[Congressional Record Volume 148, Number 146 (Wednesday, November 13, 2002)]
[House]
[Pages H8722-H8728]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     CONFERENCE REPORT ON H.R. 3210, TERRORISM RISK PROTECTION ACT

  Mr. SHAYS submitted the following conference report and statement on 
the bill (H.R. 3210) to ensure the continued financial capacity of 
insurers to provide coverage for risks from terrorism.

                  Conference Report (H. Rept. 107-779)

  The committee of conference on the disagreeing votes of the two 
Houses on the amendment of the Senate to the bill (H.R. 3210), to 
ensure the continued financial capacity of insurers to provide coverage 
for risks from terrorism, having met, after full and free conference, 
have agreed to recommend and do recommend to their respective Houses as 
follows:
  That the House recede from its disagreement to the amendment of the 
Senate and agree to the same with an amendment as follows:
  In lieu of the matter proposed to be inserted by the Senate 
amendment, insert the following:

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Terrorism 
     Risk Insurance Act of 2002''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.

                  TITLE I--TERRORISM INSURANCE PROGRAM

Sec. 101. Congressional findings and purpose.
Sec. 102. Definitions.
Sec. 103. Terrorism Insurance Program.
Sec. 104. General authority and administration of claims.
Sec. 105. Preemption and nullification of pre-existing terrorism 
              exclusions.
Sec. 106. Preservation provisions.
Sec. 107. Litigation management.
Sec. 108. Termination of Program.

                TITLE II--TREATMENT OF TERRORIST ASSETS

Sec. 201. Satisfaction of judgments from blocked assets of terrorists, 
              terrorist organizations, and State sponsors of terrorism.

              TITLE III--FEDERAL RESERVE BOARD PROVISIONS

Sec. 301. Certain authority of the Board of Governors of the Federal 
              Reserve System.
                  TITLE I--TERRORISM INSURANCE PROGRAM

     SEC. 101. CONGRESSIONAL FINDINGS AND PURPOSE.

       (a) Findings.--The Congress finds that--
       (1) 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;
       (2) 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;
       (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 title 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. 102. DEFINITIONS.

       In this title, 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 an act of terrorism;
       (ii) to be a violent act or an act that is dangerous to--

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

       (iii) to have resulted in damage within the United States, 
     or outside of the United States in the case of--

       (I) an air carrier or vessel described in paragraph (5)(B); 
     or
       (II) the premises of a United States mission; and

       (iv) 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

[[Page H8723]]

     conduct of the United States Government by coercion.
       (B) Limitation.--No act shall be certified by the Secretary 
     as an act of terrorism if--
       (i) the act is committed as part of the course of a war 
     declared by the Congress, except that this clause shall not 
     apply with respect to any coverage for workers' compensation; 
     or
       (ii) property and casualty insurance losses resulting from 
     the act, in the aggregate, do not exceed $5,000,000.
       (C) Determinations final.--Any certification of, or 
     determination not to certify, an act as an act of terrorism 
     under this paragraph shall be final, and shall not be subject 
     to judicial review.
       (D) Nondelegation.--The Secretary may not delegate or 
     designate to any other officer, employee, or person, any 
     determination under this paragraph of whether, during the 
     effective period of the Program, an act of terrorism has 
     occurred.
       (2) Affiliate.--The term ``affiliate'' means, with respect 
     to an insurer, any entity that controls, is controlled by, or 
     is under common control with the insurer.
       (3) Control.--An entity has ``control'' over another 
     entity, if--
       (A) the entity directly or indirectly or acting through 1 
     or more other persons owns, controls, or has power to vote 25 
     percent or more of any class of voting securities of the 
     other entity;
       (B) the entity controls in any manner the election of a 
     majority of the directors or trustees of the other entity; or
       (C) the Secretary determines, after notice and opportunity 
     for hearing, that the entity directly or indirectly exercises 
     a controlling influence over the management or policies of 
     the other entity.
       (4) Direct earned premium.--The term ``direct earned 
     premium'' means a direct earned premium for property and 
     casualty insurance issued by any insurer for insurance 
     against losses occurring at the locations described in 
     subparagraphs (A) and (B) of paragraph (5).
       (5) Insured loss.--The term ``insured loss'' means any loss 
     resulting from an act of terrorism (including an act of war, 
     in the case of workers' compensation) that is covered by 
     primary or excess property and casualty insurance issued by 
     an insurer if such loss--
       (A) occurs within the United States; or
       (B) occurs to an air carrier (as defined in section 40102 
     of title 49, United States Code), 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, or at the premises of 
     any United States mission.
       (6) Insurer.--The term ``insurer'' means any entity, 
     including any affiliate thereof--
       (A) that is--
       (i) licensed or admitted to engage in the business of 
     providing primary or excess insurance in any State;
       (ii) 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;
       (iii) approved for the purpose of offering property and 
     casualty insurance by a Federal agency in connection with 
     maritime, energy, or aviation activity;
       (iv) a State residual market insurance entity or State 
     workers' compensation fund; or
       (v) any other entity described in section 103(f), to the 
     extent provided in the rules of the Secretary issued under 
     section 103(f);
       (B) that receives direct earned premiums for any type of 
     commercial property and casualty insurance coverage, other 
     than in the case of entities described in sections 103(d) and 
     103(f); and
       (C) that meets any other criteria that the Secretary may 
     reasonably prescribe.
       (7) Insurer deductible.--The term ``insurer deductible'' 
     means--
       (A) for the Transition Period, the value of an insurer's 
     direct earned premiums over the calendar year immediately 
     preceding the date of enactment of this Act, multiplied by 1 
     percent;
       (B) for Program Year 1, the value of an insurer's direct 
     earned premiums over the calendar year immediately preceding 
     Program Year 1, multiplied by 7 percent;
       (C) for Program Year 2, the value of an insurer's direct 
     earned premiums over the calendar year immediately preceding 
     Program Year 2, multiplied by 10 percent;
       (D) for Program Year 3, the value of an insurer's direct 
     earned premiums over the calendar year immediately preceding 
     Program Year 3, multiplied by 15 percent; and
       (E) notwithstanding subparagraphs (A) through (D), for the 
     Transition Period, Program Year 1, Program Year 2, or Program 
     Year 3, if an insurer has not had a full year of operations 
     during the calendar year immediately preceding such Period or 
     Program Year, such portion of the direct earned premiums of 
     the insurer as the Secretary determines appropriate, subject 
     to appropriate methodologies established by the Secretary for 
     measuring such direct earned premiums.
       (8) NAIC.--The term ``NAIC'' means the National Association 
     of Insurance Commissioners.
       (9) 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.
       (10) Program.--The term ``Program'' means the Terrorism 
     Insurance Program established by this title.
       (11) Program years.--
       (A) Transition period.--The term ``Transition Period'' 
     means the period beginning on the date of enactment of this 
     Act and ending on December 31, 2002.
       (B) Program year 1.--The term ``Program Year 1'' means the 
     period beginning on January 1, 2003 and ending on December 
     31, 2003.
       (C) Program year 2.--The term ``Program Year 2'' means the 
     period beginning on January 1, 2004 and ending on December 
     31, 2004.
       (D) Program year 3.--The term ``Program Year 3'' means the 
     period beginning on January 1, 2005 and ending on December 
     31, 2005.
       (12) Property and casualty insurance.--The term ``property 
     and casualty insurance''--
       (A) means commercial lines of property and casualty 
     insurance, including excess insurance, workers' compensation 
     insurance, and surety insurance; and
       (B) does not include--
       (i) Federal crop insurance issued or reinsured under the 
     Federal Crop Insurance Act (7 U.S.C. 1501 et seq.), or any 
     other type of crop or livestock insurance that is privately 
     issued or reinsured;
       (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 title insurance;
       (iii) financial guaranty insurance issued by monoline 
     financial guaranty insurance corporations;
       (iv) insurance for medical malpractice;
       (v) health or life insurance, including group life 
     insurance;
       (vi) flood insurance provided under the National Flood 
     Insurance Act of 1968 (42 U.S.C. 4001 et seq.); or
       (vii) reinsurance or retrocessional reinsurance.
       (13) Secretary.--The term ``Secretary'' means the Secretary 
     of the Treasury.
       (14) 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, each of the United States 
     Virgin Islands, and any territory or possession of the United 
     States.
       (15) United states.--The term ``United States'' means the 
     several States, and includes the territorial sea and the 
     continental shelf of the United States, as those terms are 
     defined in the Violent Crime Control and Law Enforcement Act 
     of 1994 (18 U.S.C. 2280, 2281).
       (16) Rule of construction for dates.--With respect to any 
     reference to a date in this title, 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. 103. TERRORISM INSURANCE PROGRAM.

