose real problems in some economic sectors.
The threat that loomed led to hearings in the Senate Banking
Committee, and it fueled discussion among Members in the Senate about
how to best craft a solution before the end of last year when 70
percent of reinsurance contracts were up for renewal.
There was considerable debate about how, and what, that response
should be. We debated the proper role of the Federal Government in
ensuring that commercial insurers could provide terrorism insurance,
knowing that their ability to cede some of that risk to reinsurers had
all but vanished.
Many Members of this body, people like Senator Dodd, Senator
Sarbanes, Senator Gramm of Texas, Senator Hollings, Senator Schumer,
Senator Enzi, Senator Nelson of Florida and myself put forth ideas on
how to accomplish that.
And let's be clear, there was a great deal of difference in the ways
members thought we should approach this problem. But behind those
differences, there was a singular purpose to solve the problem.
I think we all were determined not to engage in partisan politics or
to undermine a possible solution by promoting pet policy priorities.
Everyone I just mentioned didn't agree on every aspect of the product
that was eventually produced. I certainly didn't.
But, ultimately, everyone agreed that we should act to bring a
proposal to the floor, with an expectation that amendments would be
offered, including amendments that dealt with tort and liability
issues.
The proposal that was presented late last year--late last year was
not simply the result of a bunch of Democrats getting in a room and
saying ``Voila.'' It was the result of serious discussion and
negotiations between Democrats and Republicans and there was
considerable input from the State insurance commissioners, this
administration and the Treasury Department.
In fact, the Federal backstop provisions of this bill had more than
input of these folks it had their support. The bill we are debating
today is that same proposal.
Now we have an opportunity to respond to this growing emergency.
If we fail to act, or if this bill becomes stalled by those seeking
to pile their pet policy priorities onto a measure that at its core
seeks to provide relief to American businesses, then our economy will
be harmed.
Every day that passes without our action, leaves American businesses,
development projects, workers and vital infrastructure exposed to
potentially devastating losses, and that's a real threat to our
economic recovery.
In fact, the lack of terrorism insurance coverage has already begun
to create a drag on commercial lending and business activity. In April,
the Federal Reserve Board surveyed commercial loan officers regarding
their recent lending activity and terrorism insurance. The responses
are troubling to say the least.
The report indicated that 55 percent of banks had not received
applications to finance ``high profile or heavy traffic commercial real
estate properties.'' In fact, two national lenders have completely
stopped making loans to these types of properties--GMAC Commercial
Holding and Mutual of Omaha--altogether.
The report also states that 20 percent of banks reported weaker
demand for new commercial real estate financing. And while not
referenced specifically in the Fed report, we know that some existing
commercial borrowers may be in technical default on loan covenants
because they lack terrorism coverage.
Each of these elements reflects the economic threats that are posed
by the lack of affordable, comprehensive terror insurance coverage. The
threat that accompanies the decrease in commercial lending and
subsequently to development translates to one thing the loss of jobs.
But there is more. The lack of terrorism insurance coverage is also
affecting our securities and our bond markets.
According to the Bond Market Association, to date, $7 billion worth
of commercial real-estate loan activity has already been suspended or
cancelled due to problems related to terrorism insurance, that is 10
percent of the commercial-mortgage-backed-securities (CMBS) market.
And overall, CMBS activity is down a staggering 26 percent in the
first quarter of this year. That level of decline in commercial
investment activity is disturbing to think of when you consider that
that sector was one of the ones that remained strong throughout last
years' recession.
And there is even more to illustrate the there is an economic
consequence that accompanies our failure to act on this issue.
Last month, Moody's Investors Service issued an opinion indicating
that it is preparing to downgrade billions of dollars of debt of large
loan transactions, commercial mortgage-backed securities, particularly
on high-risk and ``trophy'' properties in the near future if we fail to
pass this legislation.
The American Academy of Actuaries reports that ``there is a
reluctance to finance [development] projects of $100 million or more,
and some investors are reluctant to buy bonds tied to individual office
towers, apartment building and shopping malls.''
And a report issued last month by the Joint Economic Committee offers
data illustrating the economic drag that higher insurance costs, for
terrorism and non-terrorism related coverage, is having on American
business. The report calls these factors ``a one-two punch'' that is
proving harmful to America's economy.
That report cites data from the Commercial Insurance Market Index,
which indicates that premiums for commercial insurance policies have
increased by 30 percent in first quarter of this year. And those
increased costs are in addition to the increased costs of obtaining
terrorism insurance, a real cost burden to our businesses.
The report cites the example of a building in my state, New Jersey,
which prior to 9/11 had an $80 million insurance policy that included
terrorism coverage at a cost of $60,000. The new policy for that
building has a premium of $400,000 for property-casualty insurance and
another $400,000 just for terrorism insurance.
That's a dramatic increase for the same coverage. And that building's
lucky at least they got fairly comprehensive coverage. Many others find
themselves facing similar cost increases for half the coverage.
In either case, these costs undermine productivity and any growth or
investment opportunities that the owners could possibly take on. And it
is nationwide trend.
I want to reiterate that point. Because this is more than a
Northeast, an
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urban, or a ``big city'' issue. The inability of business and
organizations to obtain terrorism insurance coverage is truly a
national problem.
Consider this:
In Cleveland, the insurer for the Cleveland Municipal School District
has notified the district that its new policy will exclude losses due
to terrorism.
In Seattle, the Seattle Mariners baseball team had difficulty
securing $1 million in terrorism insurance coverage for their $517
million stadium.
The St. Louis Art Museum's insurer informed that museum that it would
no longer be covered for terrorism losses. That could well prevent
touring shows, and undermine tourism in that city.
And a collection of Midwestern airports reported that their aviation
liability premium increased close to 300 percent post 9/11 and those
policies excluded terrorism losses.
Last year, when this issue first surfaced, we tried to move a bill
forward, but that process didn't take hold. Many members believed this
issue wasn't a problem for them that it wasn't in their back yards.
We know better than that now. At least I hope we all do.
The impact of the lack of terrorism insurance is being felt in cities
and towns all throughout America. And so I say to all my colleagues
this is an issue that affects your state and your constituents.
If there's a port in your state, your affected. If there's a bridge
or a tunnel in your state, you are affected. If you have an airport or
railway system in your state, you are affected. If you've got an NFL,
NBA, NHL or Major League Baseball stadium or arena in your State,
you're affected. If you've got a college football stadium in your
State, where tens of thousands of people gather on Saturdays to root
for their team and sing their alma mater, you're affected.
It is time to stop the stalling, stop the games and time for us to
pass an interim federal backstop to ensure against future acts of
terrorism.
It is time for us to pass this bill, and I strongly urge my
colleagues to support it.
I thank the Senator from Connecticut for his efforts and persistence
in this endeavor. I look forward to helping him as this process goes
forward.
Again, I thank my colleague from Florida for being generous and
respectful, giving me the opportunity to present my remarks.
Mr. NELSON of Florida. Of course, the Senator from New Jersey is one
of the great new bright lights of this body. What a privilege it is for
me to serve with him. What a privilege it is to have the value of his
opinion.
I agree with everything he said. Now the question is, how do we get
from here to there, to protect everybody and protect the consumer as
well from being gouged with the price hikes, because even though the
people who pay these premiums in fact are the owners of these large
commercial structures, guess what happens when they have to pay the
increase of a premium hike. That is passed on to the consumers.
That is the case I am making, that we have to have this insurance
available--and we are in large part doing that by the mechanism of this
bill, so the Federal Government provides the insurance for the risk to
the tune of 80 percent or 90 percent. But in the process of what we are
going to charge for the portion that is covered by the insurance
company, that is going to be passed on to the consumers.
Ultimately, I will offer an amendment that will call for a range, as
determined by the Secretary of the Treasury, as to what can be charged,
where that premium, going into an insurance company, will be separated
for accounting purposes, it will be segregated, so it will not be mixed
up with all the other premiums for a slip and fall and dog bites and
all kinds of liabilities. It will be separate, so it will be under the
glare of the full light of day as to how much premium is there, and
therefore the Secretary of the Treasury, with the advice of the
National Association of Insurance Commissioners, can determine what is
a range--not a specific amount, but what is a range that is fair and
affordable. That is the place I am going.
The only effective way to guarantee that the rates will be stabilized
under this circumstance is to federally regulate the premium rate for
the risk of terrorism. Why Federal? Because the 50 insurance
commissioners do not have the data to do this. And the Federal
Government is picking up the biggest part of the risk under this bill.
Remember, it is only the risk, basically, from conventional kinds of
terrorism because chemical, biological, and nuclear terrorism is exempt
from most commercial insurance policies. So that is not a risk we are
going to be protecting.
The Secretary of the Treasury is in the best position to consult with
the actuaries and to determine the actual financial risk insurers would
assume under the bill. If the Congress commits billions of taxpayer
dollars and mandates no real rate protection, we will have shirked our
responsibility to the taxpayers and to the consumers.
We gnash our teeth around here on politically charged issues such as
raising taxes. Let me tell you, as an insurance commissioner for 6
years, there is an issue that is more explosive to the consuming public
than the raising of taxes, and that is the raising of their insurance
premiums.
So I call to the attention of the Senate that as you consider a bill
such as this that has no mechanism by which to stop those rate hikes,
you had better think twice, and hopefully you will think very favorably
about the amendment I will be offering later on.
We can only rely on the States to monitor rates. State insurance
commissioners traditionally do that. That has been carved out under
Federal law as a regulation of insurance reserved to the States. State
insurance commissioners in fact, however, do not have the data nor do
they have the experience of the data with which to be able to judge
these rates. On the contrary, in some States they do not regulate the
rates of commercial policies at all. In other States, such as my State
of Florida, the State of Florida Department of Insurance sets a range
of the commercial policies' rates, as to what they may be, without the
approval of the Department of Insurance.
The PRESIDING OFFICER (Mr. Johnson). The time of the Senator has
expired.
Mr. NELSON of Florida. I will conclude my opening remarks. I look
forward to the debate. I thank the Senator from Connecticut for
bringing this important legislation to the floor. I thank the Senate
for this opportunity to be heard on a most important issue, important
not only to the businesses of this country but to the consumers of this
country as well.
Mrs. CARNAHAN. Mr. President, I strongly support the Terrorism Risk
Insurance Act.
The September 11 tragedy has affected our Nation in innumerable ways.
One of the economic impacts has been that the availability and
affordability of terrorism insurance has been severely limited.
Uncertainty in the market is freezing commercial lending, preventing
real estate transactions from going forward, and slowing various
construction projects. Therefore I believe that we should move quickly
to enact a federal terrorism insurance backstop.
I have heard from businesses throughout Missouri--from various
sectors of our economy--that are being adversely impacted by current
market conditions. But the lack of terrorism insurance is hurting
working families as well.
As President Bush pointed out, ``If people can't get terrorism
insurance on a construction project, they're not going to build a
project, and if they're not going to build a project, then someone's
not working.''
This legislation will promote investment and provide the certainty
necessary to reinvigorate commercial lending activities.
I have supported each of the unanimous consent requests that have
been offered since December to bring a terrorism insurance bill before
the Senate.
I am pleased that we have finally been able to take up this bill.
This meaningful Federal backstop is long overdue, and I hope that we
can enact it expeditiously.
The PRESIDING OFFICER. The Senator from Connecticut.
Mr. DODD. I see my friend from Kentucky. I will take a few minutes to
[[Page S5478]]
make an opening statement. I see he is here. I do not want to delay him
any longer. I will truncate my remarks and then my anticipation is we
will turn to the Senator from Kentucky to offer an amendment to get the
process going.
Let me take a few minutes, if I may. We have now heard from a number
of my colleagues. I appreciate the comments of my colleagues,
particularly those of Senators Sarbanes, Corzine, and Schumer.
I ask unanimous consent the junior Senator from New York, Mrs.
Clinton, be added as a cosponsor of this bill as well.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DODD. I thank the leadership for their efforts on this bill. This
is a complicated area of law. This is a thankless task. When you get
involved in something such as terrorism insurance, there are other
matters that may attract and galvanize the attention of the American
public, but this is a subject matter that can glaze over the eyes of
even the most determined listener, when you get into the arcane world
of insurance, particularly of terrorism insurance, the reinsurance
industry dealing with commercial loans and lending practices, and how
it affects the market at large.
I beg the indulgence of our colleagues when we go through this, to
understand what we have tried to do here in as much a bipartisan
fashion as possible, with the advice and consultation of organizations,
from the AFL/CIO to major banks and lending institutions, insurance
companies, the Department of the Treasury, and others in crafting
something that will get us out of this particular situation.
Let me just preface my remarks by saying this is a problem. I know
there may be some who will argue this is not an issue. It is a massive
issue and a growing one. I wish it were otherwise. I wish this were not
the case. But the data that is coming in indicates that we have a major
blockage, if you will, in the normal flow of commerce, and that is the
inability to acquire terrorism insurance, which has a very negative
impact when it comes to lending institutions putting their resources on
the table, where the exposure could be significant.
Just to put it in some perspective for people, the calculation of the
casualty and property loss--I am obviously not going to talk about the
loss that goes beyond that we can put a dollar sign on. But for the
loss to which you can put a dollar sign in the property and casualty
area on September 11, the estimates run no less than $50 billion, just
in property and casualty.
If you start adding others, obviously the numbers go up. To give you
some idea, if you had a September 11-like event somewhere in the United
States and an accumulation of events like September 11, the
availability of resources today to pay the property and casualty losses
is about 20 percent of that number. That is the situation we are in.
You can understand, while people may wish that it somehow were done
by just the Federal Government writing a check and the people providing
this kind of coverage, that in a free market you have to encourage or
induce people to stay involved. There is no requirement under law that
they provide this kind of coverage.
The idea of how we can keep commerce moving, and major construction
programs underway--by the way, based on the accumulated evidence we
have, most every State can demonstrate some serious problem they have
in a major commercial or real estate development.
This morning's newspaper headlines in the Washington Post that my
colleague from Florida has raised, I think, point out the problem we
are facing. I will talk about properties in the District of Columbia.
Obviously, the attack on the Pentagon on September 11, and the news the
other day about so-called ``dirty'' bombs that might have been used--
and I gather this was somewhat shaky information, but put that aside
for a second--the Nation's Capital certainly is a target of
opportunity.
We see rates already going up for properties located in the District
of Columbia. That is the subject matter of the Washington Post article
this morning. In fact, the Washington Post itself is having a difficult
time getting coverage for workman's compensation, and the National
Geographic building has a similar problem, and there are similar
problems around the city.
I will not go into all of the details in the article, suffice it to
say that this is a significant story and my colleagues ought to take a
look at it. It highlights some of the difficulties we are facing.
This is not a perfect piece of legislation. Obviously, many of us
might have written this somewhat differently than proposed. But,
obviously, in a body like this with 100 Members, with a lot of
different ideas and thoughts, you try to come together with what you
can to make some sense and move the product forward.
There are differences of opinion on the substance of this
legislation. We are going to hear some of them raised with the
amendments that will be brought up and debated. My hope is that the
substance of this legislation will prevail.
The provisions that deal with the creation of a temporary Federal
backstop for terrorism insurance represent a very hardcore compromise
negotiated with Senator Gramm of Texas, Senator Sarbanes, Senator
Schumer, myself, Senator Enzi, as well as the State insurance
regulators, White House, and the Treasury Department. This is a
modified version of what we agreed to last fall. Senator Gramm is not a
sponsor of the bill which I introduced for the reason I am sure he will
explain himself when he comes to the floor.
There is a lot in this bill that is very similar to what we worked
out last fall, but it would not move along at that time for reasons I
will not bother to go into again.
Who is supporting what we are trying to do?
I am troubled by our delay in enacting this legislation because of
the tremendous demand that we act and act precipitously. There is a
bipartisan letter from 18 Governors from across the country
representing every region of the country, which I ask unanimous consent
to be printed in the Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
April 15, 2002.
Hon. Tom Daschle,
Senate Majority Leader, Capitol Building, Washington, DC.
Hon. Trent Lott,
Senate Republican Leader, Capitol Building, Washington, DC.
Hon. Dennis Hastert,
Speaker of the House of Representatives, Capitol Building,
Washington, DC.
Hon. Richard Gephardt,
House Democrat Leader, Capitol Building, Washington, DC.
Dear Congressional Leaders: As a result of the events of
September 11th, the nation's property and casually insurance
companies have or will pay out losses that will exceed $35
billion dollars. Since the first of January, many insurance
companies, self-insurers and states have been faced with a
situation where they are unable to spread the risk that they
insure because of the unavailability of reinsurance
protection. In the event of another major attack, some
companies or perhaps a segment of the industry would face
insolvency. While most states have approved a limited
exclusion for terrorism with a $25 million deductible,
exclusions for workers' compensation coverage are not
permitted by statute in any state. The present situation
poses a grave risk to the solvency of the insurance industry,
state insurance facilities, economic development initiatives,
and the ability of our states to recover from impacts of the
September 11th attacks.
In the months after the attack on our nation, legislation
passed in the House and was introduced in the Senate to
create a backstop for the Insurance industry so they could
continue to provide protection to their customers. The
Administration has also supported this concept. Currently,
there is broad bi-partisan agreement for providing an
Insurance backstep. Governors believe this is an important
goal that should be inhibited by other issues.
Since late December, the lack of a financial backstop has
started to ripple through the economy and will continue to do
so. This will further impact the ability of the economy to
recover from the current recession.
As Governors, we are facing many critical issues resulting
from the September 11th crisis. The emerging problem in
insurance coverage only serves to exacerbate our recovery
efforts. In view of this, we, the undersigned Governors,
respectfully urge the Congress to quickly complete its work
on the terrorism reinsurance legislation in order to return
stability to U.S. insurance markets.
Sincerely.
Jim Hodges, Governor, South Caroline; Mike Johanns,
Governor, Nebraska; Paul E. Patton, Governor, Kentucky;
Judy Martz, Governor, Montana; Don Siegelman, Governor,
Alabama; Bob Holden, Governor, Missouri; Mark R.
[[Page S5479]]
Warner, Governor, Virginia; John G. Rowland, Governor,
Connecticut; Angus S. King, Jr., Governor, Maine; Mike
Huckabee, Governor, Arkansas; Jim Geringer, Governor,
Wyoming; George H. Ryan, Governor, Illinois; Bill
Owens, Governor, Colorado; Scott McCallum, Governor,
Wisconsin; Jeb Bush, Governor, Florida; Frank O'Bannon,
Governor, Indiana; Jane Swift, Governor, Massachusetts;
Bob Taft, Governor, Ohio.
Mr. DODD. Mr. President, they lay out their concerns about what is
going on in their own States.
We have letters from 30 of our Senate colleagues representing a broad
array of the political spectrum. I ask unanimous consent that those
letters be printed in the Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
United States Senate,
Washington, DC, April 22, 2002.
Hon. Tom Daschle,
Majority Leader, Senate.
Hon. Trent Lott,
Minority Leader, Senate.
Dear Majority Leader Daschle and Minority Leader Lott: We
are writing to urge prompt Senate passage of short-term,
terrorism insurance backstop legislation that would stabilize
the insurance market for policyholders and provide financial
security in the event of future terrorist acts. As you both
know, members of this body quickly responded with a
legislative package in the wake of September 11 to ensure the
continued availability of insurance for terrorist-related
acts. The proposal provided a short term, financial backstop
so that private markets for terrorism coverage could be
reestablished.
While the House passed H.R. 3210, the ``Terrorism Risk
Protection Act'' late last year, the Senate was unable to
bring a legislative package to the floor before our
adjournment in December. Since that time, we have heard from
the financial services industry, the building and
construction sectors, the labor community, small businesses,
and other impacted parties that there is currently either no
insurance against acts of terrorism or inadequate levels of
insurance. This problem is having a delirious impact on our
economy, including with respect to the financing and
construction of new real estate projects. A host of
additional parties, including hotels, convention centers,
hospitals, local municipalities, and professional sports
teams are also pressing for needed action. Particularly
troubling is the evidence that insurers cannot provide needed
workers compensation coverage where there are large
aggregations of individuals. As you know, these claims are
bolstered by a recently released study by the General
Accounting Office and by testimony provided recently to the
House Financial Services Subcommittee on Oversight.
The Senate should be proud of its work following the tragic
events of September 11. We passed numerous pieces of
legislation to address the security of our country and the
viability of key sectors of our economy. We should also try
to prevent severe economic dislocation and should certainly
not fall short in helping to ensure that employers and their
workers have adequate levels of insurance in the event of
additional terrorist acts.
We urge you to bring a terrorism insurance bill to the
Senate floor expeditiously.
Sincerely,
Judd Gregg; Jim Bunning; John Breaux; E. Benjamin Nelson;
Dick Lugar; Jesse Helms; Wayne Allard; Mike DeWine;
Susan Collins; Mike Enzi; Jack Reed; George V.
