[Congressional Record Volume 148, Number 81 (Tuesday, June 18, 2002)]
[Senate]
[Pages S5664-S5673]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




            TERRORISM RISK INSURANCE ACT OF 2002--Continued

  The PRESIDING OFFICER. The Chair notes that the time between the two 
Senators is equally divided.
  Mr. GRAMM. Mr. President, we are coming down to a vote at 4:45. I 
intend to vote no. I don't expect many other Members to vote no, nor am 
I encouraging people to vote no. But I want to try to explain the 
problem I have and explain a little bit of the history of this bill so 
people know where we are coming from.
  I think we have about 14 minutes each. Is that right?
  The PRESIDING OFFICER. The Senator from Texas has approximately 10 
minutes 30 seconds.
  Mr. GRAMM. Mr. President, when terrorism insurance was first 
proposed, the whole logic was that we were going to have the Federal 
Government step in to help provide insurance coverage and pay claims 
when there was a cataclysmic event.
  When we first started debating this issue in the House of 
Representatives, insurance companies had to pay back money that was 
paid by the Federal Government over $1 billion. When we debated it in 
the Senate, we concluded that if it had to be paid back, you were not 
providing the assistance we sought, but we were sure when we initially 
debated this subject we had a very substantial amount of money that the 
companies had to pay before the Federal Government got in the business 
of having to pay. The amount the companies have to pay before the 
Federal Government starts paying is called ``retention.''
  When we first started to debate this issue, and when we reached an 
initial bipartisan agreement in October, I believe it was that 
companies were required to pay $10 billion before the Federal 
Government came in to pay claims. Above that $10 billion, the Federal 
Government was to pay 90 percent of the next $90 billion. The logic of 
the retention--the amount that the insurance companies had to pay--was 
basically, No. 1, that the insurance companies are selling this 
insurance and collecting premiums. The fact that they would cover the 
initial cost was imminently logical.
  No. 2, we wanted to protect the taxpayer unless there was a 
cataclysmic event.
  Thirdly, the whole objective of our bill was to try to encourage the 
development of reinsurance and to encourage syndication so that no one 
insurance company would write an insurance policy on the Empire State 
Building. There might be a lead insurance company that would write the 
policy. But then they would syndicate and sell off part of the 
insurance to other companies, or they would simply go into a 
reinsurance market and sell all or part of the policy--the idea being 
to distribute the risk not just throughout the United States but 
throughout the world.
  When we reached an agreement in October, the companies had to pay $10 
billion before the taxpayer got involved. Many Members of the Senate 
thought that was too low. We reached an agreement. We announced it, and 
the White House signed off on it.
  We also protected victims of terrorism from punitive damages and 
predatory losses.
  In December, we still had not passed a bill. We were 3 weeks away 
from 80 percent of the insurance policies in America expiring. There 
was a belief

[[Page S5665]]

that if we did pass a bill right at the end of the session there would 
not be enough time for syndication and reinsurance to develop. So the 
bill that was written at that time had an individual company retention 
but not a $10 billion retention.

  This is still very much confused by the media in writing on this 
subject.
  The net result is that the biggest insurance company in America--
AIG--has a retention of about $1.6 billion. The smallest insurance 
companies in the country might have a retention that would be in the 
tens of millions. That means that is what they have to pay before the 
taxpayer pays.
  That has several problems.
  No. 1, companies have already collected premiums. Premiums have gone 
up. They had to go up because risks have gone up. But premiums have 
gone up, and insurance companies have collected these premiums. When 
they wrote the insurance policy, they had no taxpayer backup 
whatsoever. Now we are coming along, and instead of having $10 billion 
that the industry has to pay before the taxpayer pays, in some cases 
some insurance companies will have to pay only millions of dollars 
before the taxpayer steps in and pays.
  It doesn't take a great knowledge of economics or arithmetic to 
figure out that when people wrote policies and collected premiums based 
on having to pay the full cost if a claim was made and the Government 
is going to come in and pay 90 percent of the claim above only a few 
million dollars in the case of some insurance companies, that you are 
going to create a very substantial shifting of wealth from the 
taxpayers to the people who have written the policies, if there is a 
major claim. And, at a minimum, you are shifting a substantial amount 
of risk from the insurance company to the Federal Government.
  I am one of a handful of Members of the Senate who thought we ought 
to do a bill. In fact, at one point, I was one of the few people 
willing to stand up and say so.
  I have always believed if we were going to do a bill we had to have a 
substantial industry retention so the people collecting the premiums 
paid first, and also so that we had an incentive for industry to 
syndicate to spread the risk, and an incentive to develop reinsurance.
  I am very concerned that the bill, as it is now written, represents 
an unwarranted shift of risk from the insurance companies to the 
taxpayer. If there is, God forbid, another attack, it will mean the 
shifting of billions of dollars from the taxpayer to the insurance 
companies.
  But the biggest concern I have is not about taxpayer risk or about 
the unintended shift of billions of dollars to private interests from 
the taxpayer. The biggest concern I have is that by reducing the amount 
that the companies have to pay before the Government pays, that we are 
going to reduce the incentive that companies will have to spread the 
risk to syndicate, to develop reinsurance, and that 2 years from now, 
when the bill expires, none of these secondary markets will have 
developed, the Government will have become the primary risk taker, and 
we will end up extending this indefinitely.
  In World War II we had a Government program, but we knew World War II 
was going to end with the signing of a peace treaty. This war is going 
to end with the death of some terrorist, and we are not going to know 
he was the last terrorist in the world.
  So I am very concerned that unless we raise this retention level, 
unless we make companies that have collected the premiums pay a 
substantial amount of money before the taxpayer pays, that we are never 
going to get the Government out of this area of insurance.
  Our whole focus from the beginning--in fact, I have never heard a 
Democrat or Republican suggest otherwise--has been that this was a 
bridge to help us get through this period of great uncertainty so that 
ultimately these risks could be built into insurance rates.
  That is where we are. I think we are making a mistake by not 
requiring the people who collected these premiums to pay a substantial 
amount of money first. I think we are planting the seeds to get 
Government permanently in the insurance business.
  Something happened, and it is perfectly reasonable that it would 
happen. When we were talking about the industry having to pay $10 
billion before the taxpayer paid, the industry was delighted that they 
were going to have the backup of the taxpayer. But in December it was 
suggested that the industry could pay tens of millions of dollars 
before the taxpayer paid. And even though all those insurance policies 
expired on January 1, many of them were rewritten at substantially 
higher premiums. I am not complaining. Premiums have to go up because 
risks have gone up. But now to suggest that we should not make the 
industry pay up to $10 billion before the taxpayer pays, I think, is 
basically going back on the deal in which we engaged.
  I do not doubt that if I were in the insurance business I would 
probably want the Government to pay the whole claim, and I would want 
to collect the policy, I would want to collect the premiums. But I 
think we have a gross overreach here that puts the taxpayer at risk at 
an unjustifiable level.
  Finally, and most importantly, I am concerned that the incentives we 
are creating here will induce companies not to syndicate, not to spread 
risk as much as they would; and, as a result, the Government will pay 
sooner. I am worried that secondary markets will not develop and the 
Government will not be able to get out of the insurance business. And I 
am very much concerned that 2 years from now we will be right back 
here, and the argument will be made that there is no syndication, that 
there is no secondary market, and, therefore, the Government has to 
stay in the terrorism insurance business.
  We can fix that by changing this bill. We have not done that. That is 
why I am opposed to it.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Mr. President, if I may, I want to engage, before some 
final comments, in a couple of housekeeping matters.


