[Congressional Record Volume 148, Number 147 (Thursday, November 14, 2002)]
[House]
[Pages H8802-H8809]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
[[Page H8802]]
CONFERENCE REPORT ON H.R. 3210, TERRORISM RISK PROTECTION ACT
Mr. OXLEY. Mr. Speaker, pursuant to House Resolution 607, I call up
the conference report on the bill (H.R. 3210) to ensure the continued
financial capacity of insurers to provide coverage for risks from
terrorism.
The clerk read the title of the bill.
The SPEAKER pro tempore. Pursuant to the rule, the conference report
is considered as having been read.
(For conference report and statement, see proceedings of the House of
November 13, 2002, at page H8722).
The SPEAKER pro tempore. The gentleman from Ohio (Mr. Oxley) and the
gentleman from New York (Mr. LaFalce) each will control 30 minutes.
The Chair recognizes the gentleman from Ohio (Mr. Oxley).
General Leave
Mr. OXLEY. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days within which to revise and extend their remarks
and include extraneous material on the conference report.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Ohio?
There was no objection.
Mr. OXLEY. Mr. Speaker, I yield myself 6 minutes.
September 11, 2001, will go down in history as one of the most tragic
days in American history as a foreign terrorist network unleashed a
devastating attack against our Nation, killing or injuring thousands
and causing greater insured losses than all recent natural disasters
combined. This attack not only destroyed the lives of innumerable
innocent people from all corners of the world, but it was also intended
to disrupt the very center of America's financial infrastructure.
Fortunately, the American people and our economy proved stronger and
more resilient than anyone could have imagined. Under the leadership of
our President, we have fought back, destroyed the terrorist launching
pad, and fortified our borders and financial infrastructure security.
We absorbed the terrorists' best hit, and our financial system and our
will remain as strong as ever.
In the insurance industry not a single American firm was rendered
insolvent and insurers were able to expedite claims payments to rush
aid to those most in need.
The one weak link in our comeback has been the foreign reinsurance
market, which since 9/11 has been understandably uncomfortable with
providing further coverage for terrorist attacks. An effective
insurance industry relies on spreading risk as broadly as possible, in
the case of reinsurance across the entire globe. American insurers rely
on foreign reinsurance to protect their solvency against truly
catastrophic events. Insurers simply cannot responsibly provide
protection for American businesses without some sort of financial
backstop, and where the foreign private sector can no longer fill that
role we must step in to protect our economy against the threat of
future attacks.
A recent Real Estate Roundtable survey cited more than $15 billion in
real estate projects across the U.S. being delayed or canceled because
of their terrorism exposure. If the building projects do not go
forward, it means that the architects, engineers, construction workers,
and realtors do not work. Our economy will continue to be impaired and
thousands of American jobs will continue to be lost. We cannot afford
to allow the terrorists this victory. We must act.
Another survey found that 84 percent of responding American
businesses do not believe their companies have sufficient coverage in
the face of another terrorist attack and 71 percent find it difficult
or impossible to obtain adequate coverage. We survived 9/11, but
without a reinsurance backstop for terrorism, another attack could
force thousands of companies into bankruptcy with no protection or
recourse. At a time when we are preparing for war in the Middle East
and facing repeated terrorism security warnings in the United States,
we cannot afford not to have a Federal backstop in place.
President Bush immediately realized the significance of this economic
problem and called on the Congress to pass legislation soon after 9/11
and has been tirelessly pressing Congress for legislation ever since.
The House quickly answered this call with passage of legislation last
November 1 a year ago and now stands ready to deliver. We have worked
closely with the President and the Senate to draft strong bipartisan
legislation that is pro-consumer, pro-taxpayer and pro-business. This
legislation, the Terrorism Risk Insurance Act, will provide a Federal
backstop for Americans to protect against future catastrophic terrorist
attacks. We provide American businesses with immediate protection upon
enactment while long-term contracts are being negotiated. The Federal
backstop then phases out over time with insurers paying a steadily
increasing deductible of 7 to 15 percent of their premiums before the
Federal catastrophic protection kicks in.
{time} 2100
As the reinsurance market flows back in, the Federal involvement
would phase out in 3 years.
We also provide full protection for the American taxpayers. The
conference report provides for full payback of any Federal assistance,
with the first 10 to $15 billion of losses required to ultimately be
borne by the insurance industry as mandatory retention and payback. The
remainder will be recouped based on economic conditions.
Consumers are provided with mandatory availability of terrorism
coverage and with a significant disclosure to improve their competitive
options.
This bill is absolutely necessary to the well-being of the American
economy to protect U.S. jobs and against future terrorist attacks. We
need this backstop in place now.
I would be remiss if I did not point out the considerable
contributions made by my colleague and subcommittee chairman, the
gentleman from Louisiana (Mr. Baker). Without his hard work and
dedication, this legislation would not have been possible. Also I
recognize the important contributions to protect Americans by our full
committee ranking member, the gentleman from New York (Mr. LaFalce),
and our subcommittee ranking member, the gentleman from Pennsylvania
(Mr. Kanjorski), here in the House, as well as Senators Dodd, Sarbanes
and Gramm.
Our House conference report was signed by every single conferee on
our committee, and its bipartisan support is a testament to the work of
the President and these Members.
I just want to take this opportunity to thank my good friend, John
LaFalce. I think he is probably handling his last bill in his role as
ranking member on the committee. But I want to personally thank him for
his dedication and service to our Nation, and particularly his hard
work on this very, very important legislation on terrorism insurance.