       (a) Establishment of Program.--
       (1) In general.--There is established in the Department of 
     the Treasury the Terrorism Insurance 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).
       (3) Mandatory participation.--Each entity that meets the 
     definition of an insurer under this title shall participate 
     in the Program.
       (b) Conditions for Federal Payments.--No payment may be 
     made by the Secretary under this section with respect to an 
     insured loss that is covered by an insurer, unless--
       (1) the person that suffers the insured loss, or a person 
     acting on behalf of that person, files a claim with the 
     insurer;
       (2) the insurer 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 that is issued before the 
     date of enactment of this Act, not later than 90 days after 
     that date of enactment;
       (B) in the case of any policy that is issued within 90 days 
     of the date of enactment of this Act, at the time of offer, 
     purchase, and renewal of the policy; and
       (C) in the case of any policy that is issued more than 90 
     days 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;
       (3) the insurer processes the claim for the insured loss in 
     accordance with appropriate business practices, and any 
     reasonable procedures that the Secretary may prescribe; and
       (4) the insurer 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 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 Availability.--
       (1) Initial program periods.--During the period beginning 
     on the first day of the Transition Period and ending on the 
     last day of Program Year 2, each entity that meets the 
     definition of an insurer under section 102--
       (A) shall make available, in all of its property and 
     casualty insurance policies, coverage for insured losses; and
       (B) 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.
       (2) Program year 3.--Not later than September 1, 2004, the 
     Secretary shall, based on the factors referred to in section 
     108(d)(1), determine whether the provisions of subparagraphs 
     (A) and (B) of paragraph (1) should be extended through 
     Program Year 3.
       (d) State Residual Market Insurance Entities.--

[[Page H8724]]

       (1) In general.--The Secretary shall issue regulations, as 
     soon as practicable after the date of enactment of this Act, 
     that apply the provisions of this title to State residual 
     market insurance entities and State workers' compensation 
     funds.
       (2) Treatment of certain entities.--For purposes of the 
     regulations issued pursuant to paragraph (1)--
       (A) a State residual market insurance entity that does not 
     share its profits and losses with private sector insurers 
     shall be treated as a separate insurer; and
       (B) a State residual market insurance entity that shares 
     its profits and losses with private sector insurers shall not 
     be treated as a separate insurer, and shall report to each 
     private sector insurance participant its share of the insured 
     losses of the entity, which shall be included in each private 
     sector insurer's insured losses.
       (3) Treatment of participation in certain entities.--Any 
     insurer that participates in sharing profits and losses of a 
     State residual market insurance entity shall include in its 
     calculations of premiums any premiums distributed to the 
     insurer by the State residual market insurance entity.
       (e) Insured Loss Shared Compensation.--
       (1) Federal share.--
       (A) In general.--The Federal share of compensation under 
     the Program to be paid by the Secretary for insured losses of 
     an insurer during the Transition Period and each Program Year 
     shall be equal to 90 percent of that portion of the amount of 
     such insured losses that exceeds the applicable insurer 
     deductible required to be paid during such Transition Period 
     or such Program Year.
       (B) 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 to any person under any other Federal 
     program for those insured losses.
       (2) Cap on annual liability.--
       (A) In general.--Notwithstanding paragraph (1) or any other 
     provision of Federal or State law, if the aggregate insured 
     losses exceed $100,000,000,000, during the period beginning 
     on the first day of the Transition Period and ending on the 
     last day of Program Year 1, or during Program Year 2 or 
     Program Year 3 (until such time as the Congress may act 
     otherwise with respect to such losses)--
       (i) the Secretary shall not make any payment under this 
     title for any portion of the amount of such losses that 
     exceeds $100,000,000,000; and
       (ii) no insurer that has met its insurer deductible shall 
     be liable for the payment of any portion of that amount that 
     exceeds $100,000,000,000.
       (B) Insurer share.--For purposes of subparagraph (A), the 
     Secretary shall determine the pro rata share of insured 
     losses to be paid by each insurer that incurs insured losses 
     under the Program.
       (3) Notice to congress.--The Secretary shall notify the 
     Congress if estimated or actual aggregate insured losses 
     exceed $100,000,000,000 during the period beginning on the 
     first day of the Transition Period and ending on the last day 
     of Program Year 1, or during Program Year 2 or Program Year 
     3, and the Congress shall determine the procedures for and 
     the source of any payments for such excess insured losses.
       (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, unless 
     expressly provided, and shall not be subject to judicial 
     review.
       (6) Insurance marketplace aggregate retention amount.--For 
     purposes of paragraph (7), the insurance marketplace 
     aggregate retention amount shall be--
       (A) for the period beginning on the first day of the 
     Transition Period and ending on the last day of Program Year 
     1, the lesser of--
       (i) $10,000,000,000; and
       (ii) the aggregate amount, for all insurers, of insured 
     losses during such period;
       (B) for Program Year 2, the lesser of--
       (i) $12,500,000,000; and
       (ii) the aggregate amount, for all insurers, of insured 
     losses during such Program Year; and
       (C) for Program Year 3, the lesser of--
       (i) $15,000,000,000; and
       (ii) the aggregate amount, for all insurers, of insured 
     losses during such Program Year.
       (7) Recoupment of federal share.--
       (A) Mandatory recoupment amount.--For purposes of this 
     paragraph, the mandatory recoupment amount for each of the 
     periods referred to in subparagraphs (A), (B), and (C) of 
     paragraph (6) shall be the difference between--
       (i) the insurance marketplace aggregate retention amount 
     under paragraph (6) for such period; and
       (ii) the aggregate amount, for all insurers, of insured 
     losses during such period that are not compensated by the 
     Federal Government because such losses--

       (I) are within the insurer deductible for the insurer 
     subject to the losses; or
       (II) are within the portion of losses of the insurer that 
     exceed the insurer deductible, but are not compensated 
     pursuant to paragraph (1).