Voinovich; Debbie Stabenow; Mary L. Landrieu; Zell
Miller; Max Cleland; Dianne Feinstein; Lincoln Chafee;
Chuck Hagel; John Ensign; Olympia Snowe; John F. Kerry;
Ted Kennedy; Orrin Hatch; Daniel K. Inouye; Evan Bayh;
Joe Lieberman; Jon Corzine.
Mr. DODD. Mr. President, we have had repeated letters from the
President, Secretary O'Neill, and others in the administration which
certainly point out the difficulty.
I will quote the President's comments during the White House
gathering back in April. He said:
If people can't get terrorism insurance on a construction
project, they are not going to build the project. If they are
not going to build the project, then someone is not working.
We in Washington must deal with it, and deal with it in a
hurry.
Secretary O'Neill commented:
There is a real and immediate need for Congress to act on
terrorism insurance legislation. The terrorist attacks on
September 11th have caused many insurance companies to limit
or drop terrorists risk coverage from their property and
casualty coverage, a move that leaves the majority of
American businesses extremely vulnerable. The dynamic, in
turn, threatens America's jobs, and will wreak havoc on
America's economy.
Just this week, Secretary of Treasury O'Neill, Larry Lindsey,
Director of the National Economic Council, Mitch Daniels, Director of
the Office of Management and Budget, and R. Glenn Hubbard, Director of
the Council of Economic Advisors, wrote Senate leadership outlining
again the significance of moving forward with this bill.
The labor unions as well have called for action here--a rare
occurrence when you get this kind of symmetry between both labor and
management.
I quote from Ed Sullivan, president of the Building Construction
Trades Department of the AFL-CIO. He says:
President Bush, like all of us, realize that as long as
terrorism is a threat, new job-creating projects are being
delayed or canceled because we do not have adequate insurance
coverage, or workman's compensation coverage available.
The Union Building Trades:
Our members join in urging the U.S. Senate to pass
terrorism risk insurance legislation without delay.
The National Association of Insurance Commissioners from across the
country, which is made up of State insurance regulators, which
continues to strongly urge the creation of a Federal backstop for
terrorism insurance, has to its displeasure begun the process of
excluding terrorism insurance from standard casualty property policies.
On behalf of the national insurance regulators, I strongly
urge the Senate to quickly pass legislation that will make
insurance affordable and available to all American consumers
and businesses. Only the Federal Government has sufficient
resources at this time to help restore adequate levels of
risk measurement and financial certainty to our markets.
Finally, a broad coalition of small and large businesses and
consumers of terrorism insurance have called for Senate action as well.
There are some who believe there is no reason for the Federal
Government to act. They cite a few press articles which suggest
terrorism insurance is available in some areas and wonder why the
Congress should step in with legislation such as we are proposing.
Terrorism insurance is available, it is true, in limited areas.
However, it is not available in many buildings, powerplants, shopping
centers, and transportation systems that are perceived as high risk for
terrorism acts--hence, the article this morning in the Washington Post
about our Nation's Capital. In those cases where terrorism insurance is
available, it is often unaffordable and very limited in its scope and
amount of coverage.
There are plenty of examples. Also, again, the Washington Post story
this morning is the one that comes to mind immediately. I mentioned the
National Geographic headquarters in town dropped its workman's
compensation because it received threats to large concentrations of
employees and joined with the District of Columbia government's insurer
as a last resort.
The Washington Post is trying with inability to secure its own
workman's compensation insurance. Workplaces around the Nation's
Capital have either been denied coverage or have offered reduced
coverage.
Why is this going on? When you have a $50 billion event, you can
understand.
If I could wave a magic wand and say, whether you like it or not, you
have to be there, you have to have premiums--the law requires them to
collect premiums so they can provide the kind of resources they need to
pay out if an event occurs. The law requires it.
The question is how do you know how big an event is going to be. We
had a $50 billion one. That is at least a floor of what we know it
costs. That is without including workman's compensation, life insurance
and others. Just in property and casualty, that is the number.
If you are going to have the industry be out and the private sector
do this, they have to cost it out. I wish it could be for nothing. I
wish it wouldn't cost anything at all. That is a mythical world. The
reality is that banks don't lend money unless they can have some
coverage to protect their exposure. If you are not going to give the
coverage to protect the exposure, they don't lend the money.
It is not complicated. If you look at the commercial mortgage-backed
security business, which covers all but about $1 billion of all
commercial lending that goes on, already in the first quarter it is
down $7 billion--10 percent. You are already finding a stall going on
in that area.
Most of my colleagues understand that it is like residential
mortgage-backed securities. Security in the commercial area is where
they go out and bundle them together and have a secondary market to
cover it. Right now,
[[Page S5480]]
10 percent in the first quarter is already down in that area.
I am not making the numbers up to highlight the significance of what
we are talking about. George Washington University's downtown campus
three blocks west of the White House has cut the school's former $1
billion property and casualty policy in half, and its premiums have
been raised 160 percent, and advise that renewing terrorism coverage
would cost 15 times more. That is what we are up against here.
I can rail against it. Obviously, there is no great wisdom here to
attack the insurance industry. That is a pretty safe bet out there
politically.
But the fact is, when you end up with institutions like George
Washington University, the National Geographic, private sector people
here in the Nation's Capital, it would be difficult to say we are going
to go out and cover this after we had a $50 billion loss, to just jump
back in somehow; and for people to say, by the way, don't raise your
premiums to do it, and you better have the resources to pay for it. I
do not know where people acquired their math knowledge, but this does
not work out, unfortunately.
So what we are trying to do is get this industry back in because we
cannot require them to do it. So we have come up with a backstop idea
that says: Look, the first $10 billion of losses you are on the hook
for. When it gets beyond that, we are going to work out a system that
allows us to help in that kind of cost, for 2 years, by the way, with a
sunset provision.
Some would like it longer. I think we could make a good case for it
being longer because it is awfully difficult, with some major real
estate development going on that has more than a 2-year lifespan. But I
am not sure how much this institution will tolerate in terms of time,
so it has to be abbreviated to some extent. Then, hopefully, as the
market develops, the costing out can be calculated, and we can get the
Federal Government out of this altogether.
I know of no one who wants to turn the Secretary of the Treasury into
an insurance regulator. I am afraid that is what some of my colleagues
are suggesting. That is not what this is about. That is a separate
debate. Maybe someday we are going to have a debate around here that
says the Federal Government ought to become an insurance company. That
is a debate, but I don't think that is the debate we want to have here
today.
The debate here today is whether or not we are going to set up a
program that is going to cause the flow of commerce to get reignited in
areas where we have a significant stall.
Let me stay to my colleagues--and my colleague from Florida raises
the issue--our bill does require that there be an accounting here
separating out the premiums collected for terrorism insurance from the
normal course of business. We do not go as far as my colleague from
Florida would like, but in our bill that we have proposed there is an
accounting requirement that says you must at least have a separate
accounting for the premiums collected for terrorism insurance.
So there is a long list here of projects that I could talk about that
go all across the country that highlight everything from the Golden
Gate Bridge to the Dolphin Stadium in Florida that are having
problems--the United Jewish Appeal, the Hyatt Corporation, the Steve
Wynn's operation in Las Vegas our colleague from Nevada has already
talked about, Amtrak, the Cleveland Municipal School District, Baylor
University. The list goes on and on and on.
Again, we are not making these stories up. This is the evidence we
are receiving from across the country, that there is a problem, and it
is a growing one. We probably should have acted earlier, but I don't
think it is too late for us to be moving forward.
So that is the background of it. Every perspective homeowner, of
course, needs insurance to obtain a mortgage from a bank. Similarly,
industry as diverse as commercial real estate, shipping, construction,
manufacturing, and retailers require insurance to obtain credit loans
and investments necessary for their business operations. Additionally,
the creation of new construction projects require business loans. I
think most people understand that.
If you ever bought a home, you know you don't get the mortgage unless
you have insurance. That is what the law requires. That is just as true
in the commercial areas. So if there isn't insurance available, the
banks are not going to lend you money to buy a house. Maybe some people
can buy a house by just writing out a check. Most Americans need a
mortgage. And most Americans understand that the banks want to have
some insurance on that property to cover their potential loss. So that
is why you have to be able to get that.
That is true in commercial areas as well. If you can't get the
insurance, then the banks don't lend you the money to build the
projects, and people lose jobs. Those are the dots you connect, and
that is what is going on all across the country as one of the effects
of 9-11. It is a more complicated subject matter, but it is a serious
one that the President, the Secretary of the Treasury, organized labor,
and others have highlighted.
Some critics will argue, Why should we do anything to help the
insurance industry? Quickly, let me add, this is not about the
financial health of the insurance industry at all. It is about the
financial well-being of nearly every individual and company in America
that requires this industry to be healthy enough to be in business.
If you end up being put out of business because you don't have the
resources, your solvency gets wiped out, as it would be today with a 9-
11-like event. As I mentioned earlier, there are only about 20 percent
of the resources to cover a similar kind of event that occurred 9
months ago on the 11th of September. So this is not so much about their
health and well-being as it is those who rely on this industry for
their own health and well-being.
As I said, the industry is paying off losses from the September 11
attacks estimated to be roughly $50 billion. The industry has made
clear that despite this unprecedented loss, it remains very strong and
solvent.
The question that many will ask is why we need to help an industry
that is financially sound? And I think I have laid that out. The answer
is we are not protecting insurance companies, we are protecting policy
owners and businesses and workers.
This legislation makes sense because it is based on three principles
that must be included in any bill that reaches the President's desk.
First, it makes the American taxpayer the insurer of last resort. We
could do what we did in World War II. In World War II, the Federal
Government insured everything. We just paid all the claims. I don't
need to tell you what could happen if that happened today. But that is
a point of view: Just let the Federal Government pick up the claims of
this stuff, and don't worry about having a private sector insurance
industry being involved at all.
But I don't think most Americans think that is a wise solution
necessarily given the potential exposure we have. So I think it makes
sense to have the industry be the ones that are going to be on the
front lines responsible to do what is best, to calculate the risk, to
assess premiums, to pay claims. I don't necessarily believe we want to
set up another agency of Government, maybe under homeland security. Now
that we are reorganizing Government, maybe someone would like to add a
branch to become an insurance company. I don't think so.
Secondly, the legislation should promote competition in the current
insurance marketplace. Competition is the best way to ensure that the
private marketplace assumes the entire responsibility for insuring
against the risk of terrorism without any direct Government role as
soon as possible. That is why this bill has the very short lifespan we
are talking about. This is not setting up something in perpetuity. It
is setting up a very short lifespan.
Right now it is 24 months in the bill. And I think there will be
suggestions to extend that, which may have some merit, by the way, I
suggest, to those who may be offering them. But it is going to be
limited, in any case.
Thirdly, the legislation ensures that all consumers and businesses
can continue to purchase affordable coverage for terrorist acts.
Without action, consumers would be unable to get insurance, or
insurance that is available would be totally unaffordable for them.
[[Page S5481]]
Very simply, and lastly, I will just explain briefly--Senator
Sarbanes has done this already--but let me just take another minute or
so for those who may not have heard his comments to briefly describe
how S. 2600 actually works.
It will provide Federal terrorism insurance in the event of another
significant terrorist attack. This legislation is designed to maximize
private sector involvement and minimize the Federal role. The bill does
not create a new Federal insurance regulator; rather, it promotes the
authority of existing private sector mechanisms.
The Federal backstop is temporary, lasting only 1 year unless
extended for an additional year by the Secretary of the Treasury.
The bill envisions that the private sector alone would respond to
small-scale attacks, such as car bombs, arson fires, and the like.
The Government intervention only occurs in insured losses in excess
of a specific trigger. The amount each insurance company must pay
before the Federal participation begins is determined by a statutory
formula based on each company's market share. Larger companies pay more
through the resulting individual company retentions.
Individual company retentions are calculated based on each company's
market share of $10 billion in the first year, and $15 billion in the
second year if the program is extended, meaning that large companies
would sustain hundreds of millions of dollars in losses before the
backstop is triggered.
In addition, once the backstop is triggered, each insurance company
remains responsible for 10 to 20 percent of every claim dollar paid.
Lastly, I would say as well, regarding the States, we require that
these actions be brought in Federal court, that there be a venue that
is closer to where the action may have occurred.
But let me quickly point out, we have tried very strongly to retain
the role of the State insurance commissions. There are 40 States right
now that allow for rates to go into effect, and then the State
commissioners can determine whether or not those rates are excessive or
not. And 10 States require that rates be approved before they go into
effect. That is in commercial property.
In this bill, we say the rates could go into effect, but we do not
deny, as exists in 40 States, the State insurance commissioners to then
rule on those rate increases. So we are not setting a Federal regulator
in that regard. We are still keeping that in the States, and the State
insurance commissioners do not lose that power.
The State insurance commissioners have the responsibility, obviously,
to keep an eye on the rates, but they also have an obligation to see
that the insurers are solvent so they can pay claims, if, God forbid,
some event occurs. So the responsibility is dual, both to the insurer
to make sure they have the assets and, of course, to the policyholder
to make sure their rates are not too high and coverage will be there,
if needed. We make it very clear in this bill that we want to keep the
role of the State insurance commissioner viable.
We don't want to get in the business of setting up some massive new
government program with a new regulator with a whole bunch of new rules
established at the Federal level to start regulating this industry.
That is a debate that will occur to some degree down the road, but
today is not the day. This is not the place or time for that debate.
This is an emergency. It should have been dealt with a long time ago.
My hope is that my colleagues will offer their amendments, we will
get through this, and vote it up or down. Maybe our colleagues will
decide this bill is not necessary; they don't want to be a part of it.
Then we ought to say so. Then end the debate entirely and go about our
business. I suspect that a majority of our colleagues think this has
value and is important. My hope is we can get it done sooner rather
than later.
I turn to my colleague from Kentucky who, I know, has a very
important amendment. We will try to deal with that and move the process
along.
The PRESIDING OFFICER. The Senator from Kentucky.
Amendment No. 3836
Mr. McCONNELL. I thank my friend from Connecticut. I certainly agree
with him that this is legislation we should have passed quite some time
ago. The principle sticking point with which I am concerned is the
liability issue.
Under the underlying bill, punitive damages are available against
victims of terrorism. Let me repeat that. Having just been attacked by
the terrorists, the victims of that terrorist act are subject to
punitive damages under the underlying bill.
The only concession that those advocates of this kind of litigation
have made is to take the taxpayers off the hook for punitive damages.
But the way the thresholds are allocated under the balance of the bill,
it is highly likely that the taxpayers will be liable under any attack,
and all other kinds of damages other than punitive damages will be
available against the taxpayer.
We are talking about a bill that while certainly in concept is
desirable, it has a number of significant flaws, one of which I would
like to begin to try to fix this morning by laying down the amendment I
will lay down shortly.
While many of my colleagues on the other side of the aisle have been
talking about the need for a terrorism insurance bill, my Republican
colleagues and I have been busily preparing for action. Two weeks ago,
Senator Gramm and I broke a month-long logjam by informally offering a
proposal for a base text that establishes a responsible program for
Federal assistance and assures that we don't punish the victims of
terrorism for the criminal acts of the terrorists.
For months now, the Senate has been locked in a debate about whether
an American victim of a terrorist attack, whether it is Walt Disney
World, the Mall of America, Giants Stadium, or the Las Vegas MGM Grand,
should be held liable for punitive damages.
Remember, punitive damages are intended to punish bad actors. That is
what punitive damages are about. In all other ways, defendants are
compensated. Punitive damages are designed to punish the defendant.
They are not designed to compensate victims.
Nothing in the Republican proposal for a base bill has sought to
limit damages to compensate victims. There are no efforts on our part
in the Senate to limit damages to compensate victims. What we are
talking about is punitive damages which are designed to punish
defendants.
We are talking solely about whether American victims of a terrorist
attack should be punished not once but twice, attacked first by the
terrorists, attacked second by the lawyers.
In pondering this question our colleagues who disagree and their
allies have raised an interesting point--that there are some victims of
terrorism whose conduct may be so flagrant, indeed so criminal, that as
a matter of public policy, we should not let it go unpunished. So to
address that concern head on, Senator Gramm and I offered a new
compromise for a base bill that I fully expected my Democratic
colleagues would embrace, at least I had hoped they would. Our proposal
would permit punitive damages against any defendant who has been
convicted of a crime in State or Federal court. Using our criminal
justice system to determine what conduct is worthy of punishment is a
simple, commonsense solution to ensure that no criminals avoid punitive
damages in civil cases.
Let me state that again: In an ideal world, we would not have any
punitive damages available against a victim of a terrorist attack. But
to help address the concerns of those on the other side that punitive
damages might lie in some extraordinary circumstance, the amendment I
am about to offer provides a punitive damage opportunity against
victims of terrorism who themselves have been convicted of a criminal
act. That makes sense because if you have been convicted of a criminal
act, punitive damages ought to lie because of the nature of the
conduct.
Although Senator Gramm and I informally offered this proposal before
the Memorial Day recess, we did not formally offer it on the floor
because we wanted to give the other side plenty of time to consider
this approach as a compromise for a base bill.
Actually our proposal was the second compromise supported by many on
this side of the aisle. The first compromise from the House-passed bill
included a
[[Page S5482]]
stripped down liability section agreed upon by Senators Gramm,
Sarbanes, Dodd, and Enzi. But that compromise was later undone in
December by others on the other side of the aisle.
After months of inaction, Senator Gramm and I came back to propose
this second compromise in the hopes that our colleagues on the other
side would agree to these protections.
Sadly, the opposite appears to have taken place. Our colleagues on
the other side rejected our idea by proceeding to a bill that would
allow American victims of a terrorist attack to be held liable for
punitive damages. Under this underlying bill, American victims of a
terrorist attack could be held liable for punitive damages.
This approach to punitive damages does not compensate plaintiffs,
does not prevent the double punishment of American companies who are
victims of a terrorist attack, and does nothing to prevent insurance
money intended to rebuild homes and reopen American business from being
diverted to pay lottery-sized litigation awards.
The message this sends to the American people is that some of our
colleagues are not truly concerned with guarding against criminal
conduct. Instead, they appear more concerned with guarding the rights
of personal injury lawyers to seek punitive damages against American
victims of terrorism, protecting the opportunity for American lawyers
to seek punitive damages against American victims of terrorism.
On Saturday, the New York Times, certainly a publication I am not
frequently allied with on any matter, asked Senate Democrats to move
toward our liability proposal. This is the New York Times talking:
Senate Democratic leaders eager to pass their own bill must
compromise, even if it means offending trial lawyer groups.
This is the New York Times.
Senate Republicans appear willing to accept far more modest
curbs on terrorism-related litigation than their House
brethren. Their proposals provide the basis for an eventual
reconciliation of House and Senate efforts.
This is in the New York Times, the liberal New York Times, in an
editorial entitled ``Insuring Against Terrorism,'' June 8, 2002, just a
few days ago.
The home office of the New York Times, of course, is in New York City
where this problem is the most apparent. They would like to see some
action, and they think having some reasonable limits on punitive
damages makes sense in the context of moving this legislation along.
On Monday, four top administration officials, including Treasury
Secretary O'Neill, National Economic Council Director Larry Lindsey,
Office of Management and Budget Director Mitch Daniels, Council of
Economic Advisors Director Glenn Hubbard, announced they would
recommend that the President veto legislation that ``leaves the
American economy and victims of terrorist acts subject to predatory
lawsuits and punitive damages.'' They sent a letter to Senator Lott,
dated June 10. Let me say it again. All four of these top officials in
the Bush administration say they would recommend the President veto
legislation that ``leaves the American economy and victims of terrorist
acts subject to predatory lawsuits and punitive damages.''
That gives us some parameters or outlines here if we are serious
about making a law and not simply playing legislative games. We ought
to pass a bill that has a chance of being signed. I think it is pretty
clear that the President's top advisers in this area would recommend
that he veto legislation similar to the underlying bill. So we have an
opportunity, if we are serious about this legislation, to fix it up and
get rid of this outrageous punitive damage provision that subjects
victims of terrorism to these awards, unless they themselves have
engaged in criminal conduct, in which case I must say I think they
deserve punitive damages in that unlikely eventuality.
Interestingly, for those who say liability protections are not an
important part of terrorism insurance, let me share with you a quote
from a recent report by the Joint Economic Committee:
Liability costs are estimated to constitute the largest
single cost of the 9-11 attacks and could easily exceed the
property damage, life insurance, and workers compensation
payments combined.
That is from the ``Economic Perspectives on Terrorism Insurance,''
prepared by the Joint Economic Committee in May of this year.
With this backdrop, I send the amendment to the desk on behalf of
myself, Senator Gramm, and Senator Lott.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:
The Senator from Kentucky [Mr. McCONNELL], for himself, Mr.