                           Amendment No. 3862

  First, Mr. President, what is the pending business before the Senate?
  The PRESIDING OFFICER. The pending business before the Senate is 
amendment No. 3862.
  Mr. DODD. Mr. President, I make a point of order that the Specter 
amendment is not germane post cloture.
  The PRESIDING OFFICER. The point of order is well taken and the 
amendment falls.


Amendments Nos. 3872, 3874 through 3879, 3881, 3883, 3884, 3885 through 
                          3887, 3889, and 3890

  Mr. DODD. Mr. President, I ask unanimous consent it be in order for 
the Senate to consider en bloc the following amendments; that the 
amendments be considered and agreed to en bloc, and the motion to 
reconsider be laid upon the table en bloc, without further intervening 
action or debate: amendments Nos. 3872, 3874 through 3879, 3881, 3883, 
3884, 3885 through 3887, 3889, and 3890.
  The PRESIDING OFFICER. Is there objection?
  Mr. GRAMM. Will the Senator yield?
  Reserving the right to object.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. GRAMM. Did the Senator include 3884?
  Mr. DODD. I did.
  Mr. GRAMM. I would just like to say that we do not have any 
objection. These are amendments that were agreed to.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendments (Nos. 3872, 3874 through 3879, 3881, 3883, 3884, 3885 
through 3887, 3889, and 3890) were agreed to, as follows:


                           amendment no. 3872

       On page 5, line 3, insert ``or vessel'' after ``air 
     carrier''.
                                  ____



                           amendment no. 3874

       On page 9, line 19, strike ``the period'' and all that 
     follows through line 22 and insert the following: ``the 1-
     year period beginning on the date of enactment of this Act; 
     and''.
                                  ____



                           amendment no. 3875

       On page 10, beginning on line 2, strike ``the period'' and 
     all that follows through ``2003'' on line 3, and insert ``the 
     1-year period beginning on the day after the date of 
     expiration of the period described in subparagraph (A)''.
                                  ____



                           amendment no. 3876

       On page 10, line 17, insert before the semicolon ``, 
     including workers' compensation insurance''.

[[Page S5666]]

     
                                  ____
                           amendment no. 3877

       On page 11, line 4, strike the period and insert the 
     following: ``; or
       ``(iii) financial guaranty insurance.''.
                                  ____



                           amendment no. 3878

       On page 11, line 14, strike ``all States'' and insert ``the 
     several States, and includes the territorial sea''.
                                  ____



                           amendment no. 3879

       On page 11, between lines 14 and 15, insert the following:
       (14) Rule of construction for dates.--With respect to any 
     reference to a date on this Act, such day shall be 
     construed--
       (A) to begin at 12:01 a.m. on that date; and
       (B) to end at midnight on that date.
                                  ____



                           amendment no. 3881

       On page 24, line 7, strike ``2003'' and insert ``the second 
     year of the Program, if the Program is extended in accordance 
     with this section''.
                                  ____



                           Amendment No. 3883

       On page 21, strike lines 1 through page 22, line 14 and 
     insert the fillowing:
       (1) In general.--The Program shall terminate 1 year after 
     the date of enactment of this Act, unless the Secretary--
       (A) determines, after considering the report and finding 
     required by this section, that the Program should be extended 
     for one additional year, beginning on the day after the date 
     of expiration of the initial 1-year period of the Program; 
     and
       (B) promptly notifies the Congress of such determination 
     and the reasons therefor.
       (2) Determination final.--The determination of the 
     Secretary under paragraph (1) shall be final, and shall not 
     be subject to judicial review.
       (3) Termination after extension.--If the Program is 
     extended under paragraph (1), the Program shall terminate 1 
     year after the date of commencement of such extension period.
       (b) Report to Congress.--Not later than 9 months after the 
     date of enactment of this Act, the Secretary shall submit a 
     report to Congress--
       (1) regarding--
       (A) the availability of insurance coverage for acts of 
     terrorism;
       (B) the affordability of such coverage, including the 
     effect of such coverage on premiums; and
       (C) the capacity of the insurance industry to absorb future 
     losses resulting from acts of terrorism, taking into account 
     the profitability of the insurance industry; and
       (2) that considers--
       (A) the impact of the Program on each of the factors 
     described in paragraph (1); and
       (B) the probable impact on such factors and on the United 
     States economy if the Program terminates 1 year after the 
     date of enactment of this Act.
                                  ____



                           AMENDMENT NO. 3884

       On page 12, strike lines 15 through 19 and insert the 
     following: ``of enactment of this Act, on a separate line 
     item in the policy, at the time of offer, purchase, and 
     renewal of the policy; and
       ``(B) in the case of any policy that is issued before the 
     date of enactment of this Act, as a line item described in 
     subparagraph (A), not''.
                                  ____



                           AMENDMENT NO. 3885

       On page 15, line 3, strike ``the period'' and all that 
     follows through line 6, and insert ``the 1-year period 
     beginning on the date of enactment of this Act--''.
                                  ____



                           AMENDMENT NO. 3886

       On page 16, beginning on line 4, strike ``the period'' and 
     all that follows through ``2003'' on line 6, and insert the 
     following: ``the 1-year period beginning on the day after the 
     date of expiration of the period described in subparagraph 
     (A)''.
                                  ____



                           AMENDMENT NO. 3887

       On page 16, between lines 19 and 20, insert the following:
       (D) Prohibition on Duplicative compensation.--dThe Federal 
     share of compensation for insured losses under the Program 
     shall be reduced by the amount of compensation provided by 
     the Federal Government for those insured losses under any 
     other Federal insurance or reinsurance program.
                                  ____



                           AMENDMENT NO. 3889

       On page 23, line 19, insert ``5(d),'' before ``and''.
                                  ____



                           AMENDMENT NO. 3890

       On page 23, line 25, strike ``10(b)'' and insert ``9(b)''.