       (B) No mandatory recoupment if uncompensated losses exceed 
     insurance marketplace retention.--Notwithstanding 
     subparagraph (A), if the aggregate amount of uncompensated 
     insured losses referred to in clause (ii) of such 
     subparagraph for any period referred to in subparagraph (A), 
     (B), or (C) of paragraph (6) is greater than the insurance 
     marketplace aggregate retention amount under paragraph (6) 
     for such period, the mandatory recoupment amount shall be $0.
       (C) Mandatory establishment of surcharges to recoup 
     mandatory recoupment amount.--The Secretary shall collect, 
     for repayment of the Federal financial assistance provided in 
     connection with all acts of terrorism (or acts of war, in the 
     case of workers compensation) occurring during any of the 
     periods referred to in subparagraph (A), (B), or (C) of 
     paragraph (6), terrorism loss risk-spreading premiums in an 
     amount equal to any mandatory recoupment amount for such 
     period.
       (D) Discretionary recoupment of remainder of financial 
     assistance.--To the extent that the amount of Federal 
     financial assistance provided exceeds any mandatory 
     recoupment amount, the Secretary may recoup, through 
     terrorism loss risk-spreading premiums, such additional 
     amounts that the Secretary believes can be recouped, based 
     on--
       (i) the ultimate costs to taxpayers of no additional 
     recoupment;
       (ii) the economic conditions in the commercial marketplace, 
     including the capitalization, profitability, and investment 
     returns of the insurance industry and the current cycle of 
     the insurance markets;
       (iii) the affordability of commercial insurance for small- 
     and medium-sized businesses; and
       (iv) such other factors as the Secretary considers 
     appropriate.
       (8) Policy surcharge for terrorism loss risk-spreading 
     premiums.--
       (A) Policyholder premium.--Any amount established by the 
     Secretary as a terrorism loss risk-spreading premium shall--
       (i) be imposed as a policyholder premium surcharge on 
     property and casualty insurance policies in force after the 
     date of such establishment;
       (ii) begin with such period of coverage during the year as 
     the Secretary determines appropriate; and
       (iii) be based on a percentage of the premium amount 
     charged for property and casualty insurance coverage under 
     the policy.
       (B) Collection.--The Secretary shall provide for insurers 
     to collect terrorism loss risk-spreading premiums and remit 
     such amounts collected to the Secretary.
       (C) Percentage limitation.--A terrorism loss risk-spreading 
     premium (including any additional amount included in such 
     premium on a discretionary basis pursuant to paragraph 
     (7)(D)) may not exceed, on an annual basis, the amount equal 
     to 3 percent of the premium charged for property and casualty 
     insurance coverage under the policy.
       (D) Adjustment for urban and smaller commercial and rural 
     areas and different lines of insurance.--
       (i) Adjustments.--In determining the method and manner of 
     imposing terrorism loss risk-spreading premiums, including 
     the amount of such premiums, the Secretary shall take into 
     consideration--

       (I) the economic impact on commercial centers of urban 
     areas, including the effect on commercial rents and 
     commercial insurance premiums, particularly rents and 
     premiums charged to small businesses, and the availability of 
     lease space and commercial insurance within urban areas;
       (II) the risk factors related to rural areas and smaller 
     commercial centers, including the potential exposure to loss 
     and the likely magnitude of such loss, as well as any 
     resulting cross-subsidization that might result; and
       (III) the various exposures to terrorism risk for different 
     lines of insurance.

       (ii) Recoupment of adjustments.--Any mandatory recoupment 
     amounts not collected by the Secretary because of adjustments 
     under this subparagraph shall be recouped through additional 
     terrorism loss risk-spreading premiums.
       (E) Timing of premiums.--The Secretary may adjust the 
     timing of terrorism loss risk-spreading premiums to provide 
     for equivalent application of the provisions of this title to 
     policies that are not based on a calendar year, or to apply 
     such provisions on a daily, monthly, or quarterly basis, as 
     appropriate.
       (f) Captive Insurers and Other Self-Insurance 
     Arrangements.--The Secretary may, in consultation with the 
     NAIC or the appropriate State regulatory authority, apply the 
     provisions of this title, as appropriate, to other classes or 
     types of captive insurers and other self-insurance 
     arrangements by municipalities and other entities (such as 
     workers' compensation self-insurance programs and State 
     workers' compensation reinsurance pools), but only if such 
     application is determined before the occurrence of an act of 
     terrorism in which such an entity incurs an insured loss and 
     all of the provisions of this title are applied comparably to 
     such entities.
       (g) Reinsurance to Cover Exposure.--
       (1) Obtaining coverage.--This title may not be construed to 
     limit or prevent insurers from obtaining reinsurance coverage 
     for insurer deductibles or insured losses retained by 
     insurers pursuant to this section, nor shall the obtaining of 
     such coverage affect the calculation of such deductibles or 
     retentions.
       (2) Limitation on financial assistance.--The amount of 
     financial assistance provided pursuant to this section shall 
     not be reduced by reinsurance paid or payable to an insurer 
     from other sources, except that recoveries from such other 
     sources, taken together with financial assistance for the 
     Transition Period or a Program Year provided pursuant to this 
     section, may not exceed the aggregate amount of the insurer's 
     insured losses for such period. If such recoveries and 
     financial assistance for the Transition Period or a Program 
     Year exceed such aggregate amount of insured losses for that 
     period and there is no agreement between the insurer and any 
     reinsurer to the contrary, an amount in excess of such 
     aggregate insured losses shall be returned to the Secretary.
       (h) Group Life Insurance Study.--

[[Page H8725]]

       (1) Study.--The Secretary shall study, on an expedited 
     basis, whether adequate and affordable catastrophe 
     reinsurance for acts of terrorism is available to life 
     insurers in the United States that issue group life 
     insurance, and the extent to which the threat of terrorism is 
     reducing the availability of group life insurance coverage 
     for consumers in the United States.
       (2) Conditional Coverage.--To the extent that the Secretary 
     determines that such coverage is not or will not be 
     reasonably available to both such insurers and consumers, the 
     Secretary shall, in consultation with the NAIC--
       (A) apply the provisions of this title, as appropriate, to 
     providers of group life insurance; and
       (B) provide such restrictions, limitations, or conditions 
     with respect to any financial assistance provided that the 
     Secretary deems appropriate, based on the study under 
     paragraph (1).
       (i) Study and Report.--
       (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, 
     including personal lines.
       (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).