Gramm, and Mr. Lott, proposes an amendment numbered 3836.
Mr. McCONNELL. Mr. President, I ask unanimous consent that further
reading of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To provide for procedures for civil actions, and for other
purposes)
On page 29, strike line 1 and all that follows through page
30, line 17, and insert the following:
SEC. 10. PROCEDURES FOR CIVIL ACTIONS.
(a) Federal Cause of Action.--
(1) In general.--There shall exist a Federal cause of
action for claims arising out of or resulting from an act of
terrorism, which shall be the exclusive cause of action and
remedy for such claims, except as provided in subsection (f).
(2) Preemption of state actions.--All State causes of
action of any kind for claims 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 (f).
(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 under paragraph (1), is inconsistent with or
otherwise preempted by Federal law.
(c) Federal Jurisdiction.--
(1) In general.--Notwithstanding any other provision of
law, not later than 90 days after the date of the occurrence
of an act of terrorism, the Judicial Panel on Multidistrict
Litigation shall assign a single Federal district court to
conduct pretrial and trial proceedings in all pending and
future civil actions for claims arising out of or resulting
from that act of terrorism.
(2) Selection criteria.--The Judicial Panel on
Multidistrict Litigation shall select and assign the district
court under paragraph (1) based on the convenience of the
parties and the just and efficient conduct of the
proceedings.
(3) Jurisdiction.--The district court assigned by the
Judicial Panel on Multidistrict Litigation shall have
original and exclusive jurisdiction over all actions under
paragraph (1). For purposes of personal jurisdiction, the
district court assigned by the Judicial Panel on
Multidistrict Litigation shall be deemed to sit in all
judicial districts in the United States.
(4) Transfer of cases filed in other federal courts.--Any
civil action for claims arising out of or resulting from an
act of terrorism that is filed in a Federal district court
other than the Federal district court assigned by the
Judicial Panel on Multidistrict Litigation under paragraph
(1) shall be transferred to the Federal district court so
assigned.
(5) Removal of cases filed in state courts.--Any civil
action for claims arising out of or resulting from an act of
terrorism that is filed in a State court shall be removable
to the Federal district court assigned by the Judicial Panel
on Multidistrict Litigation under paragraph (1).
(d) Approval of Settlements.--Any settlement between the
parties of a civil action described in this section for
claims arising out of or resulting from an act of terrorism
shall be subject to prior approval by the Secretary after
consultation by the Secretary with the Attorney General.
(e) Limitation on Damages.--
(1) In general.--Punitive or exemplary damages shall not be
available for any losses in any action described in
subsection (a)(1), including any settlement described in
subsection (d), except where--
(A) punitive or exemplary damages are permitted by
applicable State law; and
(B) the harm to the plaintiff was caused by a criminal act
or course of conduct for which the defendant was convicted
under Federal or State criminal law, including a conviction
based on a guilty pea or plea of nolo contendere.
(2) Protection of taxpayer funds.--Any amounts awarded in,
or granted in settlement of, an action described in
subsection (a)(1) that are attributable to punitive or
exemplary damages allowable under paragraph (1) of this
subsection shall not count as insured losses for purposes of
this Act.
(f) Claims Against Terrorists.--Nothing in this section
shall in any way be construed to limit the ability of any
plaintiff to seek
[[Page S5483]]
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.
(g) 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 any applicable
extension period.
Mr. McCONNELL. Mr. President, this amendment replaces the liability
section of the underlying bill with the liability section proposed in
the compromise bill sponsored by Senator Gramm and myself.
The compromise has three principal elements. First, consolidation of
all claims in a single Federal district court; second, approval of
settlements by the Secretary of the Treasury; third, a ban on punitive
damages, unless the defendant has been convicted of a criminal offense
that is related to the plaintiff's injury.
The first two provisions should not spark any controversy. The
proponents of the underlying bill themselves have agreed to Federal
jurisdiction over these claims, and the approval of settlements by the
Secretary of the Treasury simply protects the taxpayer dollars that
will be exposed to potentially enormous lawsuits under this program.
And since the underlying bill now--unlike an earlier version--prudently
bans punitive damages against the Federal Treasury, this approval
process ensures that a party does not attempt to casually circumvent
that ban through a settlement.
So, again, this is a debate about whether we should expose American
victims of terrorism to punitive damages--damages that heap additional
punishment on American victims, even after the plaintiff has been fully
compensated for his or her injuries.
Let me make a very important point to those of my colleagues who are
traditionally wary of liability protections. Lawsuits arising out of
terrorist attacks will be a wholly different animal. They will not
feature the traditional small, sympathetic plaintiffs against the
crotchety, arrogant big business that makes for such effective
television movies and plaintiffs' lawyers' tales. No, these lawsuits
will pit victim against victim--victim against victim--both of whom
have been devastated by a coldblooded terrorist attack, and both of
whom will be faced with traumatic physical, emotional, and financial
recovery.
While it is important to ensure that an injured plaintiff be
compensated for his or her injuries--and this amendment does just
that--it is absurd, immoral, and it is un-American to impose additional
punishment on an American victim of terrorism.
For those who remain concerned about punishing egregious conduct, my
amendment does not extend the punitive ban to any defendant who is
engaged in criminal conduct. History reminds us that punitive damages
have always been about punishing bad actors, not about compensating
victims. Punishment has long been a hallmark of our criminal justice
system. Indeed, punitive damages draw their origins from the English
common law cases of assault and battery, where the criminal law
provided an inadequate remedy. So it only makes sense that we should
rely on our criminal justice system to determine whether additional
punishment is warranted against American victims of terrorism.
If American defendants have engaged in criminal activity, maybe
punitive damages are appropriate in those limited circumstances. But
what we cannot and must not do is take the punishment reserved for the
terrorists who seek to destroy our buildings, our transportation
systems, our fire and rescue personnel, and our way of life and
transfer that punishment to American victims of terrorism who bear no
relation to the hijackers and suicide bombers, or the terror that they
unleash on America.
To be perfectly candid, my amendment does not do enough to protect
liability costs from skyrocketing out of control and to protect against
runaway lawsuits against terrorist victims. Indeed, this amendment
moves along way off the litigation management provisions in the House-
passed bill. If I had my own way, I would be offering something a good
deal more comprehensive than what I have offered a few moments ago.
Indeed, I think it is important for everybody to remember what kind of
awards are still possible, even if my amendment is adopted, as I hope
it will be. There is no limit to the amount of damages an American
plaintiff can receive as compensation for physical or economic loss.
Let me say that again. I am not proposing any kind of limitation on the
amount of damages an American plaintiff can receive as compensation for
physical or economic loss.
No. 2, I am not proposing to limit the amount of damages an American
plaintiff can receive as compensation for noneconomic damages--pain and
suffering losses. There is no limitation under my amendment on recovery
for pain and suffering.
In addition, there is nothing to prevent American defendants and
victims of a terrorist attack from having to pay for the pain and
suffering caused by terrorists. I could have gone a lot further, but
there is no limitation under this amendment on recovery for pain and
suffering against the victims of terrorism or the taxpayers of the
United States. And there is no limit on the amount of money an attorney
can take from the plaintiff's award. I must say, I hated not putting
that in.
This is very similar to the Federal Tort Claims Act which has been on
the books since the late forties. If you sue the United States under
the Federal Tort Claims Act, all the cases are in Federal court. There
are no punitive damages, and there is a 25-percent limit on lawyer's
fees, which seems to me is entirely appropriate. A limitation on
lawyer's fees puts more money in the hands of the victim.
I know what a sensitive subject that is for many in this body, so
that is not in this amendment. I did not even limit the lawyer's fees
which would have been a very provictim provision. I did not do that.
Yet remarkably, this is not enough for some people. Even after a
plaintiff has been fully compensated for all his or her fiscal,
economic, and noneconomic damages, the underlying bill demands the
right to seek additional punitive damages to punish American property
owners, American shopkeepers, and American air carriers who are also
victims of terrorism.
Under this amendment, no victim is going to be denied the right to
fully recover under every other provision. The only thing that is being
denied is to get punished for the second time. First, you have been
attacked by the terrorists, and then you are going to be attacked by
the lawyers if we do not pass this amendment.
Just yesterday this body voted, regrettably, to impose double
taxation on American families afflicted by the death tax--double
taxation. You get taxed once during your life, and then you get taxed
again when you die. Almost immediately afterwards, our colleagues moved
to proceed to a terrorism insurance bill that would impose double
punishment. Yesterday they voted in favor of double taxation, and today
they are advocating double punishment on American victims of
terrorism. First, you get attacked by the terrorist, and then you get
attacked by the lawyers for punitive damages.
I hope our colleagues will join me in curing the latter error by
supporting this amendment. If not, they should be prepared to explain
to the American people why--why--in the aftermath of a terrorist attack
it is somehow permissible in this country to punish American victims of
terrorism for the harm caused by the terrorists. That is what this
amendment is about.
Let me reiterate before relinquishing the floor that all other kinds
of damages are available to victims of terrorism, to the plaintiffs--
pain and suffering, economic compensation--but the only thing that
would be denied would be the opportunity to get punitive damages which
are, in effect, damages allowed for criminal-type behavior from the
victim of a terrorist attack. I have even modified that to allow
punitive damages against a victim of terrorism if that victim has been
convicted of a crime. That is the category of behavior which
historically has made available punitive damages.
This is a very modest amendment. I would have loved to have gone a
lot further. I find it outrageous that it is possible for any lawyer in
America in any one of these lawsuits to get more than a fourth. I think
the Federal Tort Claims Act would have been a perfect way to limit the
lawyer's compensation and provide more assistance for
[[Page S5484]]
the victim, but I have not offered that because I know there is
substantial reluctance in this body, as we have seen time and time
again, to impact the compensation of the plaintiff's bar. So I have not
done that in an effort to make this more attractive.
This is a very modest step in the direction of protecting the victims
of terrorism from being attacked twice. I hope it is something we can
pass overwhelmingly in the Senate whenever we get around to having a
vote.
Mr. President, I yield the floor and hope that whenever this is voted
upon, it will be adopted overwhelmingly.
The PRESIDING OFFICER. The Senator from Texas.
Mr. GRAMM. Mr. President, let me talk just a moment about the bill
and where we are, and then talk about this amendment. This is the third
bill now where we have not written a bill in committee, where we have
brought a bill to the floor, basically a partisan bill, for no purpose.
I do not think I am saying anything others will not agree with in
saying Senator Dodd and I have pretty consistently been the two most
committed people toward passing a bill. But rather than sitting down
and trying to work out the provisions of this bill on a bipartisan
basis, we have a bill that has been brought to the floor of the Senate
which has never been passed by a committee, much less the committee of
jurisdiction. We basically are converting this into a partisan issue
which I think makes no sense whatsoever.
Let me give a little bit of history so my colleagues understand how
we got to be where we are and what the two overriding issues are. There
will be many other issues raised, I am sure, but I want people to know
what the two overriding issues are.
Way back last fall, Senator Sarbanes, Senator Dodd, Senator Enzi, and
I met with the Secretary of the Treasury in the wake of 9-11 to try to
put together a bipartisan bill. In fact, we agreed to a bill. The
Secretary of the Treasury endorsed the bill on behalf of the
administration. All four of us had a press conference and announced the
bill. That bill worked as follows:
It was a 2-year bill with a possible extension to the third year. The
first year there was an industry retention, and I want to define this
term because we are going to be hearing it now for an extended debate.
There was an industry retention whereby the industry had to pay $10
billion in the case of a terrorist attack before the Federal Government
would begin to pay the bills, the idea being that the insurance
companies are selling insurance, they are collecting premiums, and they
should have a stake in the process and the Federal Government should
come in in those events that are so large and so costly that the
insurance industry could not sustain it, and that the market for
insurance and reinsurance potentially would not develop with the risk
as large as it might without the Federal backing.
Our bipartisan bill had a retention of $10 billion the first year,
$10 billion the second year, and if the Secretary of the Treasury
concluded that a third year was required, he could extend the bill for
a third year with a retention of $20 billion. Above these retention
levels where the private insurance company would pay, the taxpayer pays
90 cents out of every dollar of the claim.
Why did we have an industry retention rather than an individual
company retention? We had an industry retention because our purpose is
not to get the Government into the insurance business permanently, but
to build a bridge to transition from where we are today in the wake of
9-11 to a period when, hopefully, we will do a better job of managing
these risks at the national level in terms of our antiterrorist policy
and, secondly, over time, we can develop the insurance structure to
build the risk that remained into the term structure of insurance
rates.
If we do not have an industry retention, the incentive for companies
to spread the risk is reduced.
If my risk as the Gramm Insurance Company is only some portion of $10
billion based on my size in the industry, then once I am above that
level of exposure, the Federal Government is picking up 90 percent of
the cost.
What we are trying to do is to get insurance companies to syndicate
so that no insurance company insures the Empire State Building. They
might join 10, 20, or 30 other insurance companies in doing it and, in
doing so, spread the risk. We want to develop reinsurance so that these
risks can be disseminated.
Having an industry cap or an industry retention, rather than an
individual company retention, puts pressure on companies to enter into
reinsurance. It provides an incentive and in fact a profitability for
reinsurance to emerge. The purpose of the bill is to develop
reinsurance and syndication.
Having reached that agreement, we also agreed on a set of provisions
related to lawsuits in the wake of terrorist attacks. We agreed that
all lawsuits had to be brought in Federal court because this was a
Federal program. We agreed that the cases could be consolidated. We
agreed to require that the Treasury would have to sign off on any out-
of-court settlement in these cases. And we agreed there would be no
punitive damages in the case of a terrorist attack. This was a
compromise.
Treasury wanted a lot more in the way of protection. The House had
passed far more comprehensive protections, but this was a compromise we
worked out. As we all know, there was an objection to the liability
parts of the bill and the bill died.
Then we got into December. In December, in trying to write a bill, we
were literally faced with a situation where the bill was going to go
into effect within 3 weeks of the day we were writing it, when we tried
to put together a compromise. With 3 weeks before supposedly the vast
majority of insurance policies were expiring, we believed there was not
time for a reinsurance market to emerge, that there was not time for
companies to be able to lay off this risk by syndication. So the
proposal was made that we have individual company retention levels.
Might I say that the day we announced a bipartisan compromise with an
industry retention level of $10 billion, virtually every insurance
company in America supported that bill.
Mr. LEAHY. Mr. President, will the Senator yield for a question?
Mr. GRAMM. Yes, I would be happy to yield.
Mr. LEAHY. I ask this with some trepidation because I know that every
day I hear my good friend from Texas speaking, it is one less day I am
going to have the opportunity to hear him. And I mean that sincerely. I
really do enjoy his statements. I wonder if he has some idea how much
time he needs?
Mr. GRAMM. I think I should be through within, say, 10 minutes.
Mr. LEAHY. I thank the distinguished Senator.
Mr. GRAMM. So the day we introduced the bill with a $10 billion
industry retention, based on the logic that we wanted to encourage
reinsurance, that we wanted to encourage syndication, there was broad
support in the insurance industry and in American business for that
compromise.
We got to December, 3 weeks away from--at least as we are told, and
as I believe actually did happen--tremendous numbers of insurance
policies expiring on January 1. So recognizing we were writing a bill
where the industry would have only 3 weeks to try to respond to it, the
bill that was put together had not an industry retention but an
individual company retention that would produce a situation where, with
as little as $50 million of cost, the Federal taxpayer could be pulled
into the process, a far cry from the $10 billion retention we had had
in the original compromise. The logic of it, as of December 10, was
that we were 3 weeks away from the beginning of the year and there was
not time for this syndication to occur, there was not time for
reinsurance to occur.
Now it is 7 months later. Insurance companies have sold terrorism
insurance, not at the price we might have chosen, not to the people we
might have chosen they sell it to, but the point is at inflated rates,
because things changed, the market changed, and we expected rates would
go up. It was, in fact, required that they go up economically. Now
insurance companies have sold all these policies based, at that point,
on no Government backstop. To come back in now with an individual
company retention that could put the taxpayer at risk, when the costs
are as small as $50 million or $100 million, makes absolutely no sense.
[[Page S5485]]
What has happened, as we might expect it to happen, is that if I were
running an insurance company and I had a choice between having
Government backup begin at $100 million versus $10 billion, I would not
be running an insurance company long if I did not decide that $100
million was better than $10 billion. So now we are having this debate
driven by insurance companies that want the low retentions.
In December, when we were writing a bill to go into effect in 3
weeks, there was not any other choice, but once that marker got out
there and people saw it as a possibility, then they decided this deal
they were willing to sign on in October, which protected the taxpayer
by having insurance companies pay the first $10 billion, that that was
no longer acceptable. Seven months later, premiums collected, risks
taken to come in with an individual company retention level at the
level that is being discussed now in this bill, would grant a huge
windfall. I think it is not justified and not good public policy, and
that is an issue that has to be dealt with. We have to decide, are we
representing the taxpayer or are we representing some other interest?
It seems to me to put the taxpayer at risk, to back up policies that
have already been sold, with no Government backup, where premiums have
already been collected on the basis that there would be no Government
backup, to now come up with a backup that is in the tens of millions
rather than $10 billion, is to basically have the taxpayer enter into a
situation where the initial risk is borne largely by the taxpayer and
not by the insurance company.
Let me say to my colleagues that if this were World War II instead of
a new kind of war, we could have had a Government insurance program. We
had one in World War II. We had two kinds. We had one for international
shipping and we had one for domestic assets. Both companies made money.
Both companies, when we signed the peace treaty on the Missouri, faded
out. The problem now is this war will not end with a peace treaty on
the Missouri. It will end with the scream of some terrorist. But there
will not be a signed agreement that it is over, nor will we know that
is the last terrorist in the world.
We have to decide if this is a transition bill that is trying to
build these risks into the structure of insurance rates, or are we
getting the Government permanently in the insurance business in
America. That is a fundamental question. When we decided in October, we
answered the question. When this bill was written in December, we were
forced into this low deduction by having only 3 weeks. Seven months
later, that makes no sense.
This is the issue that needs to be dealt with. I hope it can be
compromised on a bipartisan basis. As I said earlier, from the
beginning I have believed we needed a terrorism insurance bill.
Finally, I turn to the liability question, and I will be brief. We
have before the Senate the most modest proposal related to punitive
damages that has been discussed thus far in this bill. We had a
bipartisan agreement that banned punitive damages outright, a complete
ban. The House adopted a bill that had extensive protections from
predatory lawsuits in a terrorist attack. In my mind, to unleash
predatory lawsuits after a terrorist attack is like piracy on a
hospital ship. It is outrageous and unacceptable.
Now, the Senator from Kentucky has given a very watered down
compromise and, I think, a reasonable one, and to me acceptable--though
I like the House provisions better; I like the proposal of the
President better. What his compromise says is that you cannot sue
victims of terrorism for punitive damages. You can sue the terrorists,
but you cannot sue the victims, the people who were in the attack, the
people whose buildings and lives were destroyed, unless they have been
convicted of a felony related to the attack. In other words, they had
some measure of criminal culpability.
I don't know how anyone can be against this proposal. If you are
against this proposal, you are basically willing to unleash predatory
lawsuits on anyone--in this case, including victims of terrorism.
Let me conclude and yield the floor by urging my colleagues to vote
for the McConnell amendment. The President has said in a letter,
through four spokesmen, including the Secretary of the Treasury, that
he will not sign a bill that does not protect people from predatory
lawsuits that arise from a terrorist act. I hope my colleagues will
vote for the McConnell amendment.
Second, I hope we can work out a compromise on this retention issue.
We should be able to work out a compromise. I commend to my colleagues
that we do it. If we do it, we can immediately transform this bill into
a bipartisan bill. We can get an overwhelming vote for it. We could end
the debate on it. If not today, certainly early next week.
There is work that has yet to be done. I hope we can do it together.
There is no reason we cannot.
I yield the floor.
The PRESIDING OFFICER (Mrs. Clinton). The Senator from Pennsylvania.
Mr. SANTORUM. Madam President, I will not be long. I rise in support
of the McConnell amendment. I pick up on where the Senator from Texas
left off: This should be a bipartisan bill. There is no reason why in
dealing with such a serious issue as this that we should not be able to
work in a bipartisan way with our colleagues in the Senate. That
applies also to the House of Representatives and the President.
Everyone realizes this is a piece of legislation that must be done.
We are hearing from folks back home in the business and insurance
community as to the impact of not having any kind of terrorism
insurance fallback for these coverages, and the Federal Government does
have a role to play.
I serve on the Banking Committee, and I have expressed to my ranking
member some of my concerns for us being involved at all. However, I am
convinced there is some action we need to take in the short run to
address this crisis of businesses not being covered by terrorism
insurance, projects not moving forward because of the lack of terrorism
insurance. Obviously, there is a need to do this.