  Mr. DODD. I thank my colleague from Texas.
  Mr. President, let me point out, one of these amendments is an 
amendment that was raised by our colleague from Florida, Senator Bill 
Nelson. I thank him for his work on that amendment. I appreciate the 
willingness of the Senator from Texas to agree to that change we made 
in the legislation.
  Mr. President, if I may, I would like to speak on this bill in the 
few remaining minutes we have before the vote. This bill has been 9 
months in the process.
  I would like to begin by thanking my good friend from Texas. We began 
together on this legislation a long time ago, a few weeks after the 
tragic events of September 11. In fact, I recall, very vividly, my 
friend from Texas leaning over to me and saying we ought to do 
something in the area of terrorism insurance, not that we called it 
that at that particular time, but it was the same idea that is 
contained in the legislation before the Senate today.
  So despite whatever differences we may have at this particular 
moment, I would like to acknowledge his active involvement with this 
issue. He is one of the few people who was consistently interested in 
trying to get something done here over these many months.
  It has taken us a long time. This is an arcane subject matter. We are 
literally doing something we have never done before, at least that I 
know of.
  Back in World War II, for acts of war, the Federal Government acted 
as an insurance company. But, obviously, we are not duplicating that 
here. We are trying to provide a temporary backstop, if you will, to 
allow this market to redevelop over the coming months.
  So I thank my colleague from Texas for his involvement, despite the 
fact he may disagree with the product we are going to be voting on in a 
few short moments.
  I would like to thank the leadership. I thank Senator Daschle and 
Senator Reid who have been tremendously helpful in putting this bill 
together. I thank Senator Lott and others who understood the importance 
of raising this issue. I thank Senator Sarbanes, the Chairman of the 
committee, and Senator Corzine, who has been tremendously helpful on 
this. Senator Schumer has also been tremendously helpful.
  I would also like to thank the 17 members of the minority this 
morning who voted to invoke cloture. Without their support, we would 
not be voting on this measure today and moving this process along.
  Additionally I would like to express my gratitude to President Bush 
and Treasury Secretary Paul O'Neill. They were very involved in the 
last few days in getting support for this particular effort. So I thank 
all of them.
  This is an important moment. This particular proposal or ideas like 
it have been sought by a very diverse group of people in the country. 
Organized labor to real estate, insurance groups--small businesses and 
large--the list is very long of those insurance consumers who have 
demanded that we act in this area.
  And why? Very simply, there is a major problem continuing to grow out 
there. We have seen it growing every day. There was a headline even 
today in the local newspaper here in Washington talking about a major 
problem with the number of mortgage holders, the GMAC Corporation.
  We heard the other day from the commercial mortgage-backed security 
industry, and the some $7 billion in decline they have experienced in 
the first quarter. We have a real bottleneck occurring in major 
construction projects, real estate, and development projects across the 
country in cities large and small.
  Yesterday, in my home State of Connecticut, Simon Konover, a 
wonderful developer in my State, has a small hotel, not a large one, at 
Bradley International Airport. And he can get no terrorism insurance. 
That is not a major development project--it is a small hotel at a 
regional airport--and he cannot get terrorism insurance at any cost. So 
this isn't just major development; it is also small projects where, at 
any cost, you cannot get this product. And if you can get it, it is 
very costly, as my colleague from Texas has already stated. And I agree 
with him.
  This bill is designed to, one, free up that bottleneck, to get the 
process moving again.
  We will know shortly whether or not what we have done is going to 
provoke that response. We believe it will. This is a 12-month bill with 
a possible 12-month extension. It is going to take a Herculean effort 
to get more than that. Our colleagues believe that 2 years is about 
what they are willing to try at this particular program. So remember, 
we are talking about 12 months with a possible extension of 12 more in 
order to get this moving.
  This legislation is critically important for American workers. We 
hope it

[[Page S5667]]

will dampen the tremendous increase that could occur, in the absence of 
this bill being done, in premium costs. And it is going to make 
available a product that we think is going to be critically important 
so that people such as Simon Konover in my State will be able to obtain 
insurance against terrorist acts. It is going to mean that smaller 
insurance companies can be involved in this, not just large insurers.
  One of the reasons we put retention caps on individual companies is 
because without doing that you force insolvency upon smaller insurance 
companies. Consumers would have very limited choices where that product 
was unavailable, God forbid we do have an event. The idea that insurers 
are going to go out and gouge their customer base for 1 year with the 
hopes then of retaining that customer base after this bill expires is 
unrealistic, in my view.
  I have told my colleague from Texas that, as we go into conference, 
if we can get to conference, I am willing to try to work out something 
that will at least deal with some of the issues he has raised with the 
potential problems he sees in the retention area.
  On tort reform, the House has significant tort reform. We have some 
tort reform in this bill. All of us understand we are going to probably 
come back with some additional limited tort reform. That is the way 
things work out when you have a conference between the House and the 
Senate. I am confident that will be the case as well. I hope our 
colleagues will support this effort.
  As I say, it has been 7 months. We are hearing from various groups 
all across the country that believe this is an important issue to 
address. We know we are trying to deal with homeland security to 
protect our personal security from terrorist attack. We also need to be 
talking about economic security and restoring confidence into this 
marketplace, This is a product that consumers need and must be made 
available by the private sector. If we perform our duties today and 
provide this critical backstop, I believe that it will result in the 
industry then stepping up to the plate and freeing up this bottleneck I 
have described in the terrorism insurance area.
  There is no guarantee it is going to happen. I can't promise 
absolutely. But I know this much: If we do nothing, I guarantee you 
will get skyrocketing premium costs. You may not get this product 
available to those who need it, and those that are able to obtain the 
product will pay exorbitantly high premiums for minimal coverage.
  We have to conference with the House to work out the differences. I 
hope at this hour, at this day, we will not walk away from this 
problem. There are 100 of us here trying to craft legislation. We all 
bring different ideas to the table. It is not easy to come to a 
compromise on this kind of an effort, but we have. My hope is that my 
colleagues will support us, that we will get the bill done. We can send 
it to the President, and we will try to resolve the issue this problem 
has posed for all of us.


                            state preemption

  Mrs. BOXER. Mr. President, I recognize the need to move forward on 
this terrorism insurance bill. I had filed an amendment regarding the 
state preemption language in this bill. I will not offer that 
amendment, but I wonder if the Senator from Connecticut will engage in 
a colloquy with me about that provision.
  Mr. DODD. I would be happy to.
  Mrs. BOXER. I thank the Senator.
  This bill would preempt state law with regard to the prior approval 
or a waiting period of terrorism risk insurance. Specifically, section 
7 states, ``rates for terrorism risk insurance covered by this Act and 
filed with any State shall not be subject to prior approval or a 
waiting period, under any law of a State that would otherwise be 
applicable.''
  This language would preempt the law of the State of California and 21 
other States where prior approval mechanisms for increases in insurance 
rates have been put into place to keep insurance companies from gouging 
consumers.
  The bill before us does allow States to invalidate excessive rates 
after the fact. But it will do nothing for consumers who have already 
paid too much. Prior approval mechanisms are the only way to protect 
consumers before sky-high rates go into effect.
  I understand that my colleagues who support this legislation want 
terrorism insurance made available as quickly as possible. And that is 
the reason for his preemption--to speed up the process. I agree.
  So to meet both the need for quick insurance availability and the 
desire to allow states to review rates for at least some period before 
they go into effect, I had proposed an amendment to replace the blanket 
State preemption language in the bill with more narrow language. My 
amendment would have said that terrorism risk insurance would not be 
subject to a waiting period greater than 60 days under any State law.
  This would allow California and other States to retain oversight for 
prior approval over egregious increases in terrorism insurance rates 
while also making sure that the insurance is made available quickly.
  Given the number of Americans involved, the taxpayer exposure to 
risk, and the leverage that insurers will have over consumers, I 
believe we must allow States to protect consumers. I hope my colleague 
from Connecticut will be willing to work with me on this.
  Mr. DODD. One of the guiding principles of this bill is that, to the 
extent possible, State insurance law should not be overridden. To that 
end, the bill respects the role of the State insurance commissioners as 
the appropriate regulators of policy terms and rates.
  Due to the urgency of the problems that currently exist in the 
marketplace for terrorism coverage, however, the bill requires that 
once the Federal program is in place, the States must allow rates for 
terrorism coverage to take effect immediately, without being subject to 
a preapproval requirement or a waiting period. The States would, of 
course, retain full authority to disapprove any rates that violate 
State laws, which are inadequate, unfairly discriminatory, or 
excessive.
  I understand that my colleague from California, Senator Boxer, has 
some concerns about this provision and its effects. I appreciate her 
interest in this issue, and I want to assure my colleague that I will 
work with her as this bill moves to conference to try to address her 
concerns, and to ensure that this provision is as narrowly crafted as 
possible.