We have worked continuously for the last 2 years, and I just cannot say
enough about his dedication and hard work. We are going to miss you,
John, and all of the opportunities we have had to work together on
numerous issues; and we wish you the very best in your retirement.
Mr. LaFALCE. Mr. Speaker, I yield myself such time as I may consume.
(Mr. LaFALCE asked and was given permission to revise and extend his
remarks.)
Mr. LaFALCE. Mr. Speaker, I thank the gentleman from Ohio very, very
much for his very kind comments. It, too, has been a pleasure working
with him, especially the past 2 years during his chairmanship of the
Committee on Financial Services.
Mr. Speaker, after very many fits and starts, the terrorism
reinsurance package will finally become a reality, despite persistent
opposition by many in this body who stalled passage of this bill for
almost a year by seeking to unfairly limit the rights of victims
resulting from a terrorist attack.
Our Nation has been faced with numerous economic dislocations as a
result of the September 11 attacks as it continues to prepare for the
specter of future attacks. A case in point is the legitimate concern
raised that the market relating to terrorism coverage has evaporated,
forcing primary insurers to increase prices or withdraw coverage, so we
have had both an unavailability and an unaffordability problem.
This is not an insurance industry problem, because if the insurance
industry cannot reinsure the risk of future terrorist attacks, or will
not, it
[[Page H8803]]
will either not offer terrorism coverage or will price it out of the
reach of most consumers and leave areas of the country particularly
susceptible to terrorist attacks without coverage, and, most
importantly, stall or scuttle future building projects. The
consequences of such action for our economy and for consumers, should
this continue, could be devastating.
The conference report achieves what I believe is an acceptable
balance. The bill makes insurance available by constructing a short-
term Federal backstop with minimal government intrusion into the
insurance market by ending 3 years after a private sector mechanism
emerges. In addition, it requires significant contributions by industry
that keeps industry on the hook for substantial losses, thereby
protecting the American taxpayer.
More importantly, the bill also avoids making this important economic
package a Trojan horse for tort reform, a favorite of many in this body
and many in the White House, some of whom worked long and hard for over
a year to derail this bill in order to advance what I consider to be an
ideological agenda at the expense of economic growth and the protection
of American businesses.
Rather, the bill before us tonight provides for prudent measures that
protect the interests of taxpayers and maintains the legitimate rights
of victims by, one, creating an exclusive Federal cause of action
governed by applicable state law for all suits for property loss,
personal injury or death arising out of a terrorist event; secondly,
consolidating claims into a single Federal district court; and, third,
ensuring that the Federal Government will not be directly or indirectly
responsible in its role as a reinsurer for any punitive damages.
I support this important response to mitigate the economic fallout
from the threat of future attacks on this Nation, and I urge my
colleagues to support this conference report, as I have and all the
Democratic conferees have, and then I would urge the President to sign
it into law swiftly.
Mr. Speaker, I reserve the balance of my time.
Mr. OXLEY. Mr. Speaker, I am pleased to yield 2 minutes to the
gentleman from New Jersey (Mr. Ferguson), a valuable member of the
committee, as well as the conference committee.
Mr. FERGUSON. Mr. Speaker, I thank the chairman for yielding me time.
Mr. Speaker, I rise today in strong support of this terrorism
insurance legislation that is crucial to our economic security in this
Nation. This year alone the lack of terrorism insurance has terminated
or delayed billions of dollars' worth of commercial property financing.
Across this country we have seen hospitals, office buildings, malls,
stadiums and museums among the many facilities that are having
difficulty finding terrorism coverage.
With commercial development stalling, workers are also missing out on
jobs. That is why it is imperative that we pass this terrorism
insurance legislation to protect American jobs and strengthen our
economy as we protect ourselves against future terrorist attacks.
Without coverage, the economic impact of another terrorist attack
would indeed be devastating. The U.S. could face a string of
bankruptcies, loan defaults and layoffs that would intensify the blow
of the attack. As a conferee on this legislation, I am proud to say
that we have produced legislation that is a direct response to the
uncertainty in the insurance market that is hindering the economy and
costing American jobs.
Under this legislation, private insurance would pay for damages up to
a certain amount, and the Federal Government would guarantee against
catastrophic losses. By establishing a temporary risk-spreading program
to shore up the insurance market, it will help provide much-needed
confidence and certainty, while also minimizing government regulation,
which would only go into effect if a terrorist attack occurred. It will
also effectively limit market disruptions, encourage economic
stabilization, and facilitate the transition to a viable private market
for terrorism risk insurance.
Most importantly, we have carefully crafted a package with much-
needed taxpayer protections, including mandatory payback and
recoupment. This ensures the availability and affordability of
terrorism insurance in the market, while also maintaining the
flexibility to protect taxpayers and policyholders.
I applaud President Bush and the gentleman from Ohio (Chairman Oxley)
for their determination and leadership in moving this legislation that
will strengthen our economic security. I urge my colleagues to support
this terrorism insurance legislation to help create jobs, strengthen
economic growth, and reduce the impact of any future terrorist attack.
Mr. LaFALCE. Mr. Speaker, I yield 5 minutes to the gentleman from
Pennsylvania (Mr. Kanjorski), the distinguished ranking member of the
Subcommittee on Capital Markets, Insurance and Government Sponsored
Enterprises responsible for the terrorist insurance bill.
Mr. KANJORSKI. Mr. Speaker, I rise in support of the conference
report on the Terrorism Risk Insurance Act. We need this economic
stabilization to provide an inoculation for our ailing economy.