There are some areas that, frankly, that I do not believe belong in a
bill dealing with this issue. The one that I believe is the most
egregious is a concept that is remarkable; that is, that victims of
terrorism, who have been either physically or financially and certainly
emotionally hurt by terrorists, will be liable to be sued.
Senator McConnell takes a very small part of this liability. I have a
problem with any victim being sued for anything. Think back to the days
we were at war. Can anyone imagine in previous years if someone in
America had been killed as a result of World War II, the Germans or the
Japanese bombing someplace in America, that people in America would
have rushed to the lawyers and then to the courtroom to sue the
restaurant they worked in that was hit by the bomb? Can anyone imagine
the Senate, in 1941-42, passing a bill saying people who worked in a
restaurant in Hawaii when a bomb was dropped, that the waitress who
worked in the restaurant could sue the restauranteur whose place was
destroyed for damages? On top of that, this bill says not just for any
damages but for punitive damages. In other words, damages having to do
with any kind of pain, suffering, injury, or loss of wages, but simply
to punish the victim.
We will allow people who were injured economically, emotionally,
physically, as a result of an act of war--and this terrorist act was an
act of war--to be sued under this bill.
Look back in history. I do not know that there is a precedent for
allowing this during a time when we are at war. This was an act against
America. This is a very bad and dangerous step we are taking in the
Senate.
What Senator McConnell is trying to do is a very small piece of the
overall structure of this bill that allows, if the McConnell amendment
passes, the restaurant owner of the World Trade Center, whose business
was destroyed--he may have escaped; maybe he was not there that day;
his business was destroyed, his employees were killed, maybe even
family members were killed--will now be in court. Under this bill, he
will be in court defending himself from lawsuits. After going through
what he has gone through, he now has to defend himself from lawsuits.
But worse, he has to defend himself from lawsuits that will seek to
punish him because he was a victim. Imagine that.
[[Page S5486]]
One can make an argument--and I would not agree--he would have to pay
compensation for pain and suffering or wages, but now we will say he
will be liable to be sued, to be punished, and he was a victim of
terrorism.
Victims of terrorism should not be punished. Victims of terrorists
should not be punished by the Senate. It should not be permitted. It is
an outrage to every victim who suffered on September 11; if every
victim who suffered in September 11 owned anything that was destroyed,
and had anyone working for them, they are now going to be on the firing
line, again. It is not bad enough that they were hurt physically,
emotionally, and economically as a result of terrorist acts. We are now
going to put them through another act of destruction in the courtroom.
Even if this amendment is agreed to, that is going to occur. All we
are saying is, Members of the Senate, don't allow lawyers--who
certainly will do so and certainly have done so already with past
terrorist acts--come into court and attempt to punish victims. That is
over the top. It is over the top. It is not necessary. It is inhumane.
Mr. McCONNELL. Will the Senator yield for an observation?
Mr. SANTORUM. I am happy to yield to the Senator from Kentucky.
Mr. McCONNELL. After making this argument a week or so ago, the
American Trial Lawyers Association said there could be some
circumstances under which the defendant himself engaged in criminal
behavior. So I modified this amendment to include, if the victim of
terrorism himself were convicted of a crime in connection with that
event, then punitive damages would lie because that would warrant
punishment.
Mr. SANTORUM. Absolutely.
Mr. McCONNELL. But there are no other circumstances--I agree with my
friend from Pennsylvania--under which punitive damages ought to lie
against the victim of terrorism. I thank the Senator for his
observations. I think he is right on the mark.
Mr. SANTORUM. I thank the Senator from Kentucky for further
clarifying his own amendment. I think it is important to say if someone
is, maybe, in complicity with a terrorist or did something with respect
to his business that was, as the Senator from Kentucky said, criminal
in nature, that would be prosecuted. Then I think it is a reasonable
recourse for some sort of civil damages to be awarded.
But to have a blanket provision that says every victim is a potential
defendant in a lawsuit, where the lawyer is saying you should be
punished because you were a victim in a terrorist act, I find that to
be almost something that is so absurd; it is remarkable to me that we
are even debating the existence of this provision.
Mr. McCONNELL. Will the Senator yield for a question?
Mr. SANTORUM. I am happy to yield to the Senator from Kentucky for a
question.
Mr. McCONNELL. Will the Senator agree that if punitive damages were
available, they would be sought in every instance?
Mr. SANTORUM. I am a lawyer. I did practice law before I came here,
but not as much as many here. But I do know, one of the things that
happens when you file lawsuits is, you do not leave anything out. If
you have damages available to you, you file for them and you let those
who are responsible for making the decision as to what your plaintiff
should receive--whether it is the jury or judge--you let them decide
what the plaintiff is permitted to receive.
There is no question in my mind. Imagine, that victims of terrorism--
--
Mr. LEAHY. Will the Senator yield for a question?
Mr. SANTORUM. Let me finish my statement, and then I will be happy
to.
There is no question in my mind that there will be hundreds, if not
thousands, of lawsuits where victims of terrorism will be sued for
punitive damages in order to punish them because they were victims.
I will be happy to yield for a question.
Mr. LEAHY. Madam President, the Senator has the floor and of course
can speak as long as he wishes. I do not mean to suggest otherwise.
Mr. SANTORUM. I was just about to finish.
Mr. LEAHY. We had an informal understanding that originally I was
going to follow the Senator from Texas. If not, I will pass it on to
the Chair. I just wondered how much longer he might be.
Mr. SANTORUM. I was about to finish. I am happy to do so.
I encourage my colleagues, No. 1, as I said before, to see if we can
work out some sort of bipartisan agreement. This should not be a
partisan bill. This should be a bill on which we work together in the
Senate.
No. 2, I encourage, as a good starting point for that bipartisan
arrangement, to support this very minimalist amendment, with all due
respect to my colleague from Kentucky. It is a minimalist amendment to
eliminate the most egregious aspects of lawsuits available to
plaintiffs who want to sue victims of terrorism; that they at least
should not be punished, pay compensation as a punishment, unless there
was some sort of criminal behavior attached to the victim.
I yield.
The PRESIDING OFFICER. The Senator from Vermont.
Mr. LEAHY. Madam President, I must oppose this amendment by my good
friend from Kentucky, Senator McConnell, to add controversial so-called
``tort reform'' measures to the terrorism insurance bill. This
amendment would limit the legal rights of future terrorism victims and
their families. That is not fair or just.
I have worked with the distinguished majority leader, Senator Dodd,
Senator Sarbanes and others to craft a balanced compromise in the
substitute amendment on legal procedures for civil actions involving
future acts of terrorism.
The underlying Dodd bill protects the rights of future terrorism
victims and their families while providing Federal court jurisdiction
of civil disputes involving acts of terrorism and excluding punitive
damages from Government-backed insurance coverage under the bill. These
provisions do not limit the accountability of a private party for its
actions in any way.
Further, the underlying Dodd bill fully protects Federal taxpayers
from paying for punitive damages awards. Under the Dodd bill only
corporate wrongdoers pay punitive damages, not U.S. taxpayers as some
have incorrectly claimed on the Senate floor.
But the McConnell amendment would prohibit punitive damages in almost
all civil actions covered by the bill. This latest offer excuses
wanton, reckless, and even malicious conduct by a corporate wrongdoer.
The amendment provides that a corporate wrongdoer must have engaged in
criminal conduct and must have already been convicted under State or
Federal law before it can held liable for punitive damages.
This is a ridiculously high standard that excuses and immunizes all
sorts of bad acts that should be punished and deterred.
The McConnell amendment, for all practical purposes, eliminates
punitive damages, which in turn, completely undermines the civil
justice system. There is no effective punishment, and consequently no
real deterrent, for misconduct. Right now, the threat of punitive
damages makes would-be wrongdoers think twice.
Without the threat of punitive damages, callous corporations can
decide it is more cost-effective to continue cutting corners despite
the risk to American lives. This would let private parties avoid
accountability in cases of wanton, willful, reckless or malicious
conduct. That is outrageous and irresponsible.
Punitive damages are monetary damages awarded to plaintiffs in civil
actions when a defendant's conduct has been found to flagrantly violate
a plaintiff's rights. Under this amendment, those plaintiffs will be
victims of terrorism and their families.
The standard for awarding punitive damages is set at the State level,
but is generally allowed only in cases of wanton, willful, reckless or
malicious conduct. These damages are used to deter and punish
particularly egregious conduct. Eliminating punitive damages totally
undermines the deterrent and punishment function of the tort law.
The threat of punitive damages is a major deterrent to wrongdoing.
Eliminating punitive damages would severely undercut this deterrent and
permit reckless or malicious defendants to find it more cost effective
to continue their callous behavior without the risk of paying punitive
damage awards.
[[Page S5487]]
For example, this amendment would permit a security firm to be
protected from punitive damages if the private firm hired incompetent
employees or deliberately failed to check for weapons and a terrorist
act resulted. This amendment fails to protect the interests of victims
of terrorism and their families.
I helped author the September 11th Victims Compensation Fund to take
care of any terrorism victim suffering physical injury or death. As a
result, I was open to public interest retroactive liability limits up
to insurance coverage for the September 11th attacks, such as limits
for the airlines industry to keep them out of bankruptcy and limits for
the owners of the World Trade Center to rebuild.
But liability limits for future terrorist attacks are irresponsible
because they may restrict the legal rights of victims and their
families and discourage private industry from taking appropriate
precautions.
Restricting damages against the wrongdoer in civil actions involving
personal injury or death, for example, could discourage corporations
from taking the necessary precautions to prevent loss of life or limb
in a future terrorist attack.
There is no need to enact these special legal protections and take
away the rights of victims of terrorism and their families.
At a time when the American people are looking for Congress to take
measured actions to protect them from acts of terror, these ``tort
reform'' proposals are unprecedented, inappropriate and irresponsible.
At the very moment that the President is calling on all Americans to be
especially vigilant, this amendment is calling on all American
businesses to avoid their responsibility for vigilance under existing
law.
I am disappointed that some may be taking advantage of the situation
to push ``tort reform'' proposals that have been rejected by Congress
for years. This smacks of political opportunism.
I cannot support rewriting the tort law of each of the 50 states for
the benefit of private industry and at the expense of future terrorist
victims and their families. I urge my colleagues to defeat this
amendment.
Madam President, the distinguished Presiding Officer has been as
involved in getting compensation to victims of terrorism as anybody
here.
I raise these points on the floor that we all want to help victims of
terror, and we will, but we don't want to give a wish list to anyone.
Medical laboratories specializing in nuclear medicine might know that
their security system is broken. They say: Well, you know, it will take
a few hundred dollars to fix it, and we are not going to bother. So it
stays broken for months. At the same time, even though they might put
high-security locks on the room that houses its vault, they don't put
security locks on the storage room that houses nuclear materials.
Say during this period when it is operated without a functioning
security system a lab discovers various containers of nuclear matter,
including dozens of vials containing radioactive iodine, are missing,
and it fails to report that fact to local, State, or Federal
authorities and doesn't take any action to repair its security system.
This is not a far-fetched example.
Let us say that nuclear material is traced back to the laboratory and
it is later used to fuel a ``dirty'' bomb that exposes American cities.
Under this amendment, you can't go back and prosecute that corporation.
They have no criminal prosecution. You can't go back. Come on. What is
going to be the incentive for that corporation that failed to fix their
security system and to fix the locks on their doors? It is just another
example.
I see the distinguished acting majority leader.
I yield the floor.
Mr. REID. Madam President, I have spoken to my friend, the
distinguished senior Senator from Kentucky, Mr. McConnell, indicating
we will move to table. I have been told that the Republican leader may
speak before we do that. That being the case, I certainly don't want to
move to table if the Republican leader wishes to speak.
I ask unanimous consent that when the quorum call is called off, I be
recognized. I alert everyone that I will move to table. As everyone
knows, the Republicans have their policy luncheons on Wednesdays, and
we have ours on Thursdays. I would really like to get the vote out of
the way before that time, if we could. We are going to go into a quorum
call awaiting the Republican leader.
I ask unanimous consent that I be recognized following the calling
off of the quorum.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
Mr. REID. Madam President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. REID. Madam President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. REID. Madam President, I yield the floor.
The PRESIDING OFFICER. The Republican leader is recognized.
Mr. LOTT. Madam President, I thank Senator Reid for making sure I
have this opportunity to express myself before we go to a vote on this
important issue.
I do think we need to move this legislation forward. I have met with
individuals, insurance companies, the construction industry, hotels,
and others. As Senator Reid has pointed out, they are concerned about
the growing problem in this area in terms of coverage. I wish we could
have moved it earlier. There have been a lot of efforts on both sides
to make it happen. We were not successful.
Now we do have it on the floor. Obviously, there are going to be some
important amendments that will be offered to change some of the
provisions in the legislation. But I think this is one of the most
important ones. The liability provisions in this legislation, or lack
thereof, is a critical point. I am very much concerned about
jurisdiction and venue, where these actions might occur arising out of
terrorism. I would be very concerned about the preemption of State
causes of action provisions that would be included.
But the most important point is, how would you deal with the punitive
damages issue? I have real concerns and problems with punitive damages
coming out of the U.S. Treasury as a result of an action involving a
terrorist attack. So I hope we can find a way to resolve the problem.
Senator McConnell has been very diligent in staying behind this and
working to find an appropriate solution. I think he has come up with
one, and this is the key part of it. It says that to the extent
punitive damages are permitted by applicable State law, punitive
damages may be recovered against a defendant in a civil action
involving an act of terrorism only if ``the harm to the plaintiff was
caused by a criminal act or course of conduct for which the defendant
was convicted under Federal or State criminal law, including a
conviction based on a guilty plea or plea of nolo contendere.''
This is the right solution. This is a fair solution. It does not set
a precedent saying that there can be no punitive damages; it just says
it can only occur under these conditions that were outlined where there
was a criminal act or course of conduct that led to the situation where
a terrorist could make this kind of attack or hit.
The President has made it clear that if we do not deal with this
appropriately, he will not sign this legislation. So rather than trying
to find a time to deal with it later, or to deal with it in conference,
or, in effect, try to call either side's bluff, this is the right
solution. It does not set the precedent; it does provide for damages
under these certain circumstances where there has been neglect or
egregious action that led to the terrorist attack.
So I urge my colleagues to support the McConnell proposal that I have
cosponsored, and oppose the motion to table this important issue.
I yield the floor.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Madam President, I move to table and ask for the yeas and
nays.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be.
The question is on agreeing to the motion.
[[Page S5488]]
The clerk will call the roll.
The assistant legislative clerk called the roll.
Mr. REID. I announce that the Senator from Vermont (Mr. Jeffords) is
necessarily absent.
Mr. NICKLES. I announce that the Senator from North Carolina (Mr.
Helms), the Senator from Idaho (Mr. Crapo), and the Senator from Rhode
Island (Mr. Chafee) are necessarily absent.
I further announce that if present and voting the Senator from North
Carolina (Mr. Helms) would vote ``no.''
The PRESIDING OFFICER (Mr. Edwards). Are there any other Senators in
the Chamber desiring to vote?
The result was announced--yeas 50, nays 46, as follows:
[Rollcall Vote No. 152 Leg.]
YEAS--50
Akaka
Baucus
Bayh
Biden
Bingaman
Boxer
Breaux
Byrd
Cantwell
Carnahan
Carper
Cleland
Clinton
Conrad
Corzine
Daschle
Dayton
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham
Harkin
Hollings
Inouye
Johnson
Kennedy
Kerry
Kohl
Landrieu
Leahy
Levin
Lieberman
Lincoln
Mikulski
Miller
Murray
Nelson (FL)
Nelson (NE)
Reed
Reid
Rockefeller
Sarbanes
Schumer
Stabenow
Torricelli
Wellstone
Wyden
NAYS--46
Allard
Allen
Bennett
Bond
Brownback
Bunning
Burns
Campbell
Cochran
Collins
Craig
DeWine
Domenici
Ensign
Enzi
Fitzgerald
Frist
Gramm
Grassley
Gregg
Hagel
Hatch
Hutchinson
Hutchison
Inhofe
Kyl
Lott
Lugar
McCain
McConnell
Murkowski
Nickles
Roberts
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Voinovich
Warner
NOT VOTING--4
Chafee
Crapo
Helms
Jeffords
The motion was agreed to.
Amendment No. 3834
Mr. NELSON of Florida. Mr. President, I send to the desk an
amendment. It is my understanding the amendment number is 3834.
The PRESIDING OFFICER. The clerk will report the amendment.
The assistant legislative clerk read as follows:
The Senator from Florida [Mr. Nelson] proposes an amendment
numbered 3834.
Mr. NELSON of Florida. Mr. President, I ask unanimous
consent that the reading of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To restrict insurance rate increases for terrorism risks)
At the appropriate place, insert the following:
SEC. __. INSURANCE RATE INCREASES FOR TERRORISM RISKS.
(a) Calculations of Terrorism Insurance Premiums.--
(1) In general.--Not later than 30 days after the date of
enactment of this Act, the Secretary shall promulgate
regulations establishing parameters for insurance rate
increases for terrorism risk.
(2) Consultation.--In developing the regulations under
paragraph (1), the Secretary shall consult with the NAIC and
appropriate Federal agencies.
(3) Modifications.--The Secretary may periodically modify
the regulations promulgated under paragraph (1), as necessary
to account for changes in the marketplace.
(4) Exclusions.--Under exceptional circumstances, the
Secretary may exclude a participating insurance company from
coverage under any of the regulations promulgated under
paragraph (1).
(b) Separate Account Required.--If a participating
insurance company increases annual premium rates on covered
risks under subsection (a), the company--
(1) shall deposit the amount of the increase in premium in
a separate, segregated account;
(2) shall identify the portion of the premium insuring
against terrorism risk on a separate line item on the policy;
and
(3) may not disburse any funds from amounts in that
separate, segregated account for any purpose other than the
payment of losses from acts of terrorism.
(c) Limitation on Rate Increases for Covered Risks.--
(1) Existing policies.--Any rate increase by a
participating insurance company on covered risks during any
period within the Program may not exceed the amount
established by the Secretary under subsection (a).
(2) New policies.--Property and casualty insurance policies
issued after the date of enactment of this Act shall conform
with the regulations issued by the Secretary under subsection
(a).
(d) Refunds on Existing Policies.--Not later than 90 days
after the date of enactment of this Act, a participating
insurance company shall--
(1) review the premiums charged under property and casualty
insurance policies of the company that are in force on the
date of enactment of this Act;
(2) calculate the portion of the premium paid by the policy
holder that is attributable to terrorism risk during the
period in which the company is participating in the Program;
and
(3) refund the amount calculated under paragraph (2) to the
policy holder, with an explanation of how the refund was
calculated.
Mr. DODD. Mr. President, will my colleague yield? I inquire, it is a
quarter after 1, so we can give our colleagues an indication of time,
how much time would my colleague like?
Mr. NELSON of Florida. About 3 hours.
The PRESIDING OFFICER. The Senator from Florida.
Mr. NELSON of Florida. Mr. President, while some Members are still in
the Chamber, I want them to understand an essential truth that a public
which is averse to raising taxes is all the more averse to hiking
insurance premiums. Let me repeat that.
We all know that the consuming public is averse to raising taxes, and
we are sensitive to that fact, but equally or more sensitive is the
issue of passing legislation that hikes insurance premiums, and that is
what we are facing.
We have an underlying bill that is trying to solve a problem. The
problem is that terrorism has now become an insurance risk. In large
part, this bill takes that risk off individual insurance companies and
has the Federal Government assume a large part of that risk, so much so
in one computation, it is 80 percent of the risk; in another
computation it is 90 percent of the risk.
In the very complicated formula of the bill, it has the
responsibility of each insurance company with a de minimis amount that
it would pay out in the case of a terrorism incident and, mind you,
this is only a terrorism incident which is using conventional
explosives. It does not include--because they are exempt from almost
all insurance policies--the terrorism risk when the terrorist uses
chemical, biological, or nuclear weapons.
As a result, we are talking about a risk, as we learned on September
11, in the totality of the picture of the risk, to the whole country
and risk to individuals, businesses, owners of high-rises and large
businesses, medium-size businesses and small businesses. We are talking
about a risk that, albeit still a substantial risk, it is a risk that
in large part is being picked up by the Federal Government.
I do not object to that, and I will restate what I said this morning
to my good friend and colleague and the sponsor of this legislation,
Senator Dodd. If I had objected to that, we would not be on this
legislation because I was in the Chamber when the unanimous consent
request was propounded last night, and I could have easily entered an
objection. I did not, and that is why we are on the bill.
I do not object to the Federal Government picking up a major part of
the terrorism risk, albeit only the conventional risk; it is not
chemical, nuclear, or biological. What I do vigorously object to is
that in the underlying bill of the Senator from Connecticut, there is
no process in place that can limit the rate hikes of the insurance
companies with regard to the terrorism risk.
Mr. DODD. Will my colleague yield on that point?