     SEC. 104. 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 effectively 
     administer and implement the Program, and to ensure that all 
     insurers and self-insured entities that participate in the 
     Program are treated comparably under the Program.
       (b) Interim Rules and Procedures.--The Secretary may issue 
     interim final rules or procedures specifying the manner in 
     which--
       (1) insurers may file and certify claims under the Program;
       (2) the Federal share of compensation for insured losses 
     will be paid under the Program, including payments based on 
     estimates of or actual insured losses;
       (3) the Secretary may, at any time, seek repayment from or 
     reimburse any insurer, based on estimates of insured losses 
     under the Program, to effectuate the insured loss sharing 
     provisions in section 103; and
       (4) the Secretary will determine any final netting of 
     payments under the Program, including payments owed to the 
     Federal Government from any insurer and any Federal share of 
     compensation for insured losses owed to any insurer, to 
     effectuate the insured loss sharing provisions in section 
     103.
       (c) Consultation.--The Secretary shall consult with the 
     NAIC, as the Secretary determines appropriate, concerning 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.--
       (1) In general.--The Secretary may assess a civil monetary 
     penalty in an amount not exceeding the amount under paragraph 
     (2) against any insurer that the Secretary determines, on the 
     record after opportunity for a hearing--
       (A) has failed to charge, collect, or remit terrorism loss 
     risk-spreading premiums under section 103(e) in accordance 
     with the requirements of, or regulations issued under, this 
     title;
       (B) has intentionally provided to the Secretary erroneous 
     information regarding premium or loss amounts;
       (C) submits to the Secretary fraudulent claims under the 
     Program for insured losses;
       (D) has failed to provide the disclosures required under 
     subsection (f); or
       (E) has otherwise failed to comply with the provisions of, 
     or the regulations issued under, this title.
       (2) Amount.--The amount under this paragraph is the greater 
     of $1,000,000 and, in the case of any failure to pay, charge, 
     collect, or remit amounts in accordance with this title or 
     the regulations issued under this title, such amount in 
     dispute.
       (3) Recovery of amount in dispute.--A penalty under this 
     subsection for any failure to pay, charge, collect, or remit 
     amounts in accordance with this title or the regulations 
     under this title shall be in addition to any such amounts 
     recovered by the Secretary.
       (f) Submission of Premium Information.--
       (1) In general.--The Secretary shall annually compile 
     information on the terrorism risk insurance premium rates of 
     insurers for the preceding year.
       (2) Access to information.--To the extent that such 
     information is not otherwise available to the Secretary, the 
     Secretary may require each insurer to submit to the NAIC 
     terrorism risk insurance premium rates, as necessary to carry 
     out paragraph (1), and the NAIC shall make such information 
     available to the Secretary.
       (3) Availability to congress.--The Secretary shall make 
     information compiled under this subsection available to the 
     Congress, upon request.
       (g) Funding.--
       (1) Federal payments.--There are hereby appropriated, out 
     of funds in the Treasury not otherwise appropriated, such 
     sums as may be necessary to pay the Federal share of 
     compensation for insured losses under the Program.
       (2) Administrative expenses.--There are hereby 
     appropriated, out of funds in the Treasury not otherwise 
     appropriated, such sums as may be necessary to pay reasonable 
     costs of administering the Program.

     SEC. 105. PREEMPTION AND NULLIFICATION OF PRE-EXISTING 
                   TERRORISM EXCLUSIONS.

       (a) General Nullification.--Any terrorism exclusion in a 
     contract for property and casualty insurance that is in force 
     on the date of enactment of this Act shall be void to the 
     extent that it excludes losses that would otherwise be 
     insured losses.
       (b) General Preemption.--Any State approval of any 
     terrorism exclusion from a contract for property and casualty 
     insurance that is in force on the date of enactment of this 
     Act, shall be void to the extent that it excludes losses that 
     would otherwise be insured losses.
       (c) Reinstatement of Terrorism Exclusions.--Notwithstanding 
     subsections (a) and (b) or any provision of State law, an 
     insurer may reinstate a preexisting provision in a contract 
     for property and casualty insurance that is in force on the 
     date of enactment of this Act and that excludes coverage for 
     an act of terrorism only--
       (1) if the insurer has received a written statement from 
     the insured that affirmatively authorizes such reinstatement; 
     or
       (2) if--
       (A) the insured fails to pay any increased premium charged 
     by the insurer for providing such terrorism coverage; and
       (B) the insurer provided notice, at least 30 days before 
     any such reinstatement, of--
       (i) the increased premium for such terrorism coverage; and
       (ii) the rights of the insured with respect to such 
     coverage, including any date upon which the exclusion would 
     be reinstated if no payment is received.

     SEC. 106. PRESERVATION PROVISIONS.

       (a) State Law.--Nothing in this title shall affect the 
     jurisdiction or regulatory authority of the insurance 
     commissioner (or any agency or office performing like 
     functions) of any State over any insurer or other person--
       (1) except as specifically provided in this title; and
       (2) except that--
       (A) the definition of the term ``act of terrorism'' in 
     section 102 shall be the exclusive definition of that term 
     for purposes of compensation for insured losses under this 
     title, 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 title;
       (B) during the period beginning on the date of enactment of 
     this Act and ending on December 31, 2003, rates and forms for 
     terrorism risk insurance covered by this title 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 title affects the 
     ability of any State to invalidate a rate as excessive, 
     inadequate, or unfairly discriminatory, and, with respect to 
     forms, where a State has prior approval authority, it shall 
     apply to allow subsequent review of such forms; 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 108, including authority in subsection 
     108(b), books and records of any insurer that are relevant to 
     the Program shall be provided, or caused to be provided, to 
     the Secretary, upon request by the Secretary, notwithstanding 
     any provision of the laws of any State prohibiting or 
     limiting such access.
       (b) Existing Reinsurance Agreements.--Nothing in this title 
     shall be construed to alter, amend, or expand the terms of 
     coverage under any reinsurance agreement in effect on the 
     date of enactment of this Act. The terms and conditions of 
     such an agreement shall be determined by the language of that 
     agreement.

     SEC. 107. LITIGATION MANAGEMENT.