                 clarification of legislative language

  Mr. BROWNBACK. Mr. President, I would like to correct the Record on a 
point that I made during a brief floor discussion between myself and 
Senator Specter.
  At the time, I was under the impression, given a previous 
understanding with the leadership, that my legislative language on the 
issue of human cloning had been provided to the majority leader. 
Included in my legislative language is a section that pertains to the 
patenting of human embryos.
  I am now informed that apparently that legislative language was never 
exchanged.
  I apologize for any confusion that this misunderstanding may have 
caused.
  Mrs. FEINSTEIN. Mr. President, I would like to take this time to 
express my support for the Terrorism Risk Insurance Act.
  Exposure to terrorism is not only a threat to our national security, 
but is also a threat to the United States and global economies. The 
full extent of insured losses from September 11 has been estimated at 
$70 billion.
  There is no doubt that these terrorist attacks have resulted in the 
most catastrophic loss in the history of property and casualty 
insurance.
  Even though the insurance industry committed to pay losses resulting 
from the attacks, they have indicated a reluctance to continue offering 
terrorism insurance because the risk of future losses is unknown.
  I and my staff have heard from my constituents in California, who 
have already suffered from this constriction of the terrorism insurance 
industry.
  Some are insurance providers, who have written to say that they are 
afraid that their companies will not survive if they are forced to 
endure another terrorist event without a Federal backstop for terrorism 
reinsurance.
  Some are businesses whose premiums have risen so drastically in the 
past nine months that they too, risk insolvency.
  San Francisco's own Golden Gate Bridge, Highway, and Transportation

[[Page S5668]]

District, which manages the Golden Gate Bridge, recently had to renew 
its insurance policy. The new policy costs $1.1 million per year for 
$50 million in coverage which does not include terrorism coverage, 
despite assertions by Governor Davis last year that the bridge was a 
target for the terrorist attacks.
  Last year's policy cost $125,000 for $125 million in coverage, 
including coverage for damage due to a terrorist act.
  This legislation will provide desperately needed stability to the 
terrorism insurance market.
  It provides a Federal backstop so that the industry can have the 
confidence to issue new policies, and it enables financial services 
providers to again finance new commercial property acquisitions and 
construction projects.
  This bill also has some important limits on Federal exposure to 
losses.
  First, it is designed to be temporary. The length of the program will 
be one year, with the option for the Secretary of the Treasury to 
extend it an additional year.
  Second, the bill clarifies that the Federal Government does not bear 
any responsibility for insurance losses due to punitive damage awards.
  Punitive damages awards are issued when a defendant has acted in a 
willful and malicious manner. I don't believe the American taxpayer 
should be left holding the bag if such judgments are awarded.
  It is my hope that the passage of this legislation will enable the 
Golden Gate Bridge, Highway, and Transportation District, as well as 
other, similarly affected, companies and organizations, in California 
and across the Nation, to obtain the terrorism insurance coverage they 
need to adequately protect their patrons during these uncertain times.
  Mr. DODD. How much time do I have remaining?
  The PRESIDING OFFICER. The Senator from Connecticut has 2 minutes 10 
seconds.
  Mr. REID. If the Senator will yield for a unanimous consent request, 
I ask unanimous consent that the time for the vote be extended for 3 
minutes on this side and 3 minutes on this side.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRAMM. Mr. President, I yield the Senator from Pennsylvania 3 
minutes.
  Mr. SPECTER. Mr. President, I have sought recognition to comment 
briefly on the point of order which was sustained as to Amendment No. 
3862, which was my amendment. I had been on the floor awaiting the 
making of such a point of order on germaneness. I wanted to make a very 
brief comment; that is, that the amendment which I have provided was 
germane when it was filed, which was pre-cloture. I understand that 
post-cloture it is not. I voted for cloture notwithstanding the fact 
that I knew it would render my amendment non-germane because of my view 
of the importance of passing this bill.
  I wanted to comment briefly on the amendment because it may yet 
surface in the conference. Senator McConnell had offered an amendment 
which would have eliminated punitive damages unless there was a 
criminal conviction. I supplemented that amendment by putting in a 
provision that it would be a Federal crime for someone to be malicious 
and disregard the safety of others, contributing to damages or death in 
the event of a terrorist attack, and also an additional provision for a 
private right of action so that in the event the prosecuting attorney 
did not act, that a private citizen could petition the court on the 
failure or refusal of the Attorney General to act so that would 
activate a criminal prosecution and provide a basis for punitive 
damages but, more importantly, to move to an area where there is real 
responsibility for somebody who acts maliciously, resulting in the 
death of another person.
  Punitive damages doesn't reach real responsibility. Punitive damages, 
as I amplified earlier today, are seldom granted but, where they are, 
come out of the pockets of the shareholders. To hold someone liable to 
go to jail where they are malicious, resulting in someone's death, that 
is a sanction which means something. That would provide the basis then 
for a later punitive damage claim.
  This may be the basis for action in conference. I wanted to take a 
brief period of time to explain that provision. I thank the Chair and 
yield the floor.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Mr. President, before I yield to my colleague from New 
York, I wish to thank several staff people as well--we don't do that 
enough here--Alex Sternhell and Jessica Byrnes from my own staff. Sarah 
Kline, Aaron Klein, Steve Kroll, Wayne Abernathy, Stacie Thomas, Ed 
Pagano, Jim Ryan, Jonathan Aldelstein, Jim Williams, Kate Scheeler, 
Roger Hollingsworth . I would also like to thank Laura Ayoud with 
Senate Legislative Counsel for her contribution to this process. We 
thank all of them for their efforts, the leadership staff as well for 
their support.
  Is Senator Corzine going to seek any time at all? We have 4 minutes 
remaining on this side; is that correct?
  The PRESIDING OFFICER. Four minutes twenty seconds.
  Mr. DODD. I yield 3 minutes to my colleague from New York and then 1 
minute to my colleague from New Jersey.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. SCHUMER. Let me, once again, thank the Senator from Connecticut 
for his leadership and steadfastness, his sensibleness. I also thank my 
colleague from Texas who has been, even though he didn't get his way on 
everything, a very constructive force in moving this bill forward. I 
appreciate that.
  I approach this in a few ways. I am delighted that the single company 
cap, so vital to making this legislation work, which I spent a lot of 
time working on in the early days, has stayed in the bill. I am 
particularly grateful that the city I represent, New York, and its 
metropolitan area, will have this bill because terrorism has put a 
crimp in our economy the way it has in no other city in terms of higher 
costs, lost new projects, and delays in existing projects.
  This legislation is probably as vital to New York as just about 
anything we will do with the exception maybe of the generosity that 
this body and the other have shown to New York in terms of the funding 
we have received.
  Most importantly, this has been a test, a test of whether we can meet 
the post 9-11 challenge. It will be like many tests in the future. 
First, government is going to have to play a larger role. The ideology 
that anything the government does is bad and we must shrink it at all 
cost is over in many areas. The private sector could not solve this 
problem alone, plain and simple. That is why we came to bipartisan 
agreement that the Federal Government's role should be increased. We 
can quibble about how much and where, but it was definitely needed. 
That will be repeated in years to come.
  Second, this is a problem where the legislature stepped to the plate. 
The bottom line is this: There was not clamoring from the average 
citizen for this proposal. Yes, some real estate developers, some 
bankers, some insurance companies, but not much else. Given the 
division we had here, it would have been easy to forget it.
  But we did step to the plate. We are passing what I consider to be 
not the ideal bill--my ideal bill would have had the Federal Government 
write all terrorist insurance, something I worked on with Treasury 
Secretary O'Neill should, God forbid, the next attack occur--but it is 
a good product, it is a reasonable product, and it does the job in the 
short term.
  Over and over, we are going to be asked as a government to step 
forward and solve a problem before it gets out of control without the 
public importuning us to do it. That will occur on an issue such as 
nuclear security. That will occur on an issue such as making our health 
supply system better. It is the kind of challenge we face in the post 
9-11 world: Real, but anticipatory, dealing with a problem that could 
get worse and spiral out of control if we do not act, and we have to 
show the leadership because it will not be our constituents pushing us.
  I salute the Senator from Connecticut, the Senator from Texas, the 
Senator from New Jersey, and all my colleagues who worked so hard on 
this bill.
  The PRESIDING OFFICER. The time of the Senator has expired. The 
Senator from New Jersey.
  Mr. CORZINE. Mr. President, I second the salute of the Senator from 
Connecticut. This is a tremendous step