Mr. NELSON of Florida. Certainly.
Mr. DODD. I say to my colleague, what we do is leave all the State
insurance commissioners--and under the present scheme, and my colleague
is a former commissioner and knows this better than I do, there are 40
States that allow for rate increases to go into effect, and then the
commissioners can overturn those rate increases. In 10 States, the
rates have to be approved before they go into effect.
In this bill we apply the standard used in the 40 States, but the
State insurance commissioners do not lose their power to turn down that
rate increase. We do not have anyone in the Federal Government doing
that, but we leave it at the State level for those rate determinations
to be made at the local level. That is what the bill requires.
Mr. NELSON of Florida. I was glad to yield to my colleague, and I
hope he
[[Page S5489]]
will interject these comments so we can have an honest and fair debate
about this issue because the very point that the Senator from
Connecticut has made is the flaw of this bill. The 50 insurance
commissioners of this country usually do not set the rates on
commercial policies, and the ones who do, such as the State of Florida,
set a range for rates, but that is with regard to all the conventional
types of risk--theft, dog bite, slip and fall, and so forth.
The fact is that the 50 insurance commissioners, if they were to do
what the Senator from Connecticut says, do not have any actuarial data
on which to make a judgment about whether or not a rate hike is
actuarially sound for the de minimis terrorism risk that the insurance
company is now assuming.
Wait, wait. Let me finish.
Mr. DODD. Will the Senator yield so I may comment further?
Mr. NELSON of Florida. I will not yield. I will finish the answer and
then I will yield to the Senator.
My amendment sets a process in place. We have the Secretary of the
Treasury. Now why would we go to the Secretary of the Treasury? Because
the insurance commissioners of the 50 States determine if rates are
actuarially sound on the basis of an experience or on the basis of data
coming from an experience, and the fact is that the insurance
commissioners of the 50 States do not have that data and experience.
So in the Nelson amendment what we do is put into place a process by
which actuarially sound judgments can be made on whether or not the
rate hike is just right or whether the rate hike is too high or whether
the rate hike is not high enough. You mean it could not be high enough?
In fact, that is something we ought to know. We ought to know what is
the appropriate hike to cover the insurance risk that is being assumed
by the insurance company since most of the terrorism risk is being
assumed by the Federal Government.
For example, under the Nelson amendment, the Secretary of the
Treasury shall promulgate regulations establishing parameters for
insurance rates for terrorism risk. That says ``parameters.'' It does
not say he sets the rate. It says he sets the parameters.
Then what does it say? It says the Secretary of the Treasury is going
to consult in developing the regulations of setting those parameters.
The Secretary shall consult with the National Association of Insurance
Commissioners and appropriate Federal agencies. Then we go on to give
an escape valve, a safety valve. The Secretary may periodically modify
the regulations promulgated, as necessary, to account for the changes
in the marketplace.
What do we give further on a safety valve? Then we say, under
exceptional circumstances the Secretary may exclude a participating
insurance company from coverage under any of the regulations
promulgated. So we give all kinds of leeway and exceptions, and yet we
set up a process by which we can determine if rates are actuarially
sound.
Now, why is this important? It happens to be important because guess
who is going to pay? If there is not an actuarially sound rate, guess
who is going to pay. The consuming public. You say, oh, no, this is
just on tall buildings. So it is going to be the owner of a tall
building, a big business. Not so. That is a cost of doing business that
is passed on to the consuming public.
So whether it is a football stadium, a shopping mall, a tall
building, a short building, wherever it is, a small business, a large
business, that cost, that rate hike that so many in the real estate
industry have decried because, in fact, they have experienced those
rate hikes, as chronicled by this morning's Washington Post, in
downtown DC, rate hikes of 160 percent and above since last September,
where do we think that is going and who do we think is going to pay it?
It is going to be the consuming public.
Because of that is why the Consumer Federation of America has
endorsed this legislation. This is dated today. They say it would
require the Secretary of the Treasury to set parameters for terror
insurance rates. This is the Consumer Federation of America. It would
require insurers to issue rebates for terror insurance premiums
already, and I will explain that in a minute. It would require insurers
to separately itemize terrorism rates on the insurance bill.
Let's talk about those two provisions. Why would we want to
separately itemize terrorism rates on an insurance bill? So the
consumer will know how much of their premium they are paying is going
to pay for the terrorism risk. It is all a matter of mathematics. It is
all a matter of calculations. It is all a matter of what is supposed to
be a determination to know if a rate is actuarially sound. If it is, as
I hope it will be under the process that we are putting in place in
this amendment, then the consumer ought to know how much it is they are
paying.
If one has a bank statement and they have an extra charge by the
bank, certainly they want the consumer to know how much extra that bank
is charging and for what. And so, too, with this. We set up a process
which says they shall identify the portion of the premium insuring
against the terrorism risk on a separate line item on the policy.
What we do also, as an accounting mechanism, is we cause the
insurance company to deposit the amount of the terrorism rate increase
in a separate, segregated account so it does not get mixed in with all
the other premiums, so we can keep it highlighted, so we know what it
is. Then when funds are disbursed to pay if a terrorist strikes and
there is an obligation on the part of the insurance company to pay,
then those funds would be distributed from that separate account. The
consumer would know how much of their premium they, in fact, are
paying.
The other thing the Consumer Federation of America pointed out is
that this Nelson amendment would require insurers to issue rebates for
terror insurance premiums already collected. What do we do there? This
is a little complicated, but the essence of it is, if there is a policy
in existence and we know that rates have been jacked up already, as has
been indicated by this morning's Washington Post story, under the
Nelson amendment, if law, the Secretary of the Treasury would say that
the rate hike should not be this, which has already been imposed, but
instead should be this high. What about the difference over the
remaining life of that policy--it may be only a few months left because
policies are issued on an annual basis, 1-year policies--that that
difference is going to be rebated to the consumer. What does that mean?
That means if the insurance company, as so many have already, hiked the
rates, as indicated by this morning's newspaper story, up here, but the
Secretary of the Treasury comes along and says after evaluating and
consulting that the rate hike ought to be here, not here, that for the
remainder of the months of that policy the difference is going to have
to be rebated to the consumer or to the policyholder, in this case
mostly commercial policyholders.
So what we have is a commonsense amendment. It is an amendment that
not only will help the big real estate properties that have been
putting the pressure on the majority leader to bring this to the
floor because they are feeling the heat of all these increased rates. I
don't blame them. I sympathize with them.
They need to understand what we are trying to do. Instead of letting
it operate in the sphere of the insurance company determining what the
rate should be, the real way to regulate what those rates would be is
to collect data through the Secretary of the Treasury that determines
if the rate is accurate.
This affects the big properties, but it affects little properties as
well. This underlying bill applies to commercial property and casualty.
Many of these policies are held by small businesses whose insurance
premiums have increased exorbitantly, significantly raising the cost of
running their business. Commercial policyholders will ultimately pass
their premium cost on to consumers in the form of higher prices for
products and services. Offering rate protection will allow businesses,
large and small, to obtain reasonably priced insurance, eliminating the
need to pass their cost on to consumers.
Discussing the question of whether or not insurance companies have
hiked rates since September 11, we saw in this morning's paper:
Property insurance for the firm that manages the office
building at 1700 Pennsylvania
[[Page S5490]]
Avenue will cost twice as much as last year's $2 million
premium.
That is the first paragraph of the story in the newspaper.
The second paragraph:
At George Washington University, insurers have cut the
school's former $1 billion property and casualty policy in
half.
They cut the coverage in half, and they raised the premium at the
same time 160 percent. That is the second paragraph.
The third paragraph:
The National Geographic has been dropped by its workers'
compensation provider because of the perceived threats to
large concentrations of employees that are in the D.C. area.
This story, as well as many others, can give example after example of
how insurance rates have been hiked, which in large part has caused a
number of real estate trade associations to start sounding the alarm
that the rates have gone up so much, they need some relief.
What has been said about this in the insurance industry? I am sad to
say what has been said is quite revealing. At the end of November, in a
statement quoting a Lloyd's of London investor newsletter quoted in the
Washington Post, they said, when talking of the effects of September 11
on the insurance industry premiums:
[There is a] historic opportunity [to make profits off of
9/11. Disaster insurance premiums have shot up to a level
where very large profits are possible.]
Doesn't that make your blood boil, that there would be people in the
boardrooms of insurance companies who are considering the tragedy of
September 11 as an excuse to hike insurance premiums big time? Doesn't
that make your blood boil?
Another quote from the CEO of Zurich Financial Services from a
Reuters story at the end of November as well:
As respects to the terrorist attack of September 11, the
industry ``needed it to operate efficiently. The players who
are strong, in a responsible manner, and are aggressive, will
be the winners of the next 15 years.'' In other words, the
industry will profit from the price hikes they are now
trying to put in place.
Does that concern Members?
I come to the floor to offer an amendment on a bill that I question
the need for but I did not block because I thought it ought to be aired
and discussed and voted on. I come to offer an improvement to that bill
on its fatal flaw. The fatal flaw is that it does not have a provision
to protect consumers from rate hikes and rate gouging.
When dealing with insurance, consumers have to have two provisos:
Insurance has to be available, and it has to be affordable. Part of the
reason for the bill coming to the floor is that the perception is out
there, particularly among large real estate properties, that it is
neither available nor affordable. What this amendment tries to do is,
in making it available as the underlying bill does, in a huge Federal
subsidy--in other words, the Federal Government taking over most of the
insurance risk for terrorism risk--we are making it affordable by not
letting the hikes go through the roof and all the way to the Moon.
Organizations such as the Consumer Federation of America, which point
out they endorse this amendment to protect businesses and consumers
from being gouged with unjustifiable rates, have endorsed this
legislation.
The underlying legislation I did not block because I thought it ought
to come here, but I question whether this is the way we ought to
approach it. It is using a sledgehammer in what otherwise ought to be a
much more delicate procedure to solve the problem. What is the problem?
The problem is, some 8 or 9 months after September 11 certain
properties are still having difficulty getting insurance. Where are
those properties? They are generally in highly identifiable trophy
properties such as tall buildings, such as highly visited facilities
like stadiums, such as tourist attractions, such as ports that have
cruise traffic. But there is a large part of America that is not like
that. Most of America does not have high-rise buildings. Most of
America is not highly, densely urbanized. Most of America is not the
financial district of the country; namely, Manhattan in New York
City. Most of America is not the seat of Government of the United
States, Washington DC. Most of America has found its commercial
properties to be insured. Why? Because in the last 6, 7, 8 months, the
marketplace has responded.
In the last half year, money, capital, investments are flowing into
the reinsurance industry. Reinsurance is insurance for insurance
companies to insure against catastrophe, such as the terrorism risk.
As a result of there being more supply of this money going into the
reinsurance marketplace, the price of reinsurance has started to come
down. As a result of the price coming down, because there is more
capital available, it has started to ease the price that is being
charged to most of America.
So here we are, coming along with an underlying bill that says
basically we are going to hold the insurance company on any future
conventional weapons terrorism risk only a little bit responsible.
Instead, we are going to shift most of that terrorism risk over to the
Federal Government of the United States.
For certain properties, I agree there is a legitimate need for the
Federal Government to backstop insurance companies. Those are primarily
your trophy properties. But because the insurance marketplace has
responded over the last half year, we do not need to respond with this
kind of legislation, and we surely do not need to respond with this
kind of legislation which, in fact, has no ability to limit the rate
hikes that will occur.
Thus, I offer my amendment as a means of process.
Let me close by saying this: Let's get it to its bottom line. Let's
get it to its political raw. I am afraid if you vote for this without
the Nelson amendment, you or any Senator vote for this without the
Nelson amendment, a legitimate charge can be made that the Federal
Government took over the biggest portion of the insurance terrorism
risk without a limitation on the insurance premium hikes.
I do not think any Senator wants to be accused of that. I say again,
the American public does not like you to vote for tax increases, but
let me tell you there is something they do not like even more. They do
not like people to vote on jacking up their insurance rates. You can
make this a much better bill by adopting the Nelson amendment, which
will put in place a process whereby the Secretary of the Treasury will
determine if the rate is actuarially sound or if it is not. The
Secretary of Treasury could be determining maybe it is not enough. But,
then again, he could be determining that maybe it is way too much.
I yield the floor.
The PRESIDING OFFICER. The Senator from Minnesota.
Mr. WELLSTONE. Mr. President, I thank my colleague from Florida for
this amendment. Let me start out speaking for a moment about the
underlying legislation. Then I want to speak about the Nelson
amendment.
I am glad the Senate is finally acting on the whole question of
affordable terrorism insurance. Over the past 6 to 8 months, I have
heard from developers, lenders, and retailers in my State who are
saying this is getting very expensive. Basically a lot of construction
projects have been stalled or have fallen through the cracks. Some of
the major landmarks in Minnesota, such as The Mall of America, have had
trouble with their lenders. So I want to be honest with my colleagues,
to me this is really about jobs. If the insurance is not there or it is
too expensive, then the projects do not get built and planned
development may not happen; jobs are lost. Therefore, I think the
underlying bill is important.
That is why I support the Nelson amendment. What the Nelson amendment
says is if the Federal Government is basically going to assume the
financial risk of a terrorist act, then we should ensure that the
insurance industry is passing on this reduced risk in the form of lower
insurance premiums to businesses.
The background of my colleague from Florida is in this very area, and
he can speak about this with more expertise, but he is saying we do not
want to end up giving private insurance companies a blank check to
gouge businesses. That is the real danger.
In other words, if the problem the Senate is trying to address is the
skyrocketing costs of terrorism insurance, and we address it by
reducing the liability of the insurance industry to acts of terrorism,
then we should make
[[Page S5491]]
sure the loop is closed and businesses are not charged exorbitant rates
for insurance the United States taxpayers are actually providing. I
believe that is what the Nelson amendment says. Therefore, I think it
is common sense. I think it will make terrorism insurance more
available. I think it will prevent the gouging of businesses. I think
it will prevent us from giving just a blank check to this insurance
industry. That is why I support the amendment.
I think this amendment is good for our businesses. I also think this
amendment is in the spirit of the underlying bill. I think it does not
in any way, shape, or form--I say to my colleague from Florida--negate
or undercut this legislation. I just think it strengthens it. I think
it closes a loophole and provides the additional protection we need to
have, to make sure that we, the taxpayers, are not underwriting the
insurance business which then gouges business. I believe that is what
this is about--strong probusiness and strong proconsumer.
If I could just take another minute or two, I ask unanimous consent
that I may take 5 minutes to speak as in morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Minnesota is recognized.
Mr. WELLSTONE. I thank the Chair.
(The remarks of Mr. Wellstone pertaining to the introduction of S.
2617 are located in today's Record under ``Statements on Introduced
Bills and Joint Resolutions.'')
The PRESIDING OFFICER. The Senator from Texas.
Mr. GRAMM. Mr. President, let me first say that I believe the Senator
from Florida is to some degree correct about his concern. I think his
remedy is wrong, and I am not going to support it. But I believe there
is a problem. I wish to try to set out what I think the problem is and
why I don't think this is the remedy.
The problem is that, beginning in January of this year, huge numbers
of insurance policies expired. We tried last year without success to
pass a bill. That effort went into mid-December. I am familiar with it
because I was involved in it. Insurance companies sold policies
beginning in January, and we are in June. Policies have been sold.
Rates have gone up, as they had to go up because risks have gone up.
But if we come in now with a bill that has a very low retention,
where the taxpayer is going to become the net payer before there is a
substantial or mega loss--I remind my colleagues that when we first
started debating this no one proposed that we go into business with the
insurance companies. No one has proposed--I don't think anybody
proposed. Maybe I had better be careful because for every bad idea
there is a constituency. But I don't think anybody has proposed that we
set up a Government insurance program.
The proposal has been that, once there is a cataclysmic loss, the
Federal Government be the backup for insurance companies. The word that
has been used throughout the debate is the Federal Government would be
the ``backup.'' In October, when we were putting together a bill that
had a retention rate of $10 billion, which meant that private insurers
had to lose $10 billion before we stepped in and started to pay 90
percent of the costs, $10 billion is a cataclysmic loss.
What happened as the bill evolved in December, and when we were only
weeks away from the bill going into effect, that $10 billion retention
got changed to individual company retentions. So the level at which the
taxpayer starts paying has gone down and down. Now we find ourselves in
a position where various interests that would have been delighted in
October to have gotten the $10 billion retention now oppose it, wanting
individual company retentions.
The Senator from Florida is simply pointing out that to come in now
where the Federal Government is going to pay out money before there is
a mega loss is going to create a situation where people have charged
premiums and sold policies based on one set of circumstances.
We are about to change those circumstances. In doing so, you are
going to have a net wealth effect. There is no question about it.
I think the solution is to change the bill before us and require a
higher level of loss--a higher level of ``retention,'' as it is called
in the industry--so we simply move back to insure the kind of loss that
no one was able to insure against in any case.
But I wanted to make it clear that there is some validity to the
Senator's argument and concern about equity.
Having said that, I am very loathe to getting the Federal Government
in the business of setting insurance rates. We have never done it
before. It is something that has been done by the States. Those State
regulations are still in place.
I know our distinguished colleague from Florida has been a State
insurance commissioner, and he understands how difficult it is to set
these rates. As difficult as it is for Florida and Texas, it would be
more difficult for the Federal Government because we have never done
it.
I simply, again, make the point that I made earlier; that is, I think
there are two problems with this bill as it exists now. One is we are
leaving victims of terrorism unprotected against predatory lawsuits. On
a straight party-line vote a minute ago, we decided to do that.
The second problem is that we have a retention level in this bill now
that is so low that it doesn't take into account the fact we have had 7
months where insurance has been sold with no Federal backup. Also, the
most critical point is that, if we want a reinsurance market to emerge,
if we want to encourage syndication, you don't do that with individual
company retention. I am afraid we are creating a hothouse plant here
which will never get out of subsidization. We will never get out of
this business if we leave the bill the way it is now.
I am not saying that the $10 billion retention solves every problem
in the bill. It doesn't. But at least it forces companies to syndicate,
and it forces companies to be willing to purchase reinsurance. That
creates the profits to bring it into existence.
I intend to vote against the amendment of the Senator from Florida,
but I wanted to make it clear that he has raised an issue that the
current bill does not deal with. If this amendment is not successful, I
hope we will find a way for dealing with it.
I yield the floor.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Mr. President, I have spoken to the Senator from Florida,
the sponsor of this legislation. At approximately 3:15--he thinks that
would give everyone enough time to say what they have to say, and we
have a presentation to be made by Governor Ridge at 2:15--I alert
everyone that we probably will have a vote at about 3:15 this afternoon
on this matter.
Mr. NELSON of Florida. Mr. President, will the Senator yield?
Mr. REID. Yes.
Mr. NELSON of Florida. Does that mean we will continue in session
even while Governor Ridge is speaking?
Mr. REID. That is right.
Mr. NELSON of Florida. I ask unanimous consent that Senator Clinton
be a cosponsor of the amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Utah is recognized.
Amendment No. 3839
Mr. HATCH. Mr. President, on December 5, 2001, the Senate ratified
two extremely important international treaties, the International
Convention for the Suppression of Terrorist Bombings and the
International Convention for the Suppression of the Financing of
Terrorism, both of which further our efforts in the worldwide war on
terrorism.
Under the terms of these treaties, which were negotiated under the
auspices of the United Nations, the United States and the other
countries who are signatories to the treaties, have obligated
themselves to prohibit acts of terrorism, or in support of terrorism,
within their national borders. The signatories to these treaties are
committed to fighting the global war against terrorism.
I rise today to offer an amendment that would implement the terms of
these treaties by creating new criminal offenses for terrorists who
detonate bombs in public places, and for those individuals who aid
terrorists by providing or collecting funds for use in terrorist
activities. I had hoped that
[[Page S5492]]
there would be no need for such an amendment today. There is bipartisan
support for passing implementing legislation.
I commend Senator Leahy for supporting almost identical legislation
that I am presenting and attempting to pass such legislation just last
night. The bill was cleared on the Republican side. However, I
understand that the Democrats refused to pass it. That is most
unfortunate, and I am disappointed in the Senate's failure to act.
This is critical legislation that we must enact promptly. As I have
already stated, the Senate already ratified these treaties on December
5, 2001. the House of Representatives acted soon thereafter, on
December 19, 2001, to pass a bill, H.R. 3275, which is identical to the
amendment I am offering today. There has been overwhelming, bipartisan
support for this legislation. H.R. 3275 was passed by a vote of 381-36.
For one reason or another, however, the bill has been stalled in the
Senate.
I urge my colleagues to give their unanimous support to this
amendment. The President of the United States, as well as Treasury
Secretary Paul O'Neill, Secretary of State Colin Powell, and Attorney
General John Ashcroft, have all voiced support for this implementing
legislation. Indeed, we have an obligation under the treaties we
ratified to enact this legislation.