       (a) Procedures and Damages.--
       (1) In general.--If the Secretary makes a determination 
     pursuant to section 102 that an act of terrorism has 
     occurred, there shall exist a Federal cause of action for 
     property damage, personal injury, or death arising out of 
     or resulting from such act of terrorism, which shall be 
     the exclusive cause of action and remedy for claims for 
     property damage, personal injury, or death arising out of 
     or relating to such act of terrorism, except as provided 
     in subsection (b).
       (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 (b).
       (3) Substantive law.--The substantive law for decision in 
     any such action described in paragraph (1) shall be derived 
     from the law, including choice of law principles, of the 
     State in which such act of terrorism occurred, unless such 
     law is otherwise inconsistent with or preempted by Federal 
     law.
       (4) Jurisdiction.--For each determination described in 
     paragraph (1), not later than 90 days after the occurrence of 
     an act of terrorism, the Judicial Panel on Multidistrict 
     Litigation shall designate 1 district court or, if necessary, 
     multiple district courts of the United States that shall have 
     original and exclusive jurisdiction over all actions for any 
     claim (including any claim for loss of property, personal 
     injury, or death) relating to or arising out of an act of 
     terrorism subject to this section. The Judicial Panel on 
     Multidistrict Litigation shall select and assign the district 
     court or courts based on the convenience of the parties and 
     the just and efficient conduct of the proceedings. For 
     purposes of personal jurisdiction, the district court or 
     courts designated by the Judicial Panel on Multidistrict 
     Litigation shall be deemed to sit in all judicial districts 
     in the United States.
       (5) Punitive damages.--Any amounts awarded in an action 
     under paragraph (1) that are attributable to punitive damages 
     shall not count as insured losses for purposes of this title.

[[Page H8726]]

       (b) Exclusion.--Nothing in this section shall in any way 
     limit the liability of any government, an organization, or 
     person who knowingly participates in, conspires to commit, 
     aids and abets, or commits any act of terrorism with respect 
     to which a determination described in subsection (a)(1) was 
     made.
       (c) Right of Subrogation.--The United States shall have the 
     right of subrogation with respect to any payment or claim 
     paid by the United States under this title.
       (d) Relationship to Other Law.--Nothing in this section 
     shall be construed to affect--
       (1) any party's contractual right to arbitrate a dispute; 
     or
       (2) any provision of the Air Transportation Safety and 
     System Stabilization Act (Public Law 107-42; 49 U.S.C. 40101 
     note.).
       (e) Effective Period.--This section shall apply only to 
     actions described in subsection (a)(1) that arise out of or 
     result from acts of terrorism that occur or occurred during 
     the effective period of the Program.

     SEC. 108. TERMINATION OF PROGRAM.

       (a) Termination of Program.--The Program shall terminate on 
     December 31, 2005.
       (b) Continuing Authority To Pay or Adjust Compensation.--
     Following the termination of the Program, the Secretary may 
     take such actions as may be necessary to ensure payment, 
     recoupment, 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 title, in accordance with the provisions of section 103 
     and regulations promulgated thereunder.
       (c) Repeal; Savings Clause.--This title is repealed 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 (b) of this section, 
     paragraph (4), (5), (6), (7), or (8) of section 103(e), or 
     subsection (a)(1), (c), (d), or (e) of section 104, as in 
     effect on the day before the date of such repeal, or 
     applicable regulations promulgated thereunder, during any 
     period in which the authority of the Secretary under 
     subsection (b) of this section is in effect; or
       (2) to prevent the availability of funding under section 
     104(g) during any period in which the authority of the 
     Secretary under subsection (b) of this section is in effect.
       (d) Study and Report on the Program.--
       (1) Study.--The Secretary, in consultation with the NAIC, 
     representatives of the insurance industry and of policy 
     holders, other experts in the insurance field, and other 
     experts as needed, shall assess the effectiveness of the 
     Program and the likely capacity of the property and casualty 
     insurance industry to offer insurance for terrorism risk 
     after termination of the Program, and the availability and 
     affordability of such insurance for various policyholders, 
     including railroads, trucking, and public transit.
       (2) Report.--The Secretary shall submit a report to the 
     Congress on the results of the study conducted under 
     paragraph (1) not later than June 30, 2005.
                TITLE II--TREATMENT OF TERRORIST ASSETS