Since last year's terrorist attacks, insurance rates for businesses
have risen significantly across the country. One recent report by the
Insurance Information Institute found that insurance rates have
increased by 30 percent or more after last year's terrorist attacks.
One of the primarily factors contributing to these dramatic increases
is the lack of terrorism insurance.
The failure to create a Federal terrorism insurance backstop has also
had serious implications for our economy. As the report of the Joint
Economic Committee found, the problems associated with terrorism
reinsurance pose a significant threat to sustained economic growth. The
Real Estate Roundtable found that the lack of terrorism insurance
availability for commercial properties has resulted in the cancellation
or delay of $15 billion in real estate deals, resulting in the loss of
potentially 300,000 fewer good-paying construction jobs.
Terrorism insurance is critical to protecting jobs and promoting
America's economic security, whether in Wilkes-Barre, Scranton, or
Hazleton, Pennsylvania, or in New York City. The issue of terrorism
insurance may also affect our national economy more immediately and
more drastically than any tax or spending issue that Congress has
considered in recent years. Without Federal intervention in the
insurance marketplace, our already-sluggish economy will likely
experience increased instability in the near future.
The conference report before us today is workable; it is an effective
compromise, one that provides substantial financial protection. I am
pleased that the conference report contains a number of provisions
which I advocated. For example, the legislation designates the
Secretary of the Treasury as the administrator of the program and
clearly authorizes auditing powers and penalties.
Additionally, I worked to ensure that this conference report allows
the Treasury Secretary to consider the effect of payback surcharges on
urban, smaller commercial, and rural areas and on different lines of
insurance. These considerations are important because they will ensure
that the individual policyholders will be treated fairly and a small
business, a farmer or other rural policy holder will not be asked to
disproportionately subsidize losses associated with national symbols
like a skyscraper or large manufacturing plant.
Moreover, through the process of considering this bill, I have worked
to adapt the simplest, cleanest bill to get us through the period of
uncertainty until the private sector can price the terrorism
reinsurance.
Mr. Speaker, this bill should have been before the Congress a year
ago. We worked diligently in the subcommittee; and if the report of the
subcommittee had been presented to this floor a year ago, I am
convinced in my own mind there would have been well over 420 votes to
support it. Unfortunately, as the ranking member of the committee
indicated, this got caught up in ideology and other factors, trying to
make it a locomotive, if you will, to handle tort reform.
I think this is a perfect example of how we could start the new year
and the new Congress in recognizing that partisanship and special
interests or
[[Page H8804]]
ideologies should not be made part of public policy. We can start by
looking at this case as a case in chief as to how legislation can be
accomplished and how it cannot be accomplished and why 1 year lost of
construction time and investment is not worth the attempt to win some
political point or political benefit.
I compliment the chairman of the committee and the chairman of my
subcommittee; and particularly I want to compliment, pay respect to,
the ranking member from western New York. Without his diligence and
without their diligence, we probably could be arguing until the cows
come home.
Fortunately, everybody realized that America needs this bill. The
insurance industry, which is probably the least likely industry that
wants Federal involvement, recognized that this is a role government
should play. But most of all, Mr. Speaker, the American people and the
American economy need this bill.
I urge my colleagues to support this conference report to their
fullest extent.
Mr. OXLEY. Mr. Speaker, I am pleased to yield 3 minutes to the
gentleman from Texas (Mr. DeLay), the majority whip, soon to be
majority leader.
Mr. DeLAY. Mr. Speaker, I thank the chairman for yielding me time.
Mr. Speaker, the chairman has done a lot of hard work on this bill,
and I rise today to support the terrorism insurance legislation before
us and to highlight the important work still to be done on this issue.
I had my doubts about this legislation from the very beginning. The
most accurate assessment of the risk to Americans is developed by the
private marketplace, free from government interference. However,
terrorism insurance is not always available, and sometimes it is
available only at prices people cannot pay. But the most troubling
aspect of this bill is the flaw that leaves American taxpayers holding
the bag and trial lawyers running away with the loot.
{time} 2115
The House passed a bill containing strong liability protections. The
most important was an outright ban on punitive damages. We now have a
conference report that lacks this ban.
Mr. Speaker, President Bush's top four economic advisers explained it
best in a June 10 letter. They said very directly, ``Punitive damages
are designed to punish criminal or near criminal wrongdoing. American
companies that are attacked by terrorists should not be subject to
predatory lawsuits. The availability of punitive damages in terrorism
cases would result in inequitable relief for injured parties, and
threaten bankruptcies for American companies.''
I wish these were the only problems with this bill. But the most
troublesome aspect is the prospect that taxpayer dollars may be
negotiated away in an out of court settlement. There is no sufficient
mechanism in this bill to protect a raid on the Treasury by predatory
trial lawyers.
Unfortunately, there is an industry in America today that profits
from tragedy and suffering. Businesses and property owners and victims
who have lost their lives are innocent bystanders in terrorist attacks.
My concern is that we are handing this industry additional tools to
take advantage and compound these tragedies.
President Bush repeatedly said during this election that we need to
stand with the ``hard hats'' and not the trial lawyers, and I agree
with that.
However, this bill falls very short of the President's intent. The
Wall Street Journal described its weaknesses as a ``bonanza for trial
lawyers.''
I raised these concerns with President Bush. He agreed that there is
more work left to protect victims of terrorism and the Federal
Treasury, and he pledged to work with us next year to resolve these
flaws.