[[Page S5669]]

forward in protecting our economy, not protecting insurance companies. 
This is about jobs. It is about making sure we have economic growth 
going forward. It is a bridge. It is not a long-term creation of an 
insurance function by the Government, but it is a response that the 
Government needs to build a bridge to a better marketplace and a more 
secure economy. This will make a difference to all of America's 
economic growth, not just regionally.
  I am really quite pleased we are going to have a chance to vote in a 
minute to do something that will move our economy forward in the post-
September 11 period.
  The PRESIDING OFFICER. The Senator's time has expired.
  Mr. REID. Mr. President, the majority leader will be here shortly. I 
suggest the absence of a quorum.
  The PRESIDING OFFICER. Without objection, the clerk will call the 
roll.
  The senior assistant bill clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The question is on the engrossment and third reading of the bill.
  The bill was ordered to be engrossed for a third reading and was read 
the third time.
  The PRESIDING OFFICER. The Senator from Nevada.
  Mr. REID. Mr. President, I ask unanimous consent that the Senate now 
proceed to Calendar No. 252, H.R. 3210, the House-passed terrorism 
insurance bill; that all after the enacting clause be stricken; that 
the text of S. 2600, as amended, if amended, be inserted in lieu 
thereof; that the bill be read a third time and the Senate vote on 
passage of the bill; that upon passage, the Senate insist on its 
amendment, request a conference with the House on the disagreeing votes 
of the two Houses, and the Chair be authorized to appoint conferees on 
the part of the Senate, without further intervening action or debate.
  The PRESIDING OFFICER. Is there objection?
  Mr. GRAMM. Reserving the right to object.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. GRAMM. We might come to a point where we are ready to do this. We 
are not ready to do it now, and I object.
  The PRESIDING OFFICER. Objection is heard.
  Mr. REID. I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  The bill having been read the third time, the question is, Shall the 
bill pass? The clerk will call the roll.
  The assistant legislative clerk called the roll.
  Mr. REID. I announced that the Senator from Massachusetts (Mr. Kerry) 
is necessarily absent.
  Mr. NICKLES. I announced that the Senator from North Carolina (Mr. 
Helms) is necessarily absent.
  The PRESIDING OFFICER (Mr. Miller). Are there any other Senators in 
the Chamber desiring to vote?
  The result was announced--yeas 84, nays 14, as follows:

                      [Rollcall Vote No. 157 Leg.]

                                YEAS--84

     Akaka
     Allard
     Allen
     Baucus
     Bayh
     Bennett
     Biden
     Bingaman
     Bond
     Boxer
     Breaux
     Brownback
     Bunning
     Byrd
     Cantwell
     Carnahan
     Carper
     Chafee
     Cleland
     Clinton
     Cochran
     Collins
     Conrad
     Corzine
     Crapo
     Daschle
     Dayton
     DeWine
     Dodd
     Domenici
     Dorgan
     Durbin
     Edwards
     Ensign
     Feingold
     Feinstein
     Fitzgerald
     Frist
     Graham
     Gregg
     Hagel
     Harkin
     Hatch
     Hollings
     Hutchinson
     Inhofe
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kohl
     Landrieu
     Leahy
     Levin
     Lieberman
     Lincoln
     Lott
     Lugar
     McCain
     Mikulski
     Miller
     Murkowski
     Murray
     Nelson (FL)
     Nelson (NE)
     Reed
     Reid
     Roberts
     Rockefeller
     Sarbanes
     Schumer
     Shelby
     Smith (OR)
     Snowe
     Specter
     Stabenow
     Stevens
     Thompson
     Thurmond
     Torricelli
     Voinovich
     Warner
     Wellstone
     Wyden

                                NAYS--14

     Burns
     Campbell
     Craig
     Enzi
     Gramm
     Grassley
     Hutchison
     Kyl
     McConnell
     Nickles
     Santorum
     Sessions
     Smith (NH)
     Thomas

                             NOT VOTING--2

     Helms
     Kerry
       
  The bill (S. 2600), as amended, was passed as follows:

                                S. 2600

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

     SECTION 1. SHORT TITLE.

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

     SEC. 2. CONGRESSIONAL FINDINGS AND PURPOSE.

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

     SEC. 3. DEFINITIONS.

       In this Act, the following definitions shall apply:
       (1) Act of terrorism.--
       (A) Certification.--The term ``act of terrorism'' means any 
     act that is certified by the Secretary, in concurrence with 
     the Secretary of State, and the Attorney General of the 
     United States--
       (i) to be a violent act or an act that is dangerous to--

       (I) human life;
       (II) property; or
       (III) infrastructure;

       (ii) to have resulted in damage within the United States, 
     or outside the United States in the case of an air carrier or 
     vessel described in paragraph (3)(A)(ii); and
       (iii) to have been committed by an individual or 
     individuals acting on behalf of any foreign person or foreign 
     interest, as part of an effort to coerce the civilian 
     population of the United States or to influence the policy or 
     affect the conduct of the United States Government by 
     coercion.
       (B) Limitation.--No act or event shall be certified by the 
     Secretary as an act of terrorism if--
       (i) the act or event is committed in the course of a war 
     declared by the Congress; or
       (ii) losses resulting from the act or event, in the 
     aggregate, do not exceed $5,000,000.
       (C) Determinations final.--Any certification of, or 
     determination not to certify, an act or event as an act of 
     terrorism under this paragraph shall be final, and shall not 
     be subject to judicial review.
       (2) Business interruption coverage.--The term ``business 
     interruption coverage''--
       (A) means coverage of losses for temporary relocation 
     expenses and ongoing expenses, including ordinary wages, 
     where--

[[Page S5670]]