Here is what my amendment would do. It would meet our obligations
under the two treaties by prohibiting certain acts within our borders.
With respect to the Terrorist Bombings Convention, the legislation
would prohibit delivering or detonating an explosive or other lethal
device in a public place, a transportation system, or a State or
government facility. With respect to the Terrorist Financing
Convention, the legislation would prohibit providing or collecting
funds with the knowledge or intent that such funds be used, in full or
in part, to finance an act of terrorism.
Mr. President, it is essential--now more than ever--that the United
Sates maintain its position at the forefront of nations in opposition
to terrorism. This legislation fulfills our obligations under the
treaties we already have ratified. Identical legislation has already
passed the House of Representatives. So I sincerely hope that we will
adopt this amendment here today, and on its own, so that we can deliver
it to the President to sign and thereby continue to lead the world in
the fight against terrorism.
Now, could I ask the Parliamentarian, is it possible for me to offer
this amendment as a second-degree amendment to the Nelson amendment?
The PRESIDING OFFICER (Mr. Carper). The Nelson amendment is subject
to a second degree.
Mr. HATCH. Then I will call up the amendment and offer it as a
second-degree amendment.
Mr. GRAMM. Why don't you just ask it be set aside and offer yours as
a first degree?
Mr. HATCH. Mr. President, instead of doing that, I ask unanimous
consent that we set aside the pending amendment, and I will offer this
as a first degree.
The PRESIDING OFFICER. Is there objection?
Mr. REID. I object and suggest the absence of a quorum.
The PRESIDING OFFICER. The Senator from Utah retains the floor during
the unanimous consent request.
The Senator from Utah.
Mr. HATCH. Mr. President, I renew my request to set aside the Nelson
amendment, and send an amendment to the desk.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
The clerk will report the amendment.
Mr. REID. Will the Senator from Utah yield for a unanimous consent
request?
Mr. HATCH. Excuse me?
Mr. REID. Will the Senator from Utah yield for a unanimous consent
request?
Mr. HATCH. I am happy to yield for such purpose.
Mr. REID. Mr. President, it is my understanding the Senator from Utah
has asked--and everyone has agreed--that the Nelson amendment be set
aside, and his amendment would stand separate from that.
Therefore, I ask unanimous consent that at 3:15 today Senator Dodd or
his designee be recognized to offer a motion regarding the Nelson
amendment.
The PRESIDING OFFICER. Is there objection?
Mr. NELSON of Florida. Reserving the right to object.
The PRESIDING OFFICER. The Senator from Florida.
Mr. NELSON of Florida. I would ask that you amend that unanimous
consent request so that I have 5 minutes to close before the vote on my
amendment.
Mr. REID. That would be fine that you would have 5 minutes and also
that the minority would have 5 minutes. So we would begin that at 5
after 3 p.m.
The PRESIDING OFFICER. Is there objection?
The Chair hears none, and it is so ordered.
The clerk will report the amendment.
The senior assistant bill clerk read as follows:
The Senator from Utah [Mr. Hatch] proposes an amendment
numbered 3839.
Mr. HATCH. Mr. President, I ask unanimous consent reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The amendment is printed in today's Record under ``Text of
Amendments.'')
The PRESIDING OFFICER. The Senator from Utah.
Mr. HATCH. Mr. President, I rise to speak on S. 2600, the Terrorism
Risk Insurance Act of 2002. Naturally, I supported the amendment of the
distinguished Senator from Kentucky, Mr. McConnell. I am very
disappointed I was unable to speak on the McConnell amendment before
the premature motion to table. I think most of us agree that something
needs to be done in this area. What we need to agree on is how to
resolve the issue in a prudent and responsible manner that provides the
appropriate stability to our economy without exposing our taxpayers to
an unreasonable financial burden. Let me begin by stressing the
importance of this issue. Insurance plays a vital role in this country,
not just in helping in the recovery after a tragedy, but in the day to
day operation of our national economy. We all know the devastating
impact the events of September 11th had on our Nation--the human cost
alone. What some do not realize is the economic impact that has
resulted and which will continue to have a negative effect on business,
the normal flow of commerce, and especially the jobs of everyday
Americans if we do not act and if we do not act responsibly. Insurance
is necessary to the operation and financing of property and the
construction of new property. Without insurance, our economic growth is
in jeopardy, businesses will fail, and jobs will be lost. My
constituents have come to me on multiple occasions, imploring that the
Senate act on this issue. They are genuinely concerned about the
negative impact lack of coverage will have on their businesses and on
their employees.
Mr. President, I ask unanimous consent to have printed in the Record
a letter dated June 10, 2000, from the Treasury Department and signed
by not only the Secretary of the Treasury but the Director of the
Office of Management and Budget, the Director of the National Economic
Council and the Director of Economic Advisors--all urging that the
Congress act to address this issue, but, most importantly, all noting
that it must be addressed in a reasonable and responsible manner.
Mr. President, I ask unanimous consent that letter be printed in the
Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
Department of the Treasury,
Washington, DC, June 10, 2002.
Hon. Trent Lott,
Senate Republican Leader,
U.S. Senate, Washington, DC.
Dear Senator Lott: The War on Terrorism must be fought on
many fronts. From an economic perspective, we must minimize
the risks and consequences associated with potential acts of
terror. No measure is more important to mitigating the
economic effects of terrorist events than the passage of
terrorism insurance legislation.
Last November 1, the Administration publicly agreed to
bipartisan legislation negotiated with Chairman Sarbanes,
Chairman Dodd, Senator Gramm and Senator Enzi. While the
House of Representatives quickly responded to this urgent
need by passing appropriate legislation, the Senate did not
act
[[Page S5493]]
and has not passed any form of terrorism legislation in the
intervening seven months.
The absence of federal legislation is having a palpable and
severe effect on our economy and is costing America's workers
their jobs. In the first quarter of this year, commercial
real estate construction was down 20 percent. The disruption
of terrorism coverage makes it more difficult to operate,
acquire, or refinance property, leading to diminished bank
lending for new construction projects and lower asset values
for existing properties. The Bond Market Association has said
that more than $7 billion worth of commercial real estate
activity has been suspended or cancelled due to the lack of
such insurance. Last week, Moody's Investors Service
announced that 14 commercial mortgage-backed transactions
could be downgraded due to a lack of such insurance.
Without such insurance, the economic impact of another
terrorist attack would be much larger, including major
bankruptcies, layoffs and loan defaults. While we are doing
everything we can to stop another attack, we should minimize
the widespread economic damage to our economy should such an
event occur.
One important issue for the availability of terrorism
insurance is the risk of unfair or excessive litigation
against American companies following an attack. Many for-
profit and charitable entities have been unable to obtain
affordable and adequate insurance, in part because of the
risk that they will be unfairly sued for the acts of
international terrorists.
To address this risk at least two important provisions are
essential. First, provisions for an exclusive federal cause
of action and consolidation of all cases arising out of
terrorist attack like those included in the Air
Transportation Safety and System Stabilization Act, are
necessary to provide for reasonable and expeditious
litigation.
Second, the victims of terrorism should not have to pay
punitive damages. Punitive damages are designed to punish
criminal or near-criminal wrongdoing. Of course such
sanctions are appropriate for terrorists. But American
companies that are attacked by terrorists should not be
subject to predatory lawsuits. The availability of punitive
damages in terrorism cases would result in inequitable relief
for injured parties, threaten bankruptcies for American
companies and a loss of jobs for American workers.
It is also clear that the potential for massive damages
imposed on companies that suffer from acts of terror would
endanger our economic recovery from a terrorist attack.
Indeed, the added risks and legal uncertainty hanging over
the economy as a result of last September 11th are major
factors inhibiting a business willingness to invest and to
create jobs. It makes little economic sense to pass a
terrorism insurance bill that leaves our economy exposed to
such inappropriate and needless legal uncertainty.
The bipartisan public agreement reached between the
Administration and Chairman Sarbanes, Chairman Dodd, Senator
Gramm and Senator Enzi last fall provided these minimum
safeguards. We would recommend that the President not sign
any legislation that leaves the American economy and victims
of terrorist acts subject to predatory lawsuits and punitive
damages.
The American people and our economy have waited seven
months since our public agreement on legislation. The process
must move forward. Prompt action by the Senate on this
vitally important legislation is needed now.
Sincerely,
Paul H. O'Neill,
Secretary of the Treasury.
Mitchell E. Daniels,
Director, Office of Management and Budget.
Lawrence Lindsey,
Director, National Economic Council.
R. Glenn Hubbard,
Director, Council of Economic Advisors.
Mr. HATCH. My colleagues from Kentucky and Connecticut have already
referred to this letter, but I would like to highlight a few of the
specific points conveyed in that letter.
Quoting the letter:
In the first quarter of this year, commercial real estate
construction was down 20 percent. The disruption of terrorism
coverage makes it more difficult to operate, acquire, or
refinance property, leading to diminished bank lending for
new construction projects and lower asset values for existing
properties. The Bond Market Association has said that more
than $7 billion worth of commercial real estate activity has
been suspended or cancelled due to the lack of such
insurance.
Without such insurance, the economic impact of another
terrorist attack would be much larger, including major
bankruptcies, layoffs and loan defaults.
This letter really underscores the serious ramifications to our
economy that have resulted from a lack of coverage for terrorist acts
and supports congressional action in this area. However, it seems to me
we ought to do it in a responsible manner. The letter goes on to state:
One important issue for the availability of terrorism
insurance is the risk of unfair or excessive litigation
against American companies following an attack. Many for-
profit and charitable companies have been unable to obtain
affordable and adequate insurance, in part because of the
risk that they will be unfairly sued for the acts of
international terrorists . . . It makes little economic sense
to pass a terrorism insurance bill that leaves our economy
exposed to such inappropriate and needless legal uncertainty.
In the event of a terrorist attack it is contrary to commonsense to
place unlimited exposure on companies--who are themselves victims of
that attack--for the criminal acts of third parties, the terrorists. I
do not suggest that we should limit the recovery of economic damages of
an injured victim if there is culpability on the part of a business.
However, we must provide some stability in the litigation process by
streamlining a Federal cause of action and not allowing punitive
damages unless criminal conduct is proven, as the distinguished Senator
so aptly argued in the prior amendment. Punitive damages are designed
to punish the defendant, not compensate the victim. I ask my
colleagues, is it fair to punish a defendant business for the criminal
acts of a third party?
The President may well veto any measure that unreasonably exposes
taxpayers and fails to provide stability to our economy. We need to act
in this area, but if we fail to do so in a responsible manner,
legislation may never be enacted and we will have failed in our
responsibility.
My colleague from Kentucky, Senator McConnell, has offered an
amendment that I think is both reasonable and necessary to ensure that
we address this issue in the proper and most effective manner. His
amendment provides for a Federal cause of action and consolidation of
multiple actions relating to the same event by the panel on
multidistrict litigation. When we are dealing with a catastrophic
event, it makes sense to have a process in place that avoids
inconsistent judgments in multiple courts which could result in
disparate treatment of victims.
This amendment of the distinguished Senator from Kentucky does not
ban punitive damages. Let me restate, it does not ban punitive damages.
It ensures that punitive damages are not counted as an insured loss
covered by the Government backstop, as does S. 2600. Senator
McConnell's amendment goes on to provide that punitive damages will be
available to a claimant, if State law so provides, but only if criminal
conduct by the defendant is proven. This is reasonable and just.
Without this limitation, then we are in effect punishing victims of
terrorism and lining the pockets of the trial lawyers, not the victims.
My colleagues on the other side of the aisle seem to think that if they
merely provide that the Government will not cover punitive damages that
is all that is necessary. I submit that the provision regarding
punitive damages in S. 2600 actually compounds the problem. Insurance
companies do not generally cover punitive damages, so those that are
really at risk of bearing the brunt of the terrorist attacks are the
insured businesses, businesses that provide jobs. Do we really want to
undercut the real purpose of enacting Federal terrorism insurance
legislation?
Senator McConnell's amendment has another important aspect--
settlement approval by the Secretary of the Treasury. If the Government
is going to act as a backstop for insurance, then we must ensure that
the Government's generosity is not abused. An approval mechanism such
as that proposed by Senator McConnell will work to ensure that any
settlement of a claim is justified and supportable by the underlying
facts and not a rush to the courthouse so that the trial lawyers can
cash in and the defendants can reach their, what is in essence a
deductible limit, resulting in the Government responsibility kicking in
prematurely.
We are seeking to provide stability to our economy, but S. 2600, as
currently written, will actually hurt those we are trying to help. If
given the opportunity I would have urged my colleagues to support this
amendment so that we can provide the necessary stability to our economy
in an appropriate manner.
I hope before this debate is over we can return to this issue and
resolve it. It is hard for me to support a bill such as this if we
don't resolve this type of problem, because we are creating problems,
not resolving them. Frankly, it is
[[Page S5494]]
about time that we do what is right around here rather than what is
politically important to one side or the other.
This is a very important bill. I want to vote for it. I want to
support it. I want to see that our businesses are protected. I want the
Federal Government to step to the plate. But I want them to do it under
the right circumstances with well-written laws that will make a
difference in the fight against terrorism but will not destroy
companies or businesses or jobs, which is what I think this current
bill will do.
I appreciate the leadership of those who are trying to resolve this
problem and who have brought this bill to the floor. I want to support
them, but we have to start worrying about what works economically, what
works legally, what is fair legally, what really should be done. We
have to punish the perpetrators and not punish those who are the
victims.
In many cases, the bill as written does not solve those problems. I
think we should spend a little more time in trying to find some common
ground to help resolve these problems.
Good trial lawyers don't need punitive damages. If they are really
good, they can still get tremendous judgments and awards against those
who are negligent, those who haven't done what is right. But when you
allow punitive damages, that can lead to runaway juries and other
problems. As an example, States such as Nevada have had so many medical
liability cases brought now that they are losing their obstetrician-
gynecologists, neurosurgeons, and other surgeons. Physicians are going
to other States or they are just getting out of the business. That is
starting to happen all over America because we are not approaching
these problems in ways that really make sense. On this bill, we ought
to approach it in a way that makes sense.
With that, I yield the floor.
The PRESIDING OFFICER. The Senator from Connecticut.
Mr. DODD. Mr. President, I believe Senator Leahy from Vermont will
talk with the Senator from Utah about his amendment which, except for
the word ``terrorism,'' is unrelated to the substance of the underlying
bill. I think the effort was to make that a freestanding proposal to
deal with implementation of a convention dealing with terrorism. My
hope is that the members of the Judiciary Committee will work on this
to see if they can't resolve that matter to have it be dealt with as a
freestanding proposal rather than as an amendment.
The reason I say that to my friend and colleague from Utah is that if
we begin to open up this bill to matters unrelated to the subject
matter, we will delay enactment of this bill. It may die here on the
floor. If Members are interested in seeing us get something done on
terrorism insurance, we need to stick with amendments related to the
subject matter.
My friend from Florida has offered an amendment related to the
subject matter. I may disagree with him on the amendment, but I
appreciate the fact that we are offering language that relates directly
to what is before us.
I know Senator Leahy, the chairman of the Judiciary Committee, is
working his way over here to talk with the Senator from Utah. Maybe
they can resolve this matter and there can be a way to deal with this
rather than having us necessarily get caught up in extensive debate on
the implementation of a convention in the midst of the terrorism
insurance bill, which is of concern to me, that we would end up off on
a tangent and not get the matter before us considered properly.
I see my colleague standing.
Mr. HATCH. Mr. President, I will be happy to work with the
distinguished Senator and listen to any suggestions that are made.
I think it is very pertinent to this bill. I would like to work with
him. I am open and will be happy to get our two staffs together.
Mr. DODD. I appreciate the comments of the Senator from Utah. I hope
my other colleagues on the Judiciary Committee have heard his
statement. That seems to leave the door open for some possible
resolution of the matter.
Let me address the Nelson amendment. My colleague from Florida has
offered an amendment that comes in several parts. I will emphasize to
him that the first parts of it deal with basically having the Secretary
of the Treasury, as I read it, becoming an insurance regulator, a
Federal insurance regulator.
I will hold some hearings, as the chairman of the Securities
Subcommittee, with the permission and approval of the chairman of the
committee, Senator Sarbanes. But we want to hold hearings at some point
on the whole issue of a Federal regulator of insurance. That is a very
important debate and discussion.
I know the Senator from New York, Mr. Schumer, has a significant
interest in that subject, as does my colleague from New Jersey. It is a
very divided constituency within the insurance constituency as to
whether there ought to be a Federal regulator or not. That is going to
require a number of hearings as to whether or not we want to make that
step and move forward.
I do not have an opinion on that issue one way or the other.
Mr. NELSON of Florida. Will the Senator yield?
Mr. DODD. I am happy to yield.
Mr. NELSON of Florida. Mr. President, the Senator raised a very
legitimate question. I think that ought to be hashed out. However, the
Senator's bill does self-destruct at the end of year 2002, unless it is
extended by the Secretary for 1 more year.
Mr. DODD. That would be 1 year. The bill before us is only a 2-year
bill. So it is 1 year and a second year if the Secretary of the
Treasury agrees to it.
Mr. NELSON of Florida. That is correct. Therefore, we are not talking
about this Senator's amendment having any kind of permanent regulation
of rates at the Federal level. Rather, we are looking at a process to
affect this specific bill having to do with terrorism rates of which
the Federal Government is picking up 80 or 90 percent.
Mr. DODD. Mr. President, I will concede that point because this is a
2-year bill that sunsets. Obviously, we are talking about if all of a
sudden the Department of the Treasury--is going to set rates and engage
in all of the activities that a normal insurance commissioner would, on
a Federal level it is going to require a rather significant step
forward.
Let me address this. The one point the Senator from Florida has
raised with which I agree--the language is different, but I think the
point is the same. In the underlying bill, on page 12, lines 7 through
12, paragraph 2, under conditions for Federal payments:
No payment may be made by the Secretary under subsection
(e) unless . . . (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.
In effect, it is separate accounting so that we have a very clear
accounting procedure which allows that whatever premiums are collected
for terrorism insurance would be accounted for separately from other
premiums collected. The language the Senator from Florida has is even
more explicit. It requires segregation of the funds and the like. I
don't disagree with him on that part of his amendment, that we ought to
have separate accounting.
Secondly, in response to some comments made by my colleague from
Florida, there are significant reporting requirements. Let me remind my
colleagues again, what we have done with the underlying bill is
maintain the important role of State insurance commissioners. Rates
will be set by insurance commissioners at the State level. Now they are
done differently.
I will repeat the point. Under existing law in the 50 States, 40
States presently allow rates on property and casualty in the commercial
field to go forward, and then the commissioner can rule that the rate
is too high. In 10 States, the State law prohibits any rate increase
prior to approval by the State commissioner's office.
Under this bill, we do a number of things. One of the things we do
here is follow what 40 States do. In other words, under this, we will
allow for rate increases to occur, but we in no way undercut the
historic role of State commissioners then to oppose a rate increase. So
we maintain a very strong role for the insurance commissioners.
Why? Because, obviously, the expertise is there. They have the shops
and the personnel to do it. To all of a sudden allow one Federal
regulator, the
[[Page S5495]]
Department of the Treasury, to do that would be asking too much, and it
would be very difficult for the apparatus to be set up.
Mr. NELSON of Florida. Will the Senator yield for a series of
questions?
Mr. DODD. At some point I will, but let me get through my statement.
Let me tell you some of the reporting requirements we have here and why
this would be.
The Senator's amendment does set up the Secretary of the Treasury to
be the regulator. There may be Members who believe that is a
progressive step. I think it is dangerous.
Secondly, it would have the effect of a price control, trapping
capital for many issues that do not experience a loss attributable to
acts of terrorism. I don't think we want to do that. We are not trying
to facilitate a clogging up of the commercial process that is ongoing.
Thirdly, with regard to the reports, the Secretary must report to
Congress 9 months after date of enactment on the availability and
affordability of the insurance for terrorism and a reflection on the
impact on the U.S. economy.
The Secretary must report to Congress 9 months after the date of
enactment on the availability of life insurance and other lines of
insurance coverage. We only deal with property and casualty. There is a
legitimate issue being raised about other forms of insurance that we do
not cover in this bill.
Also, participating insurance companies must report their terrorism
premium rates to the National Association of Insurance Commissioners
every 6 months. These reports will be forwarded from the NAIC to the
Treasury Department, the Commerce Department, the Federal Trade
Commission, and the General Accounting Office. These agencies would
submit a joint report to Congress summarizing and evaluating the data
they receive from the NAIC. The GAO will report to Congress on its
evaluation of the agency reports. We are trying to get as much internal
information as we can coming through here so we can provide additional
data when it comes to rate increases.