I want to thank President Bush for that pledge to protect the
taxpayers.
As long as I have been in Congress I have guarded the taxpayers, and
we are working to fix the problems with this bill.
We are going to lock the doors of the Federal Treasury against trial
lawyers who would exploit flaws in this new law to soak the taxpayers.
I am going to stand with hard-working Americans. I am going to stand
with those ``hard hats,'' and I am going to oppose anyone who seeks to
plunder the Federal Treasury.
Mr. LaFALCE. Mr. Speaker, I yield 4 minutes to the distinguished
gentlewoman from Manhattan (Mrs. Maloney).
Mrs. MALONEY of New York. Mr. Speaker, I thank the gentleman for
yielding me this time and for his fine leadership on this committee and
on this legislation.
I rise in strong support of the conference report for the Terrorism
Risk Protection Act, which provides a Federal safety net in the form of
a loan program to the insurance industry in the event of another
terrorist attack.
September 11 cost the insurance industry more than $40 billion and
many insurers have since dropped terror insurance completely or hiked
premiums to extreme levels.
The lack of comprehensive and affordable terrorism insurance has
blocked billions in development deals, halting construction and costing
jobs.
The bill provides loans to insurers for 90 percent of damages over a
deductible and can apply to terrorist events over $5 million. Very
importantly, it sunsets 3 years after passage.
This is an economic stimulus bill for New York City and the country.
Cathy Wylde of New York City Partnership estimates that passage of
this bill will add 1 percent to the GDP of New York City, and some
economists believe it will have the same impact for the Nation. It is
extremely important to get our economy moving again. It is about jobs,
putting people to work, and not letting terrorists cut off credit.
One example of the impact of the lack of terror insurance is the
situation facing the managers of the Conde Nast building in Times
Square. This 48-story property is a New York City landmark that houses
a publishing empire and the famous NASDAQ market site from which the TV
networks broadcast updates on the stock market.
While the building's owners have always carried insurance to cover
the $430 million mortgage, after September 11 terrorism coverage
insurance alone for the building skyrocketed to $5 million a year. The
building's owners were unable to pay this high amount while the bank
holding the mortgage demanded that they carry full coverage. As my
colleagues might expect, this situation has led to prolonged
litigation.
Passage of this legislation will resolve the situation for the Conde
Nast building and for many other properties like it across the Nation.
Importantly, this is not just a New York City or New York State
problem.
According to a recent report by the Mortgage Bankers Association, the
lack of terrorist insurance has led to downgrades by the rating
agencies of commercial real estate property around the country. The MBA
alone believes the downgrades have cost its industry $8 billion in
canceled or delayed projects.
I am very pleased that today's bill contains a compromise on the tort
reform issue.
Finally, I want to thank the chairman of the committee, and to the
Democratic leader of the Committee on Financial Services, I want to
thank very much the gentleman from New York (Mr. LaFalce) for his
tireless work on this issue and so many others. He stood for principle
throughout consideration of the debate on this bill and, I would say,
all legislation before the committee. We will truly miss his
contributions to the Committee on Financial Services and to this
Congress. I believe this will probably be the last bill that the
gentleman will manage on the floor and we appreciate very much the
gentleman's wonderful leadership and all of his fine work for his
district, New York State, and I would say for the country.
Mr. OXLEY. Mr. Speaker, I am pleased to yield 4 minutes to the
gentleman from Louisiana (Mr. Baker), the chairman of the Subcommittee
on Capital Markets, Insurance and Government Sponsored Enterprises.
Mr. BAKER. Mr. Speaker, I appreciate the chairman yielding me this
time and certainly want to compliment his leadership on this most
important matter, and certainly the gentleman from New York (Mr.
LaFalce) and the
[[Page H8805]]
gentleman from Pennsylvania (Mr. Kanjorski), who have worked tirelessly
with us to propound a resolution to this most difficult problem.
The important point I wish to speak to tonight is the significance of
the mechanism by which we assist the industry while requiring repayment
of taxpayer dollars. When one of these tragic events occurs, certainly
the most important thing we can do is to keep our economy working and
not have the tragic event of terrorism which takes the lives of
innocent human beings, which causes the destruction of properties, to
extend into the workforce and cause people to lose their employment by
the loss of construction jobs or other opportunities. Without the
passage of this act, should there be another unfortunate event, which
all of us hope never occurs, we would face very uncertain times.
The industry was able to respond, gratefully, to the horrific events
in New York, but capital is depleted and we do not know what ability
they may have if we suffer an event on such a grand scale again.
Tonight we are responding to those eventualities by saying yes, we
will help industry, we will help you in times of short-term liquidity,
when your bank account is low, when you have paid out the claims and
you cannot meet the next obligation, but we are going to require that
industry to put their money up first; we do not go to the taxpayer as
the first stop. But then we say to those companies, here is the
taxpayer loan and it is in fact a loan where we are going to enable you
to continue to operate by extending credit to you during this time of
crisis, but we are going to expect you to pay it back.
That is a unique standard. This House has acted in other areas of
concern relating to business operation in times of terrorist attack and
we have not required the extension of taxpayer funds to be repaid.
Tonight, we establish a new standard. Yes, we are willing to help big
business; yes, we are willing to do what is necessary to keep our
economy going, but when the economy returns and the industry is
enjoying a profit, we are going to expect to get our money back. I
think that is not only entirely appropriate, but the highest standard
of conduct for this committee to have exercised. We should not ever
open the taxpayer checkbook to industry of any sort without demanding a
high standard of conduct. Tonight we are setting it: You are going to
give us the money back.
