[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
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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.
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