       (i) there is physical damage to the business premises of 
     such magnitude that the business cannot open for business;
       (ii) there is physical damage to other property that 
     totally prevents customers or employees from gaining access 
     to the business premises; or
       (iii) the Federal, State, or local government shuts down an 
     area due to physical or environmental damage, thereby 
     preventing customers or employees from gaining access to the 
     business premises; and
       (B) does not include lost profits, other than in the case 
     of a small business concern (as defined in section 3 of the 
     Small Business Act (15 U.S.C. 632) and applicable regulations 
     thereunder) in any case described in clause (i), (ii), or 
     (iii) of subparagraph (A).
       (3) Insured loss.--The term ``insured loss''--
       (A) means any loss resulting from an act of terrorism that 
     is covered by primary property and casualty insurance, 
     including business interruption coverage, issued by a 
     participating insurance company, if such loss--
       (i) occurs within the United States; or
       (ii) occurs to an air carrier (as defined in section 40102 
     of title 49, United States Code) or to a United States flag 
     vessel (or a vessel based principally in the United States, 
     on which United States income tax is paid and whose insurance 
     coverage is subject to regulation in the United States), 
     regardless of where the loss occurs; and
       (B) excludes coverage under any life or health insurance.
       (4) Market share.--
       (A) In general.--The ``market share'' of a participating 
     insurance company shall be calculated using the total amount 
     of direct written property and casualty insurance premiums 
     for the participating insurance company during the 2-year 
     period preceding the year in which the subject act of 
     terrorism occurred (or during such other period for which 
     adequate data are available, as determined by the Secretary), 
     as a percentage of the aggregate of all such property and 
     casualty insurance premiums industry-wide during that period.
       (B) Adjustments.--The Secretary may adjust the market share 
     of a participating insurance company under subparagraph (A), 
     as necessary to reflect current market participation of that 
     participating insurance company.
       (5) NAIC.--The term ``NAIC'' means the National Association 
     of Insurance Commissioners.
       (6) Participating insurance company.--The term 
     ``participating insurance company'' means any insurance 
     company, including any subsidiary or affiliate thereof--
       (A) that--
       (i) is licensed or admitted to engage in the business of 
     providing primary insurance in any State, and was so licensed 
     or admitted on September 11, 2001; or
       (ii) is not licensed or admitted as described in clause 
     (i), if it is an eligible surplus line carrier listed on the 
     Quarterly Listing of Alien Insurers of the NAIC, or any 
     successor thereto;
       (B) that receives direct premiums for any type of 
     commercial property and casualty insurance coverage or that, 
     not later than 21 days after the date of enactment of this 
     Act, submits written notification to the Secretary of its 
     intent to participate in the Program with regard to personal 
     lines of property and casualty insurance; and
       (C) that meets any other criteria that the Secretary may 
     reasonably prescribe.
       (7) Participating insurance company deductible.--The term 
     ``participating insurance company deductible'' means--
       (A) a participating insurance company's market share, 
     multiplied by $10,000,000,000, with respect to insured losses 
     resulting from an act of terrorism occurring during the 1-
     year period beginning on the date of enactment of this Act; 
     and
       (B) a participating insurance company's market share, 
     multiplied by $15,000,000,000, with respect to insured losses 
     resulting from an act of terrorism occurring during the 1-
     year period beginning on the day after the date of expiration 
     of the period described in subparagraph (A), if the Program 
     is extended in accordance with section 6.
       (8) Person.--The term ``person'' means any individual, 
     business or nonprofit entity (including those organized in 
     the form of a partnership, limited liability company, 
     corporation, or association), trust or estate, or a State or 
     political subdivision of a State or other governmental unit.
       (9) Program.--The term ``Program'' means the Terrorism 
     Insured Loss Shared Compensation Program established by this 
     Act.
       (10) Property and casualty insurance.--The term ``property 
     and casualty insurance''--
       (A) means commercial lines of property and casualty 
     insurance, including workers' compensation insurance;
       (B) includes personal lines of property and casualty 
     insurance, if a notification is made in accordance with 
     paragraph (6)(B); and
       (C) does not include--
       (i) Federal crop insurance issued or reinsured under the 
     Federal Crop Insurance Act (7 U.S.C. 1501 et seq.);
       (ii) private mortgage insurance, as that term is defined in 
     section 2 of the Homeowners Protection Act of 1998 (12 U.S.C. 
     4901); or
       (iii) financial guaranty insurance.
       (11) Secretary.--The term ``Secretary'' means the Secretary 
     of the Treasury.
       (12) State.--The term ``State'' means any State of the 
     United States, the District of Columbia, the Commonwealth of 
     Puerto Rico, the Commonwealth of the Northern Mariana 
     Islands, American Samoa, Guam, and each of the United States 
     Virgin Islands.
       (13) United states.--The term ``United States'' means the 
     several States, and includes the territorial sea of the 
     United States.
       (14) Rule of construction for dates.--With respect to any 
     reference to a date in this Act, such day shall be 
     construed--
       (A) to begin at 12:01 a.m. on that date; and
       (B) to end at midnight on that date.

     SEC. 4. TERRORISM INSURED LOSS SHARED COMPENSATION PROGRAM.

       (a) Establishment of Program.--
       (1) In general.--There is established in the Department of 
     the Treasury the Terrorism Insured Loss Shared Compensation 
     Program.
       (2) Authority of the secretary.--Notwithstanding any other 
     provision of State or Federal law, the Secretary shall 
     administer the Program, and shall pay the Federal share of 
     compensation for insured losses in accordance with subsection 
     (e).
       (b) Conditions for Federal Payments.--No payment may be 
     made by the Secretary under subsection (e), unless--
       (1) a person that suffers an insured loss, or a person 
     acting on behalf of that person, files a claim with a 
     participating insurance company;
       (2) the participating insurance company provides clear and 
     conspicuous disclosure to the policyholder of the premium 
     charged for insured losses covered by the Program and the 
     Federal share of compensation for insured losses under the 
     Program--
       (A) in the case of any policy covering an insured loss that 
     is issued on or after the date of enactment of this Act, on a 
     separate line item in the policy, at the time of offer, 
     purchase, and renewal of the policy; and
       (B) in the case of any policy that is issued before the 
     date of enactment of this Act, as a line item described in 
     subparagraph (A), not later than 90 days after that date of 
     enactment;
       (3) the participating insurance company processes the claim 
     for the insured loss in accordance with its standard business 
     practices, and any reasonable procedures that the Secretary 
     may prescribe; and
       (4) the participating insurance company submits to the 
     Secretary, in accordance with such reasonable procedures as 
     the Secretary may establish--
       (A) a claim for payment of the Federal share of 
     compensation for insured losses under the Program;
       (B) written verification and certification--
       (i) of the underlying claim; and
       (ii) of all payments made for insured losses; and
       (C) certification of its compliance with the provisions of 
     this subsection.
       (c) Mandatory Participation; Mandatory Availability.--Each 
     insurance company that meets the definition of a 
     participating insurance company under section 3--
       (1) shall participate in the Program;
       (2) shall make available in all of its property and 
     casualty insurance policies (in all of its participating 
     lines), coverage for insured losses; and
       (3) shall make available property and casualty insurance 
     coverage for insured losses that does not differ materially 
     from the terms, amounts, and other coverage limitations 
     applicable to losses arising from events other than acts of 
     terrorism.
       (d) Participation by Self Insured Entities.--
       (1) Determination by the secretary.--The Secretary may, in 
     consultation with the NAIC, establish procedures to allow 
     participation in the Program by municipalities and other 
     governmental or quasi-governmental entities (and by any other 
     entity, as the Secretary deems appropriate) operating through 
     self insurance arrangements that were in existence on 
     September 11, 2001, but only if the Secretary makes a 
     determination with regard to participation by any such entity 
     before the occurrence of an act of terrorism in which the 
     entity incurs an insured loss.
       (2) Participation.--If the Secretary makes a determination 
     to allow an entity described in paragraph (1) to participate 
     in the Program, all reports, conditions, requirements, and 
     standards established by this Act for participating insurance 
     companies shall apply to any such entity, as determined to be 
     appropriate by the Secretary.
       (e) Shared Insurance Loss Coverage.--
       (1) Federal share.--
       (A) In general.--Subject to the cap on liability under 
     paragraph (2) and the limitation under paragraph (6), the 
     Federal share of compensation under the Program to be paid by 
     the Secretary for insured losses resulting from an act of 
     terrorism occurring during the 1-year period beginning on the 
     date of enactment of this Act--
       (i) shall be equal to 80 percent of that portion of the 
     amount of aggregate insured losses that--