Now, the Secretary of the Treasury does have the discretion, should
we be in desperate economic circumstance where the imposition of the
repayment would not be wise, meaning it would raise the premiums on
homeowners, on business owners, or that the industry simply could not
generate the resources to pay the money back. So we have a balanced
approach. We say yes, we will help in times of crisis and we expect you
to pay us back, but if economic conditions do not warrant it, the
Secretary of the Treasury shall report to this Congress why he believes
that the repayment should not occur. I think this is an excellent
balance utilizing common sense and taxpayer resources to do that which
we all are driven to do: to ensure that our economy functions, that
terrorists do not win, that innocent working people are not harmed, and
that at the end of the day our economic interests are protected.
I wish to commend all of the parties who have contributed mightily to
this effort and say, job well done.
With regard to those issues concerning punitive damages, I agree with
our whip. I do believe that we should be very careful in opening the
doors to allow those who choose to file unwarranted litigation and
suits and take 30 or 40 or 50 percent of the award that is granted,
particularly in the area of punitive damages, for no apparent public
policy reason, and I hope it is an area that with the President's
leadership we can return to next year and resolve in the favor of the
American taxpayer.
Mr. LaFALCE. Mr. Speaker, I yield 4 minutes to the gentleman from
Texas (Mr. Bentsen), a departing Member of Congress and a very
distinguished representative who is here with his lovely daughter to
witness what I think will probably be his final remarks in Congress.
Mr. BENTSEN. Mr. Speaker, I thank the gentleman for yielding me this
time, and I want to say at the outset what a pleasure it has been to
serve with the gentleman from New York (Mr. LaFalce) on the Committee
on Financial Services.
I rise in strong support of the conference report. I want to echo the
comments of my colleague from Louisiana, because I think he does
understand the prudent nature of this legislation. I for one have been
one who is concerned about the extension of government credit where
markets already exist which can provide for that. What we learned in
the aftermath of the despicable attacks of September 11 was that in
addition to the human carnage there was also an economic fallout,
particularly as it related to the insurance market. In effect, the
insurance market for terrorism which heretofore had been a very narrow
and inexpensive market basically was unpriceable. One could not buy it
at any price. And as such, not only were existing loans on commercial
structures out of compliance with their loan documents, but innumerable
new projects were halted because lenders were not able to, or were not
comfortable to provide credit where the risk of terrorism would not be
covered by the insurance market.
So it became necessary for the Congress to act.
We started looking at this issue shortly after September 11, 2001,
and as the gentleman from New York and the gentlemen from Ohio and
Louisiana will recall, we had a number of issues that were thrown on
the table. We had the reinsurers who were here, hat in hand, and wanted
a program much like what Great Britain has done with the City of London
and expanded across the entire nation; we had the Treasury Secretary
and the administration that was here with a proposal which, quite
frankly, would have put the taxpayers I think, and I think the majority
of the committee felt, a little bit too much on the hook than we felt
was the appropriate way to go. Actually, over time, a pretty sensible
bill was crafted, bipartisan bill was crafted, primarily with the
leadership of the gentleman from Ohio and the gentleman from Louisiana,
and I was proud to join them on that legislation, along with the senior
Senator from the State of Maryland.
As we went forward, the principle that the gentleman from Louisiana
espoused became very clear, and it was that the government would
provide a backstop using the credit of the American taxpayer, but that
we would not do it forever, that it would have a sunset, and that there
would have to be some payback mechanism; that if we were going to
extend the credit, we needed a way that we could recoup the losses to
the taxpayer.
{time} 2130
As the gentleman said, that was a rather unprecedented approach. It
has survived in this legislation, and it was not supported across the
board by a number of Republicans and Democrats, but it did survive. I
think a lot of credit goes particularly to the gentleman from Louisiana
(Mr. Baker), because he was quite adamant in that regard.
In addition, I want to address the question of tort, because we
discussed that in the committee when we first moved the bill on this
side of the street. I have to take issue with the comments of my dear
colleague, the gentleman from Texas (Mr. DeLay), my neighbor in Texas,
the majority whip, soon to be majority leader. As I see the final
conference report, there are a number of changes that are designed to
protect the taxpayers from excessive litigation: number one, all tort
claims are consolidated; number two, they are all Federal claims and
not State claims; number three, if I read it properly, no claims can be
made against Federal taxpayer dollars.
There are some who, unfortunately, sought to use this bill as a proxy
for the issue of tort reform. Yet I do not think that was what the
gentleman from Ohio, the chairman, wanted to do; and quite frankly I do
not think that is what the gentleman from Louisiana wanted to do,
because they understood what the core problem was.
Over the last year and a half, almost, that we have been working on
this legislation, I have yet to meet one business leader, one
commercial developer, one insurance person who has said that the tort
issue is an issue that must be
[[Page H8806]]
addressed. The concern they had was that there was no insurance market
available and that development had come to a screeching halt.
Tonight, we finally have a product which is prudent for the American
taxpayer, which sets a very fine precedent going forward for future
Congresses as they look at the extension of Federal credit. I hope our
colleagues will adopt this package. I wish we could have done it
sooner, but thank goodness we are doing it now. I commend the chairman
and the chairman of the subcommittee, and my colleague, the gentleman
from New York, and the ranking member for the work they have done.