     SEC. 201. SATISFACTION OF JUDGMENTS FROM BLOCKED 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), as amended by 
     section 686 of Public Law 107-228, is further amended--
       (1) in subsection (a)(2)(A)(ii), by striking ``July 27, 
     2000, or January 16, 2002'' and inserting ``July 27, 2000, 
     any other date before October 28, 2000, or January 16, 
     2002'';
       (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 Account Balances and Proceeds 
     Inadequate To Satisfy Full Amount of Compensatory Awards 
     Against Iran.--
       ``(1)  Prior judgments.--
       ``(A) In general.--In the event that the Secretary 
     determines that 90 percent of the amounts available to be 
     paid under subsection (b)(2) are inadequate to pay the total 
     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) with respect to Iran, the 
     Secretary shall, not later than 60 days after such date, make 
     payment from such amounts available to be paid under 
     subsection (b)(2) to each party to which such a judgment has 
     been issued in an amount equal to a share, calculated under 
     subparagraph (B), of 90 percent of the amounts available to 
     be paid under subsection (b)(2) that have not been subrogated 
     to the United States under this Act as of the date of 
     enactment of this subsection.
       ``(B) Calculation of payments.--The share that is payable 
     to a person under subparagraph (A), including any person 
     issued a final judgment as of the date of enactment of this 
     subsection in a suit filed on a date added by the amendment 
     made by section 686 of Public Law 107-228, shall be equal to 
     the proportion that the amount of unpaid compensatory damages 
     awarded in a final judgment issued to that person bears to 
     the total amount of all unpaid compensatory damages awarded 
     to all persons to whom such judgments have been issued as of 
     the date of enactment of this subsection in cases identified 
     in subsection (a)(2)(A) with respect to Iran.
       ``(2) Subsequent judgment.--
       ``(A) In general.--The Secretary shall pay to any person 
     awarded a final judgment after the date of enactment of this 
     subsection, in the case filed on January 16, 2002, and 
     identified in subsection (a)(2)(A) with respect to Iran, an 
     amount equal to a share, calculated under subparagraph (B), 
     of the balance of the amounts available to be paid under 
     subsection (b)(2) that remain following the disbursement of 
     all payments as provided by paragraph (1). The Secretary 
     shall make such payment not later than 30 days after such 
     judgment is awarded.
       ``(B) Calculation of payments.--To the extent that funds 
     are available, the amount paid under subparagraph (A) to such 
     person shall be the amount the person would have been paid 
     under paragraph (1) if the person had been awarded the 
     judgment prior to the date of enactment of this subsection.
       ``(3) Additional payments.--
       ``(A) In general.--Not later than 30 days after the 
     disbursement of all payments under paragraphs (1) and (2), 
     the Secretary shall make an additional payment to each person 
     who received a payment under paragraph (1) or (2) in an 
     amount equal to a share, calculated under subparagraph (B), 
     of the balance of the amounts available to be paid under 
     subsection (b)(2) that remain following the disbursement of 
     all payments as provided by paragraphs (1) and (2).
       ``(B) Calculation of payments.--The share payable under 
     subparagraph (A) to each such person shall be equal to the 
     proportion that the amount of compensatory damages awarded 
     that person bears to the total amount of all compensatory 
     damages awarded to all persons who received a payment under 
     paragraph (1) or (2).
       ``(4) Statutory construction.--Nothing in this subsection 
     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.
       ``(5) Certain rights and claims not relinquished.--Any 
     person receiving less than the full amount of compensatory 
     damages awarded to that party in a judgment to which this 
     subsection applies shall not be required to make the election 
     set forth in subsection (a)(2)(B) or, with respect to 
     subsection (a)(2)(D), the election relating to relinquishment 
     of any right to execute or attach property that is subject to 
     section 1610(f)(1)(A) of title 28, United States Code, except 
     that such person shall be required to relinquish rights set 
     forth--
       ``(A) in subsection (a)(2)(C); and
       ``(B) in subsection (a)(2)(D) with respect to enforcement 
     against property that is at issue in claims against the 
     United States before an international tribunal or that is the 
     subject of awards by such tribunal.
       ``(6) Guidelines for establishing claims of a right to 
     payment.--The Secretary may promulgate reasonable guidelines 
     through which any person claiming a right to payment under 
     this section may inform the Secretary of the basis for such 
     claim, including by submitting a certified copy of the final 
     judgment under which such right is claimed and by providing 
     commercially reasonable payment instructions. The Secretary 
     shall take all reasonable steps necessary to ensure, to the 
     maximum extent practicable, that such guidelines shall not 
     operate to delay or interfere with payment under this 
     section.''.
       (d) Definitions.--In this section, the following 
     definitions shall apply:
       (1) Act of terrorism.--The term ``act of terrorism'' 
     means--
       (A) any act or event certified under section 102(1); or
       (B) to the extent not covered by subparagraph (A), any 
     terrorist activity (as defined in section 212(a)(3)(B)(iii) 
     of the Immigration and Nationality Act (8 U.S.C. 
     1182(a)(3)(B)(iii))).
       (2) Blocked asset.--The term ``blocked asset'' means--
       (A) any asset seized or frozen by the United States under 
     section 5(b) of the Trading With the Enemy Act (50 U.S.C. 
     App. 5(b)) or under

[[Page H8727]]

     sections 202 and 203 of the International Emergency Economic 
     Powers Act (50 U.S.C. 1701; 1702); and
       (B) does not include property that--
       (i) is subject to a license issued by the United States 
     Government for final payment, transfer, or disposition by or 
     to a person subject to the jurisdiction of the United States 
     in connection with a transaction for which the issuance of 
     such license has been specifically required by statute other 
     than the International Emergency Economic Powers Act (50 
     U.S.C. 1701 et seq.) or the United Nations Participation Act 
     of 1945 (22 U.S.C. 287 et seq.); or
       (ii) in the case of property subject to the Vienna 
     Convention on Diplomatic Relations or the Vienna Convention 
     on Consular Relations, or that enjoys equivalent privileges 
     and immunities under the law of the United States, is being 
     used exclusively for diplomatic or consular purposes.
       (3) Certain property.--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.
       (4) Terrorist party.--The term ``terrorist party'' means a 
     terrorist, a terrorist organization (as defined in section 
     212(a)(3)(B)(vi) of the Immigration and Nationality Act (8 
     U.S.C. 1182(a)(3)(B)(vi))), or a foreign state designated as 
     a state sponsor of terrorism under section 6(j) of the Export 
     Administration Act of 1979 (50 U.S.C. App. 2405(j)) or 
     section 620A of the Foreign Assistance Act of 1961 (22 U.S.C. 
     2371).
              TITLE III--FEDERAL RESERVE BOARD PROVISIONS

     SEC. 301. CERTAIN AUTHORITY OF THE BOARD OF GOVERNORS OF THE 
                   FEDERAL RESERVE SYSTEM.

       Section 11 of the Federal Reserve Act (12 U.S.C. 248) is 
     amended by adding at the end the following new subsection:
       ``(r)(1) Any action that this Act provides may be taken 
     only upon the affirmative vote of 5 members of the Board may 
     be taken upon the unanimous vote of all members then in 
     office if there are fewer than 5 members in office at the 
     time of the action.
       ``(2)(A) Any action that the Board is otherwise authorized 
     to take under section 13(3) may be taken upon the unanimous 
     vote of all available members then in office, if--
       ``(i) at least 2 members are available and all available 
     members participate in the action;
       ``(ii) the available members unanimously determine that--
       ``(I) unusual and exigent circumstances exist and the 
     borrower is unable to secure adequate credit accommodations 
     from other sources;
       ``(II) action on the matter is necessary to prevent, 
     correct, or mitigate serious harm to the economy or the 
     stability of the financial system of the United States;
       ``(III) despite the use of all means available (including 
     all available telephonic, telegraphic, and other electronic 
     means), the other members of the Board have not been able to 
     be contacted on the matter; and
       ``(IV) action on the matter is required before the number 
     of Board members otherwise required to vote on the matter can 
     be contacted through any available means (including all 
     available telephonic, telegraphic, and other electronic 
     means); and
       ``(iii) any credit extended by a Federal reserve bank 
     pursuant to such action is payable upon demand of the Board.
       ``(B) The available members of the Board shall document in 
     writing the determinations required by subparagraph (A)(ii), 
     and such written findings shall be included in the record of 
     the action and in the official minutes of the Board, and 
     copies of such record shall be provided as soon as 
     practicable to the members of the Board who were not 
     available to participate in the action and to the Chairman of 
     the Committee on Banking, Housing, and Urban Affairs of the 
     Senate and to the Chairman of the Committee on Financial 
     Services of the House of Representatives.''.
       And the Senate agree to the same.

     From the Committee on Financial Services, for consideration 
     of the House bill and the Senate amendment thereto, and 
     modifications committed to conference:
     Michael G. Oxley,
     Richard H. Baker,
     Robert W. Ney,
     Sue W. Kelly,
     Christopher Shays,
     Vito Fossella,
     Michael Ferguson,
     John J. LaFalce,
     Paul E. Kanjorski
     Ken Bentsen,
     James H. Maloney,
     Darlene Hooley,
     From the Committee on the Judiciary, for consideration of 
     sec. 15 the House bill and sec. 10 and 11 of the Senate 
     amendment thereto, and modifications committed to conference:
     John Conyers, Jr.,
                                Managers on the Part of the House.