       (I) exceeds the participating insurance company deductibles 
     required to be paid for those insured losses; and
       (II) does not exceed $10,000,000,000; and

       (ii) shall be equal to 90 percent of that portion of the 
     amount of aggregate insured losses that--

       (I) exceeds the participating insurance company deductibles 
     required to be paid for those insured losses; and
       (II) exceeds $10,000,000,000.

       (B) Extension period.--If the Program is extended in 
     accordance with section 6, the Federal share of compensation 
     under the

[[Page S5671]]

     Program to be paid by the Secretary for insured losses 
     resulting from an act of terrorism occurring during the 1-
     year period beginning on the day after the date of expiration 
     of the period described in subparagraph (A), shall be 
     calculated in accordance with clauses (i) and (ii) of 
     subparagraph (A), subject to the cap on liability in 
     paragraph (2) and the limitation under paragraph (6).
       (C) Pro rata share.--If, during the period described in 
     subparagraph (A) (or during the period described in 
     subparagraph (B), if the Program is extended in accordance 
     with section 6), the aggregate insured losses for that period 
     exceed $10,000,000,000, the Secretary shall determine the pro 
     rata share for each participating insurance company of the 
     Federal share of compensation for insured losses calculated 
     under subparagraph (A).
       (D) Prohibition on duplicative compensation.--The Federal 
     share of compensation for insured losses under the Program 
     shall be reduced by the amount of compensation provided by 
     the Federal Government for those insured losses under any 
     other Federal insurance or reinsurance program.
       (2) Cap on annual liability.--Notwithstanding paragraph 
     (1), or any other provision of Federal or State law, if the 
     aggregate insured losses exceed $100,000,000,000 during any 
     period referred to in subparagraph (A) or (B) of paragraph 
     (1)--
       (A) the Secretary shall not make any payment under this Act 
     for any portion of the amount of such losses that exceeds 
     $100,000,000,000; and
       (B) participating insurance companies shall not be liable 
     for the payment of any portion of the amount that exceeds 
     $100,000,000,000.
       (3) Notice to congress.--The Secretary shall notify the 
     Congress if estimated or actual aggregate insured losses 
     exceed $100,000,000,000 in any period described in paragraph 
     (1), and the Congress shall determine the procedures for and 
     the source of any such excess payments.
       (4) Final netting.--The Secretary shall have sole 
     discretion to determine the time at which claims relating to 
     any insured loss or act of terrorism shall become final.
       (5) Determinations final.--Any determination of the 
     Secretary under this subsection shall be final, and shall not 
     be subject to judicial review.
       (6) In-force reinsurance agreements.--For policies covered 
     by reinsurance contracts in force on the date of enactment of 
     this Act, until the in-force reinsurance contract is renewed, 
     amended, or has reached its 1-year anniversary date, any 
     Federal share of compensation due to a participating 
     insurance company for insured losses during the effective 
     period of the Program shall be shared--
       (A) with all reinsurance companies to which the 
     participating insurance company has ceded some share of the 
     insured loss pursuant to an in-force reinsurance contract; 
     and
       (B) in a manner that distributes the Federal share of 
     compensation for insured losses between the participating 
     insurance company and the reinsurance company or companies in 
     the same proportion as the insured losses would have been 
     distributed if the Program did not exist.

     SEC. 5. GENERAL AUTHORITY AND ADMINISTRATION OF CLAIMS.

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

     SEC. 6. TERMINATION OF PROGRAM; DISCRETIONARY EXTENSION.

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

[[Page S5672]]

     the Program, and includes an explanation of and justification 
     for those rates.
       (2) Reports forwarded.--The NAIC shall promptly forward 
     copies of each report submitted under paragraph (1) to the 
     Secretary, the Secretary of Commerce, the Chairman of the 
     Federal Trade Commission, and the Comptroller General of the 
     United States.
       (3) Agency reports to congress.--
       (A) In general.--The Secretary, the Secretary of Commerce, 
     and the Chairman of the Federal Trade Commission shall submit 
     joint reports to Congress and the Comptroller General of the 
     United States summarizing and evaluating the reports 
     forwarded under paragraph (2).
       (B) Timing.--The reports required under subparagraph (A) 
     shall be submitted--
       (i) 9 months after the date of enactment of this Act; and
       (ii) 12 months after the date of submission of the first 
     report under clause (i).
       (4) GAO evaluation and report.--
       (A) Evaluation.--The Comptroller General of the United 
     States shall evaluate each report submitted under paragraph 
     (3), and upon request, the Secretary, the Secretary of 
     Commerce, the Chairman of the Federal Trade Commission, and 
     the NAIC shall provide to the Comptroller all documents, 
     records, and any other information that the Comptroller deems 
     necessary to carry out such evaluation.
       (B) Report to congress.--Not later than 90 days after 
     receipt of each report submitted under paragraph (3), the 
     Comptroller General of the United States shall submit to 
     Congress a report of the evaluation required by subparagraph 
     (A).

     SEC. 7. PRESERVATION OF STATE LAW.

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

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

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

     SEC. 9. AUTHORIZATION OF APPROPRIATIONS; PAYMENT AUTHORITY.

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

     SEC. 10. PROCEDURES FOR CIVIL ACTIONS.