Mr. OXLEY. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, let me recognize my good friend, the gentleman from
Texas (Mr. Edwards), who also is involved in his last bill on the
floor, at least for a while. He has been a principled member of our
committee and has provided reasoned judgment throughout a number of the
issues that the committee has dealt with over the last 2 years. I want
him to know he has my personal thanks and recognition for his excellent
work.
Mr. Speaker, I yield 3 minutes to the gentlewoman from New York (Mrs.
Kelly), chairman of the Subcommittee on Oversight and Investigations.
Mrs. KELLY. Mr. Speaker, I thank the gentleman from Ohio for yielding
time to me.
Mr. Speaker, on September 11, our world fundamentally changed with
the cowardly act of a handful of terrorists. Passage of this bill
represents another significant step in our efforts to address the new
realities we confront.
This bill addresses the fact that one of the key objectives of the
terrorist networks is to disrupt our economy. The losses of September
11 and the continued terrorist threat demonstrate that we must provide
basic protections for our economy.
The September 11 attacks resulted in the largest single hit to our
insurance industry in history. Since then, businesses and insurance
markets have faced a new reality. Insurers are being asked to insure
terrorism risk when they have no realistic way to determine the fair
price for that risk, or, in the vast majority of cases, being able to
obtain any reinsurance for it.
Moreover, no one can presently calculate the proper odds for where or
when the next attack will occur. We do know, however, that our
government officials believe that we should expect additional attacks.
Consequently, the vast majority of insurers have been reluctant to
cover terrorism, especially for major buildings, factories, or
gathering places.
Where terrorism insurance is available or is required by law,
insurers are now charging high premiums for it and offering very
limited capacity to protect against the risk of insolvency. I believe
that the GAO put it best when they testified before my oversight
committee that ``large companies, businesses of any size perceived to
be in or near a target location, or those with some concentration of
personnel or facilities, are unlikely to be able to obtain a meaningful
level of terrorism coverage at an economically viable price.''
Hospitals have been especially hard hit by this terrorism insurance
crisis. Representatives of some of the New York hospitals testified
before my subcommittee that they have seen a 256 percent increase in
their coverage of their insurance rates for only one-third of the
previous coverage. It is only one example of the crisis. I have many,
many more and will insert letters into the Record which demonstrate
this.
It is clear that the current lack of terrorism coverage acts as a
chill factor, restraining our economy. We heard that businesses,
particularly in cities and near potential targets, wanting to build are
being required to carry terrorism insurance. However, there is little
or no terrorism coverage available, so some new construction is being
stopped before it can even start. This is causing the loss of new jobs
at a time when creating jobs should be one of our highest priorities.
In short, the failure to act quickly on terrorism insurance
legislation is imposing a fear tax on America, costing real jobs when
the country is trying to pull out of a recession.
In addition, the administration says that another terrorist attack is
extremely likely, and we must plan now for how the government should
react to an attack; now, not after another attack. We have learned
countless lessons from September 11 on homeland security, and the need
for this legislation is one of them.
This conference report is a good solution to the problem and deserves
our full support. I ask my colleagues on both sides of the aisle to
join me in support of jobs by voting for this conference report.
I thank the gentleman from Ohio (Chairman Oxley) for his leadership,
and I thank his wonderful staff for their work on this issue.
Mr. Speaker, I include for the Record the following letters regarding
terrorism insurance:
July 8, 2002.
Hon. Sue Kelly,
House of Representatives, Longworth House Office Building,
Washington, DC.
Dear Congresswoman Kelly: Our members, the owners,
institutional investors and others in real estate in New York
City, appreciate the leadership you have provided in dealing
with the critical problem of the absence of adequate
terrorism insurance coverage.
I understand from a recent conversation with one of our
members, Douglas Durst, that you are interested in having
some specific examples of the problems the absence of
terrorism insurance coverage has created. Those examples
follow:
4 Times Square, also known as the Conde Nast building, is
in litigation with its lender due to the absence of terrorism
insurance coverage. The lender, La Salle Bank and CIGNA has
threatened to invade the ``lock box'' into which rents are
deposited in order to buy $430 million in terrorism
insurance, the amount of the mortgage. The insurer for the
portfolio held by the owners of 4 Times Square has refused to
write coverage for this building claiming it is ``high
profile.'' The owners have recently obtained $100 million in
terrorism insurance but without no coverage for biological or
chemical events. As for the remaining $330 million dollars in
coverage the lenders require, the courts will resolve whether
the money to buy such coverage, if available, can be claimed
from the cash flow of the property. Should the courts
determine that the cash flow can be invaded for this purpose,
the full interest due to the investors holding certificates
will not be paid, the rating services will downgrade the
securities which are already on the Moody's watchlist, and
the individuals who invested will see their investment
eroded. Meanwhile, the owner-builder of 4 Times Square has
equity of $450 million invested in this $880 million building
and no coverage. That owner, who typically would be investing
in the construction of a new building is stymied.
A lending officer at HypoVereinsbank, the major
construction lender in the nation, has advised us that at
least 5 major construction projects in his portfolio are not
going forward until the terrorism insurance situation is
resolved. HypoVereinsbank wants full terrorism coverage
including biological and chemical causes as well as certainty
that for the duration of construction the insurance will be
available. Four of these projects are in New York, the fifth
in Chicago. Andy Veith, the lending officer will try to reach
you later this week either by phone or e-mail.