There is a very important point to make about insurance
commissioners. Insurance commissioners not only set rates, what
premiums can be charged, but in every State they bear the
responsibility of seeing to it that insurance companies that do
business in their States are solvent. That is a critical issue for
consumers. In fact, if they hold policies under an insurance company
and that company lacks solvency, then obviously those consumers are in
jeopardy of not having their claims paid if some event occurs. I am not
just talking about terrorism insurance here. So the dual responsibility
of insurance commissioners is to not only set rates, but also to make
sure that the companies themselves are solvent.
Again, this is not terribly complicated when it comes to the
political questions. It doesn't take a lot to attack an insurance
company. That is a safe bet politically. People don't like rate
increases, and they know the difficulties they can have when claims are
filed.
The problem is, if you are opposed to the idea of insurance
companies, vote against the bill. I guess that is a simple answer; it
is probably a safe bet if that is your concern. If you are worried at
all, as you ought to be, about the fact that banks are not providing
the loans to major commercial enterprises because of the absence of
terrorism insurance, and you hear, as we have, from the AFL-CIO, as
well as others, that there is a growing job loss over this, it is
causing a problem economically, and when you already have 10 percent of
the commercial mortgage markets and the secondary-market-backed
securities already in the first quarter not forthcoming in the bond
market, these are signals that we have a problem economically.
If you want the Federal Government to be an insurance company, you
ought to vote for the amendment of the Senator from Florida. That is
what we did in World War II. If you believe it makes sense in the
longer term to have the private sector involved in insurance and not
the Federal Government, then it seems to me you ought to vote against
this amendment and vote for the underlying bill. That is a choice you
have to make. In a few hours, you can make that choice.
The amendment of the Senator from Florida runs the risk of providing
a program that I don't think is workable, except for the point I
mentioned earlier. I don't disagree with my colleague about having an
accounting process that makes it possible for us to distinguish between
premiums collected for terrorism insurance and for nonterrorism
insurance.
I hope that when this amendment comes up for a vote in about an hour,
or less than that, my colleagues will do what I think is the
responsible thing to do here, and that is reject this amendment. I have
told my colleague from Florida I am happy to work with him on the
provision dealing with the accounting question because I agree with him
on that. I think we want to have clear accounting so we know what is
going on.
With all due respect--and he is a good friend, and I have great
respect for him, and I admire the work he did as insurance commissioner
of the State of Florida--providing the Secretary of the Treasury the
ability to become an insurance regulator goes too far, in my view. To
require segregation of these accounts entirely would run the risk of
insurance commissioners at the local level being able to guarantee the
solvency of these companies to do business in their States, which you
know, as a former insurance commissioner, is a critical part of the
function of an insurance commissioner at the State level.
For those reasons, I strongly urge that my colleagues reject this
amendment.
I see my friend from Massachusetts. I am wondering what is on his
mind. Let me suspend for 1 minute, Mr. President.
Our colleague from Massachusetts informs me there is a markup of a
bill that may require the presence of both the Senator from Connecticut
and the Senator from Florida.
Mr. NELSON of Florida. I will be happy to run downstairs with the
Senator from Connecticut to make a quorum if we can come back and
resume and I can ask the Senator a series of questions.
Mr. DODD. I am always glad to do it. I will be happy to hear the
questions. I do not know how well I can respond to them.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. DODD. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DODD. Mr. President, I have completed my remarks in response to
the amendment of my friend from Florida. He has a series of questions,
so I will be happy to yield to my colleague for the purpose of asking
some questions.
Mr. NELSON of Florida. Mr. President, I thank my colleague. Again,
this was another experience where we had to temporarily suspend the
debate in order to go downstairs to the Foreign Relations Committee to
provide a quorum so we could vote out a very important piece of
legislation.
First, I wish to ask a couple of questions about which we agree.
The Senator from Connecticut has a provision in his bill that says:
The participating insurance company provides clear and
conspicuous disclosure to the policyholder of the premium
charged for insured loss covered by the program.
``Provide clear and conspicuous disclosure.'' Listen to the language
in my amendment with regard to the same issue, and see if the
distinguished senior Senator from Connecticut does not think that the
language I have would not be something of an improvement by making it a
little more specific. I am referring to page 2 of my amendment, line
18. The lead into it is:
If a participating insurance company increases annual
premium rates on covered risks under subsection (a), the
company--
(2) shall identify the portion of the premium insuring
against terrorism risk on a separate line item on the policy
. . .
The reason we put that there is it is my experience that if you do
not nail down general language and be very specific, it will not end up
on the policy on a separate line so that the consumer
[[Page S5496]]
can see how much they are being charged for the insured risk, in this
case the terrorism risk.
I ask the distinguished senior Senator from Connecticut if he would
consider that later on as a perfecting amendment to his language on
page 12, the paragraph starting at line 7?
Mr. DODD. Mr. President, as a procedural matter, obviously we are not
in a position to do that. I told my colleague in conversations we have
had about his amendment that I will be happy to work with him to
tighten up, if he believes it is necessary, the language in the
underlying bill. Obviously, what is before us is a much larger
amendment that covers a lot of other subject matters other than just
the issue of separation of accounting.
I will state for the record as well, he may prevail with his
amendment. If he does, then obviously all of his language gets
included. If his amendment fails when voted upon, then I will be happy
to work with him to see if we cannot tighten up the language to such a
degree that will satisfy him and satisfy our concerns as well.
At this point, for me, in the midst of a floor action, to work on
language is not the most appropriate setting for doing that, and
procedurally it is awkward, obviously, with an amendment pending. We
have to set that aside and take language, and I prefer we do it in the
way I suggested.
If the amendment of the Senator from Florida prevails, the issue
becomes moot. If he does not prevail, he has my commitment to work on
language to tighten up and do what he wants to do and what we are
interested in doing as well, and that is getting a very clear
accounting, have a very clear understanding of the difference between
premiums collected for terrorism insurance and premiums collected for
nonterrorism insurance, so we can have a better understanding over the
next 2 years or 3 years, depending on how long this program is going to
go if other amendments are adopted.
The Senator already made note of the fact that we are dealing with a
24-month bill, and that is only the second 12 months if the Secretary
of the Treasury decides to extend the program for an additional year.
As it is presently worded, this will expire, assuming it is enacted
over the next week or two and signed into law, let's say, sometime
around the middle of July. Twelve months from now this whole program
will be over.
Our fervent hope is that by that time, the costing of this product
and the other issues we talked about today will kick in and get the
Federal Government out of this entirely and let the private sector deal
with this issue as they have historically. But for the events on 9-11,
we would not be here. The fact that there was a $50 billion event,
which vastly exceeded what the reinsurance industry could calculate
would be the cost, has understandably caused the industry to back up in
terms of its willingness to provide insurance coverage for events they
no longer can cost out, at least effectively in their minds, absent, of
course, a series of other events which no one knows will be the case.
That is how costing out occurs with natural disasters. After a number
of years when you have certain hurricanes, as my friend from Florida
knows, it is easier for them to cost events when there are a series of
events they can judge over a series of years.
Because this is such a unique event, what happened here--and we hope
this is the last time it ever occurs--but in the absence of having a
series of events, it is very difficult for them actuarially to
determine what costs are in order to set premiums.
I will be happy to work with my colleague from Florida under the
circumstances that I have described.
Mr. NELSON of Florida. Will the distinguished Senator from
Connecticut yield for a further series of questions?
Mr. DODD. Absolutely.
Mr. NELSON of Florida. Does the Senator's bill require terrorism
premiums to be held in a separate account?
Mr. DODD. No, it does not.
Mr. NELSON of Florida. Would the Senator want to propound why it
should not be in a separate account?
Mr. DODD. If we look at the accounting and start setting up separate
accounts, then in a sense capital is being trapped, and I do not think
we want to do that. At least I do not want to do that; others may want
to do it. That is one of the issues, solvency.
As a former insurance commissioner, the Senator from Florida knows
that no company can do business in his State unless they are solvent,
unless they have in reserve adequate enough resources to respond to the
claims that can occur from a natural disaster or other types of
insurance that may be provided. So solvency is critically important.
If we start segregating accounts, we get into the issue of capital
adequacy. So I think I would be unwilling to require segregation of
accounts. I think if we have an accounting of them, we would achieve
the same result.
Mr. NELSON of Florida. I will merely respond before I ask my next
question by saying that we have clearly a separate matter because all
the other premiums with regard to all the other risks--be it wind,
hail, dog bite, slip and fall, construction malfunction, whatever the
risk is--is not subsidized by the Federal Government as we are doing
with this bill where the Federal Government is taking a part of the
risk.
It seems to me that it makes common sense that since the Federal
Government is getting into the business of terrorism insurance in such
a big-time way, that we ought to separate out the premiums in a
separate account, purely from an accounting function, so there is no
question that those terrorism premiums get commingled with all the
other premiums and suddenly we do not know how much that is.
I further ask the distinguished Senator, does the Senator's bill
require that premiums collected for terrorism risk be used for
terrorism losses only?
Mr. DODD. Responding to my colleague, first, we are dealing with a 2-
year bill. This is not in perpetuity. It is over 24 months. To all of a
sudden require a whole bunch more segregation of accounts and setting
up apparatuses to do it, seems to me, an overreaction. If we were
talking about a permanent program, then my colleague's case may have
more validity.
If we look back at the language of the bill in our accounting, it
requires in the language, as he read, a very clear and conspicuous
disclosure to the policyholder of the premium charged for insured
losses covered by the terrorism insurance program. Now, clear and
conspicuous seems to be about as clear and conspicuous as language
could be.
For a 24-month bill, my point would be that we are overreacting by
requiring the separate accounting. And not getting into the business of
segregating accounts and all of the costs associated with that seems to
me to satisfy and should satisfy a majority of us. I think people have
looked at this and have the same kind of concerns that our colleague
from Florida has raised.
Mr. NELSON of Florida. If the Senator will allow me to continue with
another couple of questions, I would merely respond to the
distinguished Senator's comments, that here is an example today on the
front page of the Washington Post, that we are talking about rates
being hiked using the terrorism risk as an excuse. Therefore, I clearly
implore the Senate that it makes common sense, if rates are going to be
hiked for terrorism risk, make sure it is those rate premiums that are
paying the terrorism losses, and not going into the general fund and
suddenly all of the premiums get jacked up. If we are going to jack
rates higher than the Moon, then let us at least segregate them so they
are there for what they are purported to be there for, and that is to
pay for a terrorism loss. That is what I would propound to the Senator.
Mr. DODD. In response, I think the story in the Washington Post this
morning, in fact, makes the case of why we are here. Those rates are
going up on the National Geographic building and on the Washington Post
itself. There were several other enterprises. George Washington
University, for instance, is mentioned in the article. That is done in
the absence of this bill.
As I described apparently not very well a few minutes ago, costing
this kind of an event, 9-11, is very difficult. So the insurance
industry is out there and it is going to protect itself. We believe
with this bill being a backstop for a couple of years we could help put
the
[[Page S5497]]
brakes on exactly the kind of story the Senator is reading from the
Washington Post.
If my colleague is worried about premium rate increases, it seems to
me that while our bill is not perfect, there is a greater likelihood we
are going to be able to protect consumers more against rate increases
having passed this bill, making the case that now there is a backstop
so that the kind of exposure that they would be subjected to in the
absence of this bill would be less.
If we do not pass this bill, if it is voted against, or a Federal
regulator is created and there is a lot of other unnecessary
bureaucracy, then we run the risk of not only what happened in
Washington happening elsewhere--in fact, it is happening. We already
know that terrorism insurance is not available in a lot of places, and
where it is, it is very costly. We want to do what we can to stop the
tremendous increase in that cost. That is what brings us here. That is
why, as well--I made the point earlier and I make it again--we require
on page 12 of our bill that there be a very clear disclosure of what
premiums are being charged. We put that right in the bill, clear and
conspicuous to policyholders, what the premiums are and what the
distinction is between premiums collected for that and premiums
collected for other forms of insurance.
We do not go as far as my colleague from Florida does by requiring
segregation of accounts, but we think that provision for 24 months is a
good consumer protection provision, and it will give us the kind of
information we need to have.
The three reports I have mentioned are rather extensive involving the
National Association of Insurance Commissioners, the GAO, the Commerce
Department, the Treasury Department, the Federal Trade Commission, all
requiring information be gathered so we can get, within 6 months, some
clear indication of how this is working.
In conclusion, I say to my colleague from Florida, I will be the
first to admit I cannot tell him that the Senator from New Jersey; the
Senator from Maryland; the two Senators from New York, Mrs. Clinton and
Mr. Schumer; and I have written a perfect bill. If the Senator is
asking me to say that, I cannot say that because we are in uncharted
waters in many ways. So we are trying to respond to a problem that
exists.
We know for a fact that there is a major slowdown in our economy
because major projects have either been cancelled or stalled because
they cannot get the financing necessary to go forward. The reason they
cannot get the financing is because they cannot get the insurance.
Every homeowner in America knows what I am talking about. If they
cannot get insurance, then their banker is not going to lend them the
money for the mortgage. That is a fact of life. That is just as true in
commercial enterprises as it is in residential.
With the absence of insurance, the banks do not lend the money. The
projects do not go forward and there is higher unemployment and a
slowdown of the economy.
If my colleague is looking for perfection, I cannot give it to him.
All I can tell him is we are trying our best to frame something for 24
months that will reduce the spike in premium costs and have as a
backstop the Federal Government, but let the private sector try to
solve these crises or problems in the interim, with us getting out of
the business as soon as we can.
Mr. NELSON of Florida. Would the distinguished Senator from
Connecticut yield for a further question?
Mr. DODD. I am happy to yield.
Mr. NELSON of Florida. The Senator has made much of the fact that
this would suddenly be the Federal Government getting into ratemaking.
Of course, the Senator would concede, would he not, that this is the
first time the Federal Government would be getting into big time
insuring an insurance risk?
Mr. DODD. I disagree. Facts will show after World War II we were the
insurance company for acts of war. Acts of war occurred in World War
II. The Federal Government was the party that paid the claims.
Mr. NELSON of Florida. And acts of war are exempt on every insurance
policy that I know of as a covered risk. It is exempt.
I say to the distinguished----
Mr. DODD. I get nervous when he keeps calling me ``distinguished.''
Mr. NELSON of Florida. You not only are distinguished, you look
distinguished.
Mr. DODD. You have a looking point, as well.
Mr. NELSON of Florida. You sound very distinguished, too, but I want
you to answer my questions.
Mr. DODD. Yes.
Mr. NELSON of Florida. The question is, since we have the Federal
Government involved big time under your bill, 80, 90 percent of the
risk is going to be borne by the Federal Government----
Mr. DODD. My colleague has not read the bill. We are talking about
$10 billion as the deductible level.
Mr. NELSON of Florida. Would the Senator concede under that
complicated mathematical formula, often it is a fraction of a
percentage of the total annual premium of a company that they will
actually pay in an individual company in any one year?
Mr. DODD. My colleague is getting away from the amendment. That is
not part of the amendment. Are we are talking the amendment or the
underlying bill?
Mr. NELSON of Florida. Underlying bill.
Mr. DODD. It is a formula, a debate.
Senator Gramm may offer an amendment on how you prefer to do it. On
most cases, you have a consolidation. You do not have one insurance
company covering one building.
Let me finish. You asked a question and I will respond.
Under the bill, you cannot have all of a sudden some fictitious
insurance company getting set up. It is only the companies in existence
as of September 11. The rate structures have to be what they were at
the time. You cannot have someone taking advantage of this bill to
create the phony entities allowing them to take advantage of the
situation.
In the State of Florida, talking about something such as Disney
World, start talking about the stadiums in Miami, for instance, there
is not one insurer that covers those events. There is usually a
collection that do. The idea of maintaining solvency which laws require
in each State--you could have a smaller company, obviously as part of
that. If you get levels where their percentage of the overall amounts
are exceeded and the solvency of the company goes under, we have
defeated the purpose of the legislation.
There is that distinction between industry-wide and company caps.
That is why we drew that distinction.
Mr. NELSON of Florida. Maybe I can ask a question of the
distinguished Senator to which he could give a yes or no.
First, I merely point out the fact with the Federal Government being
so involved in assuming the terrorism risk, what will be charged for
that risk is clearly a legitimate issue for the Secretary of the
Treasury with the consultation of the States to determine what you
ought to charge for that risk. Particularly given the fact that since
this is only a 1-year bill and maybe a 2-year bill by the time you get
to the end of that time, the 50 insurance commissioners of the country
would not have even had a chance to determine if a rate was actuarially
sound. Usually that is done only when the insurance companies file
those rates, when, in fact, these rates are already in effect as
indicated by this morning's newspaper.
Mr. DODD. Let me say to my colleague, we are doing here what is done
in 40 States. My colleague is right; in 10 States they do it
differently. We tried to set up a system that made some sense. That is,
you are right, the rates go into effect but we still retain the strong
involvement of your State insurance commissioners to go forward.
I ask unanimous consent a letter be printed in the Record that I
received from the National Association of Insurance Commissioners on
this amendment and their concerns about the amendment of distinguished
Senator from Florida.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
[[Page S5498]]
National Association of
Insurance Commissioners,
Kansas City, MO, June 13, 2002.
Hon Chris Dodd,
U.S. Senate,
Washington, DC.
Dear Senator Dodd: I am writing to respond to your request
regarding the amendment offered by Senator Nelson of Florida
regarding terrorism insurance rates.
While the National Association of Insurance Commissioners
(NAIC) has not taken a formal position on the Nelson
proposal, I do believe state regulators would have the
following concerns:
To our knowledge, the Treasury Department does not have the
infrastructure needed to monitor insurance rates as the
amendment proposes. Putting such a monitoring mechanism in
place could be cost prohibitive particularly when the
underlying federal legislation is short-term in nature;
The provisions on refunds of premiums would be very
difficult to enforce. Given the uncertainty of risk and the
lack of pricing experience, the revised rates could be
attributable to a host of other factors related to past or
prospective loss cost (the cost of reinsurance, or poor
return on investments in recent months), not the potential or
historical acts of terrorism, but rather to past and
prospective loss costs;
The separate accounting could cause reporting difficulties
and added expense for insurers, insurance regulators, and
presumably the Treasury Department. The marginal benefits and
costs associated with collecting the information could
outweigh the benefits that could be derived from the
information. For instance, Section (b) requires a separate
account for the ``premium increases'' and it cannot be used
for anything but to pay for terrorism losses.
There is no discussion about what happens to the funds
after the law sunsets.
At this time, state regulators already have the ability to
address this issue, making additional federal oversight
unnecessary.
I hope this responds to your concerns.
Sincerely,
Terri Vaughan,
Commissioner of Insurance, Iowa,
President, NAIC.
Mr. DODD. The key paragraphs deal with the underlying issue; that is,
the Treasury Department does not have the infrastructure needed to
monitor insurance rates as the amendment proposes. Putting such a
monitor mechanism in place could be cost prohibitive, particularly when
the underlying Federal legislation is short term in nature.
These are the State commissioners. They say:
The separate accounting could cause reporting difficulties
and added expenses for insurers, insurance regulators and
presumably the Treasury Department. The marginal benefits and
costs associated with collecting the information could
outweigh the benefits that could be derived from the
information.
Lastly they say:
At this time, state regulators already have the ability to
address this issue, making additional Federal oversight
unnecessary.
Mr. President, does my colleague have additional questions?
Mr. NELSON of Florida. Yes, I do. Is the Senator aware as a matter of
practice insurance commissioners of the States basically do not set
rates for commercial policies?
Mr. DODD. I understand how it works in different States. My point is,
without getting into the minutiae of it, 40 States, as I understand it,
allow in the commercial property and casualty area for rates to go
forward if a rate request is made. They then retain the right to decide
whether or not that rate is one they will accept. In 10 States, as I
understand it--and my colleague is a former insurance commissioner so
he may have more detail on this--and Florida could be one--do not allow
the rate increase to go forward without there being permission by the
insurance commissioner ahead of time. That is a general breakdown.
Within some States they have ranges of rates, but the point being, the
State insurance commissioner is the one that ultimately, one way or the
other, decides rates. How each State does it may vary a little bit here
and there, but we do nothing in this bill to undermine the ability of
the State insurance commissioner to ultimately set the rates if they do
it differently. We defer to the States on this issue historically, and
we did so again in this bill.
Mr. NELSON of Florida. If I may respond, the NAIC, National
Association of Insurance Commissioners, has formally adopted a new
version of the property and casualty energy rate and policy form model
law which essentially encourages the optional use and file system,
which is a system where the companies file what they want without the
insurance commissioner having to approve that rate ahead of time.
That is what I am trying to get across to the distinguished Senator
from Connecticut. That, in fact, there is not this closely held tight
reign out there in the 50 States by the insurance commissioners over
what are the rates on commercial policies. When you use that as an
excuse to justify not having some kind of mechanism by which we control
the rate hikes on terrorism insurance under a bill that the Federal
Government is basically going to support, the terrorism risk, it has
the potential of taking the rates to the Moon.