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

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

       (a) In General.--Notwithstanding any other provision of 
     law, and except as provided in subsection (b), in every case 
     in which a person has obtained a judgment against a terrorist 
     party on a claim based upon an act of terrorism or for which 
     a terrorist party is not immune under section 1605(a)(7) of 
     title 28, United States Code, the blocked assets of that 
     terrorist party (including the blocked assets of any agency 
     or instrumentality of that terrorist party) shall be subject 
     to execution or attachment in aid of execution in order to 
     satisfy such judgment to the extent of any compensatory 
     damages for which such terrorist party has been adjudged 
     liable.
       (b) Presidential Waiver.--
       (1) In general.--Subject to paragraph (2), upon determining 
     on an asset-by-asset basis that a waiver is necessary in the 
     national security interest, the President may waive the 
     requirements of subsection (a) in connection with (and prior 
     to the enforcement of) any judicial order directing 
     attachment in aid of execution or execution against any 
     property subject to the Vienna Convention on Diplomatic 
     Relations or the Vienna Convention on Consular Relations.
       (2) Exception.--A waiver under this subsection shall not 
     apply to--
       (A) property subject to the Vienna Convention on Diplomatic 
     Relations or the Vienna Convention on Consular Relations that 
     has been used by the United States for any nondiplomatic 
     purpose (including use as rental property), or the proceeds 
     of such use; or
       (B) the proceeds of any sale or transfer for value to a 
     third party of any asset subject to the Vienna Convention on 
     Diplomatic Relations or the Vienna Convention on Consular 
     Relations.
       (c) Special Rule for Cases Against Iran.--Section 2002 of 
     the Victims of Trafficking and Violence Protection Act of 
     2000 (Public Law 106-386; 114 Stat. 1542) is amended--
       (1) in subsection (a)(2)(A)(ii), by inserting after ``July 
     27, 2000'' the following: ``or before October 28, 2000,'';
       (2) in subsection (b)(2)(B), by inserting after ``the date 
     of enactment of this Act'' the following: ``(less amounts 
     therein as to which the United States has an interest in 
     subrogation pursuant to subsection (c) arising prior to the 
     date of entry of the judgment or judgments to be satisfied in 
     whole or in part hereunder).'';
       (3) by redesignating subsections (d), (e), and (f) as 
     subsections (e), (f), and (g), respectively; and
       (4) by inserting after subsection (c) the following new 
     subsection (d):
       ``(d) Distribution of Foreign Military Sales Funds 
     Inadequate to Satisfy Full Amount of Compensatory Awards 
     Against Iran.--
       ``(1)(A) In the event that the Secretary determines that 
     the amounts available to be paid under subsection (b)(2) are 
     inadequate to pay the entire amount of compensatory damages 
     awarded in judgments issued as of the date of the enactment 
     of this subsection in cases identified in subsection 
     (a)(2)(A), the Secretary shall, not later than 60 days after 
     such date, make payment from the account specified in 
     subsection (b)(2) to each party to which such judgment has 
     been issued a share of the amounts in that account which are 
     not subject to subrogation to the United States under this 
     Act.
       ``(B) The amount so paid to each such person shall be 
     calculated by the proportion that the amount of compensatory 
     damages awarded in a judgment issued to that particular 
     person bears to the total amount of all compensatory damages 
     awarded to all persons to whom judgments have been issued in 
     cases identified in subsection (a)(2)(A) as of the date 
     referred to in subparagraph (A).
       ``(2) Nothing herein shall bar, or require delay in, 
     enforcement of any judgment to which this subsection applies 
     under any procedure or against assets otherwise available 
     under this section or under any other provision of law.
       ``(3) Any person receiving less than the full amount of 
     compensatory damages awarded to that party in judgments to 
     which this subsection applies shall not be required to make 
     the election set forth in subsection (a)(2)(C) in order to 
     qualify for payment hereunder.''.
       (d) Definitions.--In this section:
       (1) The term ``terrorist party'' means a terrorist, a 
     terrorist organization, or a foreign

[[Page S5673]]

     state designated as a state sponsor of terrorism under 
     section 6(j) of the Export Administration Act of 1979 (50 
     U.S.C. App. 2405(j)) or section 620A of the Foreign 
     Assistance Act of 1961 (22 U.S.C. 2371).
       (2) The term ``blocked asset'' means any asset seized or 
     frozen by the United States in accordance with law, or 
     otherwise held by the United States without claim of 
     ownership by the United States.
       (3) The term ``property subject to the Vienna Convention on 
     Diplomatic Relations or the Vienna Convention on Consular 
     Relations'' and the term ``asset subject to the Vienna 
     Convention on Diplomatic Relations or the Vienna Convention 
     on Consular Relations'' mean any property or asset, 
     respectively, the attachment in aid of execution or execution 
     of which would result in a violation of an obligation of the 
     United States under the Vienna Convention on Diplomatic 
     Relations or the Vienna Convention on Consular Relations, as 
     the case may be.

  The PRESIDING OFFICER. The majority leader.
  Mr. DASCHLE. Mr. President, I move to reconsider the vote, and I move 
to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. NELSON of Florida. Mr. President, I voted today for passage of 
the Dodd-Schumer terrorism insurance bill. While it is not perfect, it 
provides temporary backstop to allow the private insurance marketplace 
to adjust to the new threat of terrorist attacks. Because I had serious 
concerns about a lack of consumer protection in the original bill, I 
offered two amendments, one to guard against price gouging, the other 
requiring the industry to separately disclose to policyholders the 
amount of premium due to terrorism risk. The first amendment was 
rejected by the Senate June 13. But the disclosure provision was added 
to the bill today. This provision gives regulators an essential tool to 
safeguard against excessive price hikes, and consumers more information 
upon which to base purchasing decisions.
  Mr. SARBANES. Mr. President, I want to take this opportunity to 
express my appreciation to my colleague, Senator Dodd for his efforts 
to move this bill along. We have just completed the Banking Committee's 
markup of the Public Company Accounting Reform and Investor Protection 
Act of 2002, which the committee reported favorably by a vote of 17-4. 
Returning to the matter pending before us, I simply want to acknowledge 
that the Senate has taken a considerable step forward in addressing the 
important issue of terrorism insurance.
  The discussion over the last several days has clearly illustrated the 
dimensions of the problem. Many insurers are excluding coverage of 
terrorism from the policies they write. In those cases where terrorism 
insurance is available, it is often unafforable, and very limited in 
the scope and amount of coverage.
  The fact that so many properties are uninsured or underinsured 
against the risk of terrorism could have a negative effect on our 
economy and our recovery if there were to be another terrorist attack. 
Insurance plays a vital role in our economy, by allowing businesses and 
property owners to spread their risks. As the U.S. General Accounting 
Office noted in a recent report, property owners on their own ``lack 
the ability to spread such risks among themselves the way insurers 
do.'' In the event of another attack, many properties would have to 
absorb any losses themselves, without the support of insurance. As a 
result, the GAO concluded, ``another terrorist attack similar to that 
experienced on September 11 could have significant economic effects on 
the marketplace and the public at large.'' The GAO noted that ``These 
effects could include bankrupticies, layoffs, and loan defaults.''
  But even in the absence of another attack, the lack of insurance can 
hinder economic activity. In preparing its recent report, the GAO found 
that there are examples of ``large projects canceling or experiencing 
delays . . . with a lack of terrorism coverage being cited as a 
principal contriuting factor.'' This is a drag of economic activity 
that we can ill afford.
  Most industry observers are of the opinion that, given time, the 
insurance industry will develop the capacity and the experience that 
will allow them to underwrite the terrorist risk. However, those 
conditions do not exist today. In the interim, a Federal reinsurance 
backstop of limited duration would give the insurance markets the 
necessary time to stabilize.
  I know that there are still many steps between now and final 
enactment of the legislation. We look forward to continuing to work 
with the administration on this issue, as we have done since shortly 
after the attacks. Again, I want to underscore the importance of this 
legislation and of the actions that the Senate has taken today to move 
it forward.


                            VOTE EXPLANATION

   Mr. KERRY. Mr. President, due to a longstanding commitment I 
was necessarily absent for the vote on cloture on the Terrorism 
Reinsurance bill, S. 2600, and on final passage of the terrorism 
reinsurance bill. Although my votes would not have affected the 
outcome, had I been present, I would have voted for cloture on the bill 
and for final passage.

                          ____________________