Downtown, a one million square foot office building owner
could not obtain refinancing for the underlying mortgage of
approximately $200 million because terrorism insurance was
unavailable. Finally, a lender agreed to go forward if the
owner committed to pay $41 per square foot for stand alone
terrorism insurance coverage. At the same time that the owner
faced that $1 million additional drain on the cash flow of
the building, he also had to absorb an increase of from
$110,000 to $550,00 over the prior year's cost of insurance.
This additional cost, in addition to excluding terrorism
risk, does not cover mold or biological, nuclear or chemical
events whether terrorist generated or otherwise. The owner
now has $1,440,000 additional insurance expenses with less
comprehensive coverage on the environmental risk side than
before, and has to self-insure for the equity that he has
invested in the property.
A REIT portfolio, which includes major office complexes in
Boston, San Francisco, D.C. as well as a trophy midtown
Manhattan building, can get only $250 million in terrorism
coverage for the entire portfolio worth several billion. If
there is one more terrorism incident, it is likely that even
this limited coverage will be lost given its not uncommon 30-
day cancellation clause.
Other examples from across the country, including
hospitals, stadiums, major transportation centers and other
vital private and public investments that are not covered by
terrorism insurance, along with a vivid description of the
ripple effect this problem is having on the overall economy,
appear in the May 23rd Joint Economic Committee report to
Congress.
It is most important that enactment of some form of
government temporary back up for terrorism insurance coverage
occur quickly.
[[Page H8807]]
We appreciate your efforts to resolve this critical
problem.
Sincerely,
Deborah B. Beck,
Executive Vice President.
____
Wien & Malkin llp,
New York, NY, July 9, 2002.
Re insurance.
Hon. Susan Kelly,
Longworth House Office Building,
Washington, DC.
Dear Congresswoman Kelly: Thank you for your efforts to
date to highlight the extremely difficult insurance market
for commercial real estate owners and developers in New York
City and other major cities across the United States.
Our firm represents a portfolio of over 8,000,000 square
feet of office space located in Manhattan, including the
Empire State Building that as a result of the events of
September 11th, is once again the tallest building in New
York City. I feel that our recent experience trying to renew
the insurance for these buildings underscores the problems
that Congress needs to address.
The maximum amount of property insurance that we have been
able to obtain at any price is $200 million dollars for this
portfolio, less than half of our coverage of the $550 million
maintained for the past 12 months. This level of insurance is
significantly below replacement cost of any one of our
properties, leaving our investors with significant risk.
Of even greater concern, this $200 million dollar program
does not cover any loss between $75 million and $100 million.
This ``hole'' in coverage further places our investors at
risk and limits our ability to obtain future financing.
The program outlined above specifically excludes any act of
terrorism. We have only managed to secure a $25 million
dollar terrorism program because of insurance providers'
general unwillingness to issue coverage in New York City. We
also found it necessary to purchase a $50 million pollution
liability program in the event of a chemical or biological
attack because such an attack is excluded from the terrorism
program noted above. Despite the drastic reduction of
coverage, the premium for this program has increased an
astonishing 500%.
In summary, it is clear that the insurance industry has
opted to limit its exposure in major cities, resulting in
reduced capacity, limited competition, and exorbitant
pricing. The insurance industry's unwillingness to provide
adequate levels of coverage at reasonable rates will
translate into higher rents for tenants (to whom increased
operating expenses are generally passed under typical lease
clauses), fewer new construction projects and a general
depression in the real estate market as the inability to
shift certain risks historically assumed by the insurance
industry drives people from the market.
I hope this information will help you in your continuing
efforts to persuade your colleagues to rectify this
situation.
Very truly yours,
Peter L. Malkin.
Mr. LaFALCE. Mr. Speaker, I reserve the balance of my time.
Mr. OXLEY. Mr. Speaker, I am pleased to yield 2 minutes to the
gentleman from California (Mr. Cox).
Mr. COX. Mr. Speaker, I thank the gentleman for yielding time to me.
I rise in support of this legislation, which is urgently needed and
has been urgently needed since September 11, and particularly since
November of 2001, when this House first passed it.
By backstopping the market's provision of terrorism insurance, this
legislation will be a boon for new construction everywhere in America.
But construction cannot get completed in America because financing is
not available, and the reason financing is not available is that
terrorism insurance is not available. This bill will fix that. By
taking a huge, unquantifiable risk out of the equation, we will make
writing terrorism insurance feasible again and will help Americans get
back to work and start growing the economy.
We are dealing with this bill much later than we should be, many
months after it should have been completed, because there has been a
disagreement about protections against abusive litigation. This bill
that we are voting on tonight is imperfect in that respect. Several of
the protections of taxpayers' interests and the national interest that
were built into this legislation in the original House-passed version
have been deleted. These differences are not minor.
From the original House bill, we have eliminated a prohibition on
punitive damages. We have eliminated fair-share liability for
noneconomic damages, such as pain and suffering, and a requirement that
attorneys' fees be reasonable. I do not believe that any of these
provisions should be eliminated; but in the very brief time that I have
remaining, Mr. Speaker, I will address just one of them: fair-share
liability for noneconomic damages.
When the U.S. Government certifies that the terrorists were
responsible, it should not be possible for lawyers to come in and
assert, because of 1 percent liability found or prospectively that
might be found for another party, that 100 percent of the obligation
should rest there, particularly when we are talking about noneconomic
damages; that is to say, completely notional damages like pain and
suffering, things that lawyers can gin up by asserting it, merely by
asserting it in a complaint. In each of these circumstances, the
taxpayers will be made liable.