Mr. DODD. I defer in some ways because my distinguished friend and
colleague from Florida served as an insurance commissioner for the
State of Florida. We asked the National Association of Insurance
Commissioners to respond to the proposal. All I can tell you is that in
this letter from the NAIC, the last line of their letter to me says:
At this time--
Again, they are working on the issue. My colleague has conceded that
point--
the State regulators already have the ability to address this
issue, making additional Federal oversight unnecessary.
I don't know what else you do. I do not always agree with them on
every point. But it seems to me if the State insurance commissioners
are satisfied that they are in a strong enough position to deal with
this, whether or not they do in each State, I don't know what else you
do. I know my colleague knows there may be some who are less strong
than others on this point. But the choice is either relying on the
existing structure to set rates or set up a new operation of the
Department of the Treasury, for maybe 12 months--and we all know how
long that could take--even if you wanted to defer to the Department of
the Treasury. We could spend months with them putting together an
apparatus to do so.
Again, if the intention here is perfection, I am not the guy. This is
not the right bill. If you are asking those of us who sat down to try
to work and fashion something that we think would be the right step
forward, then I think we have done it here. If we have not, we are
going to have to come back to this issue.
All I can say to my colleagues in good faith is we think we have done
the right job. It is not all inclusive. We don't deal with workers'
compensation in this bill. That is a huge issue. My colleague from
Nebraska, the other Senator Nelson, has an amendment requiring some
studies on life and other issues we do not cover in this bill that,
frankly, are major gaps. But we just did not believe we could take on
all of that under these circumstances. We tried to keep as focused as
we could, knowing that the cost was, on September 11, a minimum of $50
billion. We know today that reserves could only accommodate about 20
percent of that event. That is a fact. And we know there are projects
and jobs being lost every day in the absence of some kind of a backup,
which is what we tried to craft.
I hope my colleagues will understand we have put together what we
think is the best proposal. We urge them to be supportive of it.
I have great respect for my colleague from Florida and his passionate
concern. He rightly points out the sense of people's anger,
frustration, and anxiety over rate increases that go on all the time.
It is terribly frustrating.
Certainly for people in Washington, DC, already we know the costs are
going up. I wish I could wave a magic wand and make it go away. I think
the best we can do, as I said, is to pass this bill, and then the
justification for those cost increases, at least of the magnitude we
may be seeing, is certainly going to be minimized by providing some
backup to this issue.
For those reasons, I urge the rejection of this amendment at the time
the vote occurs.
I see my colleagues from Nebraska and New Jersey. I do not know if
they have any comments they want to make on this bill. If not, I can
note the absence of a quorum. But if they want to be heard, I will be
happy to yield the floor.
The PRESIDING OFFICER. The Senator from Nebraska.
Mr. NELSON of Nebraska. I thank my colleague from Connecticut for
putting together, with the assistance of a lot of folks, a bill that I
think can help take off some of the pressure.
[[Page S5499]]
Mr. DODD. I made a mistake. We do deal with workers' compensation
here. I am sorry. We do not deal with life.
Mr. NELSON of Nebraska. I thank my colleague for a very able job,
putting together a bill with the assistance of a lot of individuals who
have had a lot of experience dealing with these issues.
S. 2600 is a bill that I think can help bring some balance to the
whole area that we today recognize as being imbalanced because of the
events of September 11. The effects on our economy, our society, and
our national psyche can never be overstated. They have adversely
impacted the Nation's sense of security and stability, and our lives
have been permanently changed in so many different ways that we could
not have anticipated.
One cannot overstate the effects upon the families who lost their
loved ones or those affected in other ways by the actions of the small
number of terrorists, terrorists sworn to the destruction of the
American way of life and for all that we stand.
There is not any way to return to the days before September 11, nor
can we return the stability of our lives simply on the basis of
economic decisions we make today. But I think we can begin the process
of slowing down the impact, the adverse impact on our economy.
Congress can now act to help stimulate the weak economy and further
avoid the negative consequences with this Federal backup, this
``backstop'' for catastrophic losses resulting from acts of terrorism
in the future. By enacting this legislation, I think we can in fact see
a turnaround in our commercial real estate market, mortgage lenders,
the construction industry, and other segments of our economy.
This is a jobs bill, pure and simple, to make certain that our
economy will in fact respond appropriately and positively rather than
be adversely affected by the continuing lack of availability and a
growing lack of availability of the property and casualty and workers'
compensation coverages that are so important to the future of our
economy. We must in fact respond to that.
I have learned firsthand the necessity of insurance in the commercial
world. As a former insurance regulator, as someone who has been
involved in the insurance business, or the field of insurance
regulation, virtually all of my working life, with the exception of my
public service as Governor and here in the Senate, this is not so much
about----
The PRESIDING OFFICER. Under the previous order, the vote is to occur
at 3:15 on the amendment, with 10 minutes equally divided prior to that
vote. We are at that point now.
Mr. DODD. Mr. President, I will yield my 5 minutes to the
distinguished Senator from Nebraska in opposition to the Nelson
amendment. I have already spoken about it. Then Senator Nelson will
have 5 minutes in support of his amendment.
I yield my time to the distinguished Senator from Nebraska.
The PRESIDING OFFICER. The Senator from Nebraska is recognized for an
additional 5 minutes.
Mr. NELSON of Nebraska. Mr. President, what I am concerned about is
if we adopt the current amendment to the underlying bill, while there
is a temptation to try to control rates, it is absolutely antithetical
to try to control rates at a time when we are not going to control the
issuance of the coverage. We get the odd effect of not saying you must
write it--and I hope we never get to the point of saying you must write
this insurance, this line of coverage, that we never get to the point
where that has to be required--but at the same time, if we say the
rates are controlled, this market I do not think will continue to
respond or have the opportunity to respond as if we passed the
underlying bill without this amendment.
I respect a great deal my colleague from Florida, my namesake, who
has had similar experience to mine. But my experience has been
different. That is, if we try to control the rates, if we try to create
a quasi-Federal rate control structure for a very short period of time,
or for a long period of time, we will not enhance the availability of
insurance, we will get just the opposite result.
Therefore, I hope as we look at this amendment today--and it pains me
to take issue with my friend from Florida, but I must in fact say
this--it will not enhance the availability of insurance, in my opinion
and from my experience, but it will in fact deter the growth of the
market. It will help reduce the availability of the coverage and not
enhance it, as does the underlying bill as it is right now.
Whereas it may be amended by other amendments, and I intend to offer
one that in fact will enhance the availability of more terrorist
coverage in the commercial lines in those areas that are currently
being so adversely affected and impacted by the absence of this
backstop, it is about jobs, it is about the economy, less so about
insurance.
Mr. President, I yield the remainder of my time to the distinguished
Senator from Connecticut.
Mr. DODD. Madam President, in the interest of time, I yield my time
and leave the remaining time to the proponent of the amendment.
The PRESIDING OFFICER (Mrs. Carnahan). The Senator from Florida.
Mr. NELSON of Florida. Madam President, I would like to close on my
amendment.
This has been a good debate. Again, although I have serious
reservations about this legislation, I did not prevent it from coming
to the floor, which I could have done last night.
I appreciate the distinguished Senator from Connecticut engaging in
the colloquy, the series of questions and answers. I hope it is better
understood. Now I would like to make a couple of points before we vote
on the amendment, and I will ask for the yeas and nays.
First of all, I want to correct something the distinguished Senator
from Nebraska said.
In fact, terrorism insurance under this bill is mandatory. That is
the whole point of setting the system up whereby the Federal Government
is coming in and backstopping insurance companies. It is mandatory for
all commercial property and casualty insurance. The insurance is there.
The Federal Government is picking up most of the tab. If the loss
occurs, who is paying? The consumer is paying through the premiums that
have already been hiked as chronicled daily over the last 6 months,
including this one in today's paper talking about a 300-percent
increase in the last 6 months. That, in fact, is what has happened.
What should we do about it? We have to make insurance available. That
is part of the reason for the underlying bill. But we also have to make
it affordable.
When rates get hiked 300 percent, you are getting to the precipice of
whether it is affordable.
Don't just think it is the big real estate conglomerates that are
having trouble getting this insurance. This affects small businesses as
well. Whatever the size of the business, these rate hikes are going to
be passed on to the consumers as a cost of doing business. The huge
rate hikes are going directly to the consumers.
I reiterate that consumers and taxpayers do not like to have their
Senators voting to increase their taxes. Let me tell you what they do
not like even more: They do not want their Senators approving
legislation that causes rate hikes to be etched into law.
I come forth humbly and respectfully with an amendment that says we
are going to put a process in place--that we are going to put this
process in place that says the Secretary of Treasury is going to
consult with the NAIC and other Federal agencies as to what ought to be
the range of a rate hike or rate decrease, whatever is warranted; and,
furthermore, where there has been the huge increase already, but then
the Secretary says the rate increase ought to be there or not there for
the remainder of that policy, that difference has to be rebated to the
policyholder.
Naturally, this is stepping on some toes because it not only puts a
process of logic in the handling of rates, but it causes rebates to go
back where the rates have been determined to be excessive.
Senators, hear me. This is a dangerous vote. Watch out what you are
voting on as you vote on the Nelson amendment.
I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
Mr. REID. Madam President, I move to table and I ask for the yeas and
nays.
[[Page S5500]]
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The question is on agreeing to the motion, and the clerk will call
the roll.
The legislative clerk called the roll.
Mr. REID. I announce that the Senator from California (Mrs. Boxer),
the Senator from Hawaii (Mr. Inouye), and the Senator from Vermont (Mr.
Jeffords) are necessarily absent.
I further announce that, if present and voting, the Senator from
California (Mrs. Boxer) would vote ``no.''
Mr. NICKLES. I announce that the Senator from North Carolina (Mr.
Helms), the Senator from Idaho (Mr. Crapo), and the Senator from
Virginia (Mr. Allen) are necessarily absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 70, nays 24, as follows:
[Rollcall Vote No. 153 Leg.]
YEAS--70
Allard
Bayh
Bennett
Bond
Breaux
Brownback
Bunning
Burns
Byrd
Campbell
Cantwell
Carnahan
Carper
Chafee
Cochran
Collins
Conrad
Corzine
Craig
Daschle
DeWine
Dodd
Domenici
Dorgan
Edwards
Ensign
Enzi
Feinstein
Fitzgerald
Frist
Gramm
Grassley
Gregg
Hagel
Harkin
Hatch
Hutchinson
Hutchison
Inhofe
Kerry
Kyl
Lieberman
Lott
Lugar
McCain
McConnell
Miller
Murkowski
Murray
Nelson (NE)
Nickles
Reed
Reid
Roberts
Santorum
Sarbanes
Schumer
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Voinovich
Warner
Wyden
NAYS--24
Akaka
Baucus
Biden
Bingaman
Cleland
Clinton
Dayton
Durbin
Feingold
Graham
Hollings
Johnson
Kennedy
Kohl
Landrieu
Leahy
Levin
Lincoln
Mikulski
Nelson (FL)
Rockefeller
Stabenow
Torricelli
Wellstone
NOT VOTING--6
Allen
Boxer
Crapo
Helms
Inouye
Jeffords
The motion was agreed to.
Mr. DODD. Madam President, I move to reconsider the vote.
Mr. REID. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. DODD. Madam President, I know my colleague from Nevada wants to
be heard for a few minutes as in morning business. I will make an
appeal here, as I see the leader on the floor. I only know of a couple
more amendments at this point. Maybe there are more. If there are, I
would like to know about them so I can have some idea and let the
leader know, or give the leader an idea as to how we are going to be
proceeding.
I know Senator Gramm may have an amendment. I gather that Senator
Hatch's may be withdrawn. I know there is an amendment by Senator
Leahy. There will be a colloquy between Senator Collins and Senator Ben
Nelson. My colleague from Oregon, Senator Wyden, has an interest in an
amendment as well. Senator Nelson of Florida also has an amendment we
may try to take up.
Those are the parameters at this point. There may be other
amendments. If there are, let's get some sense of it so the leader can
set a schedule.
The PRESIDING OFFICER. The majority leader is recognized.
Mr. DASCHLE. Madam President, if it is possible to go to third
reading tonight or tomorrow morning, I would like to entertain that.
The sooner we can do that, the better. Colleagues are interested in
taking up the Defense authorization bill. That is something we hope we
can take up very quickly. There are other issues out there that have to
be addressed. So if it is possible to go to third reading tonight, I
would like to be able to do that very much. If there are additional
amendments, this is the time to offer them, or we will move to third
reading shortly.
I urge my colleagues to come to the floor and dispose of their
amendments so we can bring this bill to closure and move on to other
matters of great priority before we leave for the Fourth of July
recess.
I yield the floor.
Mrs. CLINTON. Madam President, I am here to express very strong
support for S. 2600, the Terrorism Risk Insurance Act of 2002. I know
we have had debate and a couple of votes, but I want to underscore how
important this legislation is to the State of New York and to the
ongoing economic challenges we confront because of September 11.
This legislation provides a temporary Government-industry program for
sharing property and casualty insurance losses; in short, what is
called a Government backstop. The loss sharing program would run for
just 1 year, although it could be extended for an additional year.
We are only talking about a temporary fix until the marketplace gets
back on its feet and we get a reinsurance industry that is willing to
backstop the insured and their losses. I hope all of my colleagues
understand how significant this legislation is to so many industries
and particularly in the State of New York.
Under the legislation, if there were a terrorist attack that results
in more than $5 million in insured losses, insurance companies would
collectively cover total losses of up to $10 billion. Companies would
contribute to that $10 billion amount based upon their individual
market shares.
If the losses exceeded $10 billion, but were less than $20 billion,
then the Federal Government would pay 80 percent of the losses and the
insurance industry would cover 20 percent. If the losses were more than
$20 billion but less than $100 billion, the Federal Government would
pick up 90 percent and the industry would cover 10 percent. And if
there were more than $100 billion in losses, the Secretary of the
Treasury would notify the Congress, and we would then determine how
losses over that huge amount would be covered.
All property and casualty insurance, except crop and mortgage
insurance, would be covered. The bill would also cover not just
insurance companies, but also those which self-insure, which includes
many businesses in New York and across the country.
I have heard so many concerns expressed by businesses in New York. I
have heard it from the real estate industry, from the Association for a
Better New York, which is the equivalent in many ways of the Chamber of
Commerce in New York City, from New York City Partnership, which also
acts to bring businesses, large and small, from all different sectors
of the economy together to speak with one voice. But throughout New
York City and throughout New York State, throughout certainly the
larger New York area, which includes New Jersey and Connecticut, the
problems associated with obtaining terrorism insurance have become a
matter of great immediacy and urgency.
In fact, the department of insurance superintendent, Gregory Serio,
has recently met with me to confirm that it is not just individual
companies that are running into problems, it is a systemwide challenge
to the fundamental concept of being able to provide insurance for our
businesses.
Mr. HATCH. Will the Senator yield for a unanimous consent request?
Mrs. CLINTON. Certainly.
Amendment No. 3839 Withdrawn
Mr. HATCH. Mr. President, I withdraw my amendment.
The PRESIDING OFFICER. The amendment is withdrawn.
The Senator from New York.
Mrs. CLINTON. I want to give one example. I could literally give so
many examples in this Chamber because they have flooded into my office
and come to my attention and to my counsel's attention for weeks now.
Francis Greenberger of Time Equities, Inc., a real estate investment
firm, has confirmed to me that the insurer they had before September 11
required their company to buy terrorism insurance for four properties:
three in New York and one in Madison, WI, an apartment building.
They were required to insure the property in Madison, WI, against
terrorism, despite the fact that it is clearly not near New York City.
It is not an area where there have been a lot of threats, but,
nevertheless, in order to get the terrorism insurance where it was
needed in New York, the four properties were lumped together.
The cost of the insurance premiums for these properties rose from
$191,500 pre-September 11 to $664,300, an increase of 347 percent. Even
with these
[[Page S5501]]
exorbitant premiums, the amount of terrorism insurance coverage that
the company received for these much higher premiums was actually 50
percent less than the amount of coverage it had previously received.
In addition, the new policy excluded bioterrorism and nuclear attacks
and had a deductibility of more than $1 million. By any standard, that
is a terrible burden to try to absorb, especially during an economic
downturn in the wake of the terrorist attack on New York.
That is not by any means a unique story. I have heard many like it
from not only real estate holders but construction contractors, stadium
owners, sports teams, amusement park owners, banks, and not just in New
York but people who do business, literally, all over the country.
The lack of insurance has affected the ability of many developers to
close real estate deals, to complete old ones and to start new ones. So
at least in our part of the world new offices, residential buildings,
new hotels, and new entertainment centers are either on hold or being
forced to expend much more money than any reasonable assessment of the
risk should call for.
In addition, we know the reinsurance market ends on July 1, so there
is urgency for us to act. I appreciate my colleagues on both sides of
the aisle who are working to get this legislation passed. It is not
only the private sector; it has also been a real challenge for
hospitals. Again, the New York insurance superintendent has reported
that hospitals were the first New York business to experience
significant difficulties in obtaining adequate and affordable property
coverage for their facilities.
We also have problems with our major philanthropic organizations.
They operate hospitals. They operate museums. We have an across-the-
board problem in getting the kind of insurance that is required, and,
in many instances, what has been offered is far from adequate. Many, as
I said, exclude certain kinds of terrorism. They tighten up the
definition of occurrence. Then they jack up the prices so that it is
not affordable anyway, even though it is not very good coverage. In
many cases, the insured has no choice.
I do hope we are not only going to pass this and pass it as soon as
possible, but that we will recognize another area of difficulty, and
that is with respect to workers' compensation coverage. Under New York
law, primary insurers providing workers' compensation coverage cannot
exclude terrorism coverage. Therefore, many primary insurers are
dropping their insureds and refusing to offer workers' compensation
anymore at all.
I understand it was the intention of Senator Dodd that workers'
compensation insurance would be covered by this bill under the general
rubric of commercial lines of insurance. I have some concern, however,
because a number of types of insurance are specifically defined, but
workers' comp is not. I understand, though, that Senator Dodd will
address this issue and will make it explicitly clear that workers'
compensation coverage is also covered by this legislation. I wish to
thank Senator Dodd and his staff for recognizing this potential
oversight and moving to remedy it.
In conclusion, I am delighted that this bill is finally being
debated. Many of us have been urging that it arrive as soon as it
could. We are now right in the crunch period because reinsurance in
most instances disappears in just a few weeks on July 1. Workers'
compensation is not even being written right now in New York in many
instances, so we must move.
I have said from this floor many times in the last months that when
New York was attacked, it was an attack on America. The economy of New
York is absolutely crucial to the full recovery of America, and there
is no more important legislation than the one we are considering now to
ensure that economic activity resume at the highest possible level and
that we not only put New Yorkers back to work but that, because of the
dynamism of the New York economy, we send out that energy that will get
our national economy moving in the right direction as well.
So I thank the sponsors. I look forward to the vote on this, and I
appreciate support for this important legislation.
I yield the floor.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Mr. President, while the majority leader is on the floor, I
want to certainly recognize the fact that this is an important piece of
legislation. We have been told that people have wanted this for months,
going back to last December. Here it is, Thursday afternoon and there
is no one else on the Senate floor.
As the majority leader said and as I have tried to say in
representing what the majority leader has said to me, really we have to
move this legislation along. There is so much left to do without our
being here doing nothing.
I would say as the leader said this morning, if there are no
amendments, maybe we should move to third reading, if people do not
have amendments to offer. The majority leader has been very generous
saying people should have the opportunity to offer all the amendments
they want. There will certainly be no rush to filing a motion for
cloture.
But I just say to the majority leader, I hope everyone heard what the
majority leader said earlier today, that we have to move ahead. Here it
is Thursday afternoon and nothing is moving.
Mr. DASCHLE. Mr. President, if I could respond to the distinguished
assistant Democratic leader.
The PRESIDING OFFICER. The majority leader.
Mr. DASCHLE. He is absolutely right. I have indicated to the
distinguished Republican leader it was not my intention to file cloture
today, even though obviously that is the prerogative of the majority
leader. We have no designs to do that. But we also recognize that we
have a lot of work to do. It is not my intention to file cloture today.
I hope colleagues who have amendments will offer them and we can have
votes on them. If there are no amendments, we will move to third
reading sometime very soon.
If there are objections to moving to third reading, our colleagues
are going to have to come over and physically object. We cannot waste
what is valuable time on the Senate floor waiting for Senators to offer
amendments if there are none. So we will make our best effort to
determine the degree to which there are Senators who still wish to
offer amendments. Time is running out. We will move to third reading
shortly if no amendments are offered.
I yield the floor and suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. BYRD. Mr. President, I ask unanimous consent that the quorum call
be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
____________________