     Paul Sarbanes,
     Christopher J. Dodd,
     Jack Reed,
     Charles Schumer,
                               Managers on the Part of the Senate.

       JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE

       The managers on the part of the House and the Senate at the 
     conference on the disagreeing votes of the two Houses on the 
     amendment of the Senate to the bill (H.R. 3210) to ensure the 
     continued financial capacity of insurers to provide coverage 
     for risks from terrorism, submit the following joint 
     statement to the House and the Senate in explanation of the 
     effect of the action agreed upon by the managers and 
     recommended in the accompanying conference report.
       The Senate amendment struck all of the House bill after the 
     enacting clause and inserted a substitute text.
       The House recedes from its disagreement to the amendment of 
     the Senate with an amendment that is a substitute for the 
     House bill and the Senate amendment.
       The Conference Report includes the following provisions:
     Section 1. Short title; table of contents
       The short title of this legislation is ``Terrorism Risk 
     Insurance Act of 2002.''


                  Title I--Terrorism Insurance Program

     Section 101. Congressional findings and purpose
       Following the widespread financial market uncertainties due 
     to the terrorist attacks of September 11, 2001, Congress 
     determined that there was a need for a temporary Federal 
     program to establish a system of shared public/private 
     compensation for insured losses resulting from acts of 
     terrorism to protect consumers and create a transitional 
     period for the private insurance markets to stabilize.
     Section 102. Definitions
       Section 102 defines terms necessary for implementation of 
     this legislation. The Federal backstop is triggered when the 
     Secretary of the Treasury, in concurrence with the Secretary 
     of State and the Attorney General, certifies that an event 
     meets the definition of an act of terrorism. The legislation 
     only applies to U.S. risks, including domestic air carriers 
     and flag vessels, U.S. territorial seas and continental 
     shelf, and U.S. missions. The legislation applies only to 
     acts that are committed by an individual or individuals 
     acting on behalf of a foreign person or foreign interest.
       The terms ``affiliate'' and ``control'' are meant to ensure 
     that affiliated insurers are treated as a consolidated entity 
     for calculating direct earned premiums. The term ``insured 
     loss'' includes losses resulting from an act of terrorism 
     (and from an act of war in the case of workers compensation). 
     Each insurer will be responsible for paying out a prescribed 
     amount of insured losses, the ``insurer deductible,'' before 
     Federal assistance becomes available. This deductible is 
     based on a percentage of direct earned premiums from the 
     previous calendar year. Insurers' deductibles are 1% during a 
     transition period for the remainder of 2002, 7% in 2003, 10% 
     in 2004, and 15% in 2005. Except as otherwise specifically 
     provided, the Conferees intend the legislation to apply only 
     to primary and excess commercial property and casualty 
     insurance (including cyber-terrorism and business 
     interruption coverage).
     Section 103. Terrorism Insurance Program
       The Terrorism Insurance Program is established in the 
     Department of the Treasury under which the Federal government 
     will share the risk of loss from future terrorist attacks 
     with the commercial property and causality insurance 
     marketplace, for a temporary period of time. The Secretary of 
     the Treasury (hereafter ``Secretary'') shall administer 
     the Program and pay the Federal share of compensation for 
     insured losses. The Federal government pays 90% of insured 
     losses in excess of an insurer's deductible while the 
     insurer pays 10%. Insurers may reinsure their insurer 
     deductibles and 10% co-shares. Losses covered by the 
     Program will be capped at $100 billion per year; above 
     this amount, Congress is to determine the procedures for 
     and the source of any payments.
       Before receiving Federal assistance under this Act, an 
     insurer must certify its claim for payment of insured losses, 
     that a policyholder (or person acting on the policyholder's 
     behalf) has filed a claim for such loss, and the insurer's 
     compliance with the Act. The Secretary may not reimburse an 
     insurer for such losses unless the insurer has provided clear 
     and conspicuous disclosure to the policyholder of the premium 
     charged for terrorism coverage and the Federal share of 
     compensation. This disclosure to the policyholder must occur 
     at the time of offer, purchase, and renewal of the policy for 
     policies issued after the date of enactment, and must be made 
     on a separate line item in the policy with respect to 
     policies issued more than 90 days after enactment. For 
     policies issued before the date of enactment, the disclosure 
     must be made within 90 days of such date. The Conferees 
     intend this disclosure to enhance the competitiveness of the 
     marketplace by better enabling consumers to comparison shop 
     for terrorism insurance coverage, and to make policyholders 
     better aware that the Federal government will be sharing the 
     costs of such coverage with the insurers, thereby reducing 
     the insurers's exposure. Insurers must submit premium and 
     claims information to the Secretary who may investigate and 
     audit all claims under the Program.
       Each entity meeting the definition of insurer under this 
     legislation is required to participate in the Program. During 
     the first two years of the Program each such insurer must 
     make available in all of its property and casualty insurance 
     polices coverage for insured losses, and shall make such 
     coverage

[[Page H8728]]

     available on terms that do not differ materially from the 
     terms, amounts, and other coverage limitations applicable to 
     losses arising from events other than acts of terrorism. The 
     Secretary has discretion to extend this requirement to the 
     third year of the Program, to preserve this important option 
     for policyholders.
       Section 103 provides for insurance marketplace retentions 
     of $10 billion in Program year 1 (including any remainder of 
     2002), $12.5 billion in Program year 2, and $15 billion in 
     Program year 3. Federal assistance within the retention above 
     in insurer deductibles and 10% co-shares must be recouped 
     while additional amounts of Federal assistance may be 
     recouped based on economic factors in the judgment of the 
     Secretary. Mandatory recoupment within the insurance 
     marketplace retention is through terrorism loss risk-
     spreading premiums (surcharges) paid by all commercial 
     property and casualty policyholders based on premium rates 
     with any year's surcharge (mandatory and discretionary 
     combined) capped at 3% of the premium charged for property 
     and casculty insurance coverage under the policy in each such 
     year. The Secretary has discretion over the timing of 
     recoupment, and to adjust amounts for urban, smaller 
     commercial, and rural areas, as well as for different lines 
     of insurance, so long as the mandatory amounts are ultimately 
     recouped. The Secretary may assess civil penalties on 
     insurers for submission of false or misleading information 
     or failure to repay the Secretary for any amount required 
     to be repaid, or for other failure to comply with the 
     provisions of this title.
       This section directs the Secretary to apply the provisions 
     of the legislation to State residual market insurance 
     entities and State workers compensation funds. The Secretary 
     is directed to either treat State residual market insurance 
     entities as separate insurers, or to calculate the premiums, 
     losses, and Federal backstop based on each insurer's share of 
     the entity, imputing such amounts as part of their total 
     business. This calculation would apply to all insurers that 
     participate in such entities, regardless of whether they 
     otherwise provide commercial property and casualty insurance 
     as set forth in the legislation. This section further gives 
     the Secretary discretion to apply the legislation to various 
     classes of captives and self-insurance programs (such as 
     workers' compensation self-insurance programs and State 
     workers' compensation reinsurance pools).
       The Secretary is also directed to conduct an expedited 
     study to determine whether adequate and affordable 
     catastrophe reinsurance for acts of terrorism is available to 
     group life insurers and whether the threat of terrorism is 
     reducing the availability of group life insurance for 
     consumers. Should the Secretary determine that terrorism 
     coverage is not or will not be reasonably available to 
     insurers and consumers, the Secretary would be required to 
     include group life insurance in the Terrorism Insurance 
     Program. In so doing, the Secretary would have discretion to 
     determine the most appropriate way to include group life 
     insurance in the Program.
       The Secretary, after consultation with the NAIC, is to 
     conduct a study of the potential effects of acts of terrorism 
     on the availability of life insurance generally and other 
     lines of insurance coverage, including personal lines, to be 
     submitted to Congress not later than 9 months from the date 
     of enactment.
     Section 104. General authority and administration of claims
       The Secretary shall have the powers and authorities 
     necessary to carry out the Program. The Secretary shall 
     annually compile information on the terrorism risk insurance 
     premium rates of insurers for the preceding year. To the 
     extent that such information is not otherwise available, the 
     Secretary may require insurers to submit their terrorism risk 
     insurance premium rates to the NAIC, which shall make such 
     information available to the Secretary.
     Section 105. Preemption and nullification of pre-existing 
         terrorism exclusions
       This section voids any commercial property and casualty 
     terrorism insurance exclusion that is in force on the date of 
     the enactment of this Act to the extent that it excludes that 
     in force on the date of the enactment of this Act to the 
     extent that it excludes losses that would otherwise be 
     insured losses. Any Sate approval of any commercial property 
     and casualty terrorism insurance exclusion in force on the 
     date of enactment is also void to the extent that it excludes 
     losses that would otherwise be insured losses.
       This provision is intended to create immediate terrorism 
     coverage for commercial property and casualty policyholders 
     upon enactment for a short window of time, while allowing 
     insurers to immediately send notices of the increased premium 
     for such coverage and giving policyholders the option within 
     30 days of such notice to pay such increased premium or allow 
     reinstatement of any preexisting terrorism exclusion.
     Section 106. Preservation provisions
       This section preserves State regulatory authority except as 
     specifically provided in this legislation. A uniform 
     definition of a terrorist act is established in this 
     legislation. Until the end of 2003, States would be required 
     to allow rate and form changes to take effect immediately but 
     would retain authority to disapprove any rates as excessive, 
     inadequate, or unfairly discriminatory and where a State has 
     prior approval authority for forms, subsequent review of such 
     forms is permitted. During the period in which the 
     Secretary's authority to carry out the Program is in effect, 
     the Secretary would have access to any books and records of 
     insurers that are relevant to the Program.
     Section 107. Litigation management
       The Conferees agreed to a provision on litigation 
     management.
     Section 108. Termination of program
       This section provides a three-year program (with a 
     transition period for the balance of 2002) that terminates on 
     December 31, 2005. The Secretary shall conduct a study and 
     report to Congress no later than June 30, 2005 on the 
     effectiveness of the Program and the likely capacity of the 
     property and casualty insurance industry to offer insurance 
     for terrorism risk after termination of the Program, and the 
     availability and affordability of such insurance for various 
     policyholders, including railroads, trucking, and public 
     transit.


                title ii--treatment of terrorist assets

     Section 201. Satisfaction of judgments from blocked assets of 
         terrorists, terrorist organizations, and state sponsors 
         to terrorism
       The purpose of Section 201 is to deal comprehensively with 
     the problem of enforcement of judgments rendered on behalf of 
     victims of terrorism in any court of competent jurisdiction 
     by enabling them to satisfy such judgments through the 
     attachment of blocked assets of terrorist parties. It is the 
     intent of the Conferees that Section 201 establish that such 
     judgments are to be enforced. Section 201 builds upon and 
     extends the principles in section 1610(f)(1) of the Foreign 
     Sovereign Immunities Act (28 U.S.C. Sec. 1610(f)(1)), 
     authorizes the enforcement of judgment against terrorist 
     organizations and eliminates the effect of any Presidential 
     waiver issued prior to the date of enactment purporting to 
     bar or restrict enforcement of such judgments, thereby making 
     clear that all such judgments are enforceable against any 
     assets or property under any authorities referenced in 
     Section 1610(f)(1).
       Section 201(c) establishes a special rule for cases against 
     Iran. In Section 2002 of the Victims of Trafficking and 
     Violence Protection Act of 2000 (2000 Act), Congress directed 
     that specified claimants against Iran under Section 
     1605(a)(7) of the Foreign Sovereign Immunities Act receive 
     payment in satisfaction of judgments. Unfortunately, several 
     victims and families of victims who brought suit against 
     Iran, were left out of the 2000 Act. The Conferees has sought 
     to correct this injustice.
       In order to accommodate additional dates within the 
     equitable formula for payment of remaining amounts in the 
     accounts and rental proceeds, the Conferees added to Section 
     (c) an adjustment to the proportional formula for payment to 
     qualifying claimants.
       In Section 201(d), the Conferees broadened the definition 
     of ``act of terrorism'' for purposes of that section; defined 
     the term ``blocked assets''; and clarified the term 
     ``terrorist organization'' to mean any entity included in the 
     definition provided in Section 212(a)(3)(B)(vi) of the 
     Immigration and Nationality Act, (8 U.S.C. 
     Sec. 1182(a)(3)(B)(vi)). This provision is intended to reach 
     terrorist organizations.


              title iii--federal reserve board provisions

     Section 301. Certain authority of the Board of Governors of 
         the Federal Reserve System
       The Conferees agreed to certain changes to Section 11 of 
     the Federal Reserve Act.

     From the Committee on Financial Services, for consideration 
     of the House bill and the Senate amendment thereto, and 
     modifications committed to conference:
     Michael G. Oxley,
     Richard H. Baker,
     Robert W. Ney,
     Sue W. Kelly,
     Christopher Shays,
     Vito Fossella,
     Michael Ferguson,
     John J. LaFalce,
     Paul E. Kanjorski,
     Ken Bentsen,
     James H. Maloney,
     Darlene Hooley,
     From the Committee on Judiciary, for consideration of sec. 15 
     the House bill and sec. 10 and 11 of the Senate amendment 
     thereto, and modifications committed to conference:
     John Conyers, Jr.,
                                Managers on the Part of the House.

     Paul Sarbanes,
     Christopher J. Dodd,
     Jack Reed,
     Charles Schumer,
     Managers on the Part of the Senate.

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