Mr. Speaker, we need to fix these flaws in the bill immediately when
the 108th Congress convenes. On that understanding, I am supporting
this bill because it is so desperately needed to put America back to
work.
Mr. OXLEY. Mr. Speaker, I am pleased to yield 2 minutes to the
gentleman from Connecticut (Mr. Shays), a valuable member of the
committee and a member of the conference committee.
Mr. SHAYS. Mr. Speaker, I thank the gentleman for yielding time to
me.
Mr. Speaker, following the terrorist attacks of September 11, the
Committee on Financial Services moved quickly to study the lack of
availability of terrorism insurance. Under the leadership of the
gentleman from Ohio (Chairman Oxley) and the subcommittee chairman, the
gentleman from Louisiana (Mr. Baker), we held hearings, met with
financial experts, and alternately passed legislation to create a
Federal insurance backstop to cover losses in the event of future
terrorist attacks.
The legislation we are considering today is consistent with the bill
passed by the House last November. Like its predecessor, it addresses
the availability and affordability of terrorism insurance while
protecting taxpayers and policyholders. It gives insurance companies
the assistance they sought without giving them a blank check.
Mr. Speaker, the economy may be growing, but it sure does not feel
that way. This bill is truly one of the keys to getting our economy
back on track, spurring development, and creating jobs. I urge all of
my colleagues to approve this measure and send it to the President,
because it is not a question of if but when, where, and what magnitude
we will face a terrorist attack using conventional weapons or, just as
likely, weapons of mass destruction. The casualties could be large and
the liability beyond comprehension.
Mr. LaFALCE. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I support this bill; and I encourage everyone to vote
for it. It is a shame we were not able to pass it a year ago, about the
time we reported our bill out of committee and passed it on the floor
of the House; but I do think this is a much better bill now than the
one we passed earlier.
Mr. Speaker, I yield back the balance of my time.
Mr. OXLEY. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, this, as I indicated in my opening remarks, is a very,
very important piece of legislation. It is critical that the Congress
act. The President has called for us to act.
Let me cite from an article today in The Washington Post regarding
the threat of attack that ``terrorist groups may be planning a new wave
of attacks on Western targets. Even before the purported bin Laden tape
surfaced on the al-Jazeera satellite network on Tuesday, the CIA, FBI,
and National Security Agency had detected a significant spike in
intelligence chatter over the previous 10 days that strongly indicated
new assaults are being planned, officials in U.S. intelligence agencies
said.''
In congressional testimony last month, CIA Director George Tenet
warned that recent attacks in Yemen, Kuwait, and Bali signal an
escalation in terrorist activity which he characterized as ``as bad as
it was last summer, before the airliner hijacking assaults on the World
Trade Center and the Pentagon.''
``That threat environment level was high then and it has not
lessened,'' a senior administration official said yesterday. ``Bin
Laden's appearances have always been carefully orchestrated, and
unfortunately, they have often presaged a major al Qaeda attack or
development.''
Mr. Speaker, it is time that this Congress act. I appreciate the
strong bipartisan support that this legislation has
[[Page H8808]]
entertained over the last several months. This is a good example of
Congress at its best, but it is even more important that we provide
this framework for protection of the American economy. This bill does
exactly that. I ask my colleagues for strong support for this
conference report.
Ms. JACKSON-LEE of Texas. Mr. Speaker, the September 11 terrorist
attacks have devastated many industries and sectors changing the
landscape of the American economy, including the insurance industry.
The legislation before us today, H.R. 3210, is a reasonable piece of
legislation and I am particularly pleased that the majority has shown
the wisdom of removing the tort liability limitation provisions of the
legislation. I joined my colleagues on the Judiciary Committee and
those on the Financial Services Committee who worked hard to eliminate
Section 15, a tort reform provision, which would effectively have
banned punitive damages in terrorism-related cases. This provision was
absolutely unnecessary.
This passage of this measure is important because the insurance
industry has stated that, while it will be able to cover the estimated
$40 billion in claims resulting from the Sept. 11 terrorist attacks,
any new and renewed policies will not cover terrorist-inflicted damage
unless the government helps cover that unknown liability. This is an
issue of great concern to Congress and to the nation.
This legislation can make a great difference. Earlier this year, we
acted swiftly and deliberately assisting the Airlines industry in the
amount of $15 billion to save this important industry which was so
severely devastated by the September 11 attacks. I am glad that we have
come to an agreement that will allow us to act with bi-partisan
sensibility to help this important sector of our economy as well.
This is not just an insurance industry problem. Rather, it is a
national issue because if the insurance industry cannot reinsure the
risk of further terrorist attacks, it will either increase premiums to
the detriment of consumers, or simply stop offering terrorism coverage
altogether. Furthermore, without adequate insurance coverage, lenders
will not be able to lend and new investments will not be made, creating
a credit crunch that could further devastate our economy.
Under this bill ``each insurer will be responsible for paying out a
certain amount in claims a deductible--before Federal assistance
becomes available. This deductible is based on a percentage of direct
earned premiums from the previous calendar year, and rises from 7
percent during the first year to 10 in year 2 and 15 percent in year 3.
For losses above an insurer's deductible, the Federal government will
cover 90 percent, while the company pays 10 percent.''
``If the Federal government pays for insured losses during the course
of a year, the Treasury Secretary will be required to recoup the
difference between total industry costs (individual insurers' losses up
to their deductibles, plus the industry's 10 percent cost share above
the deductibles) and the following fixed dollar amounts per year: $10
billion for year 1, plus the last few months of 2002; $12.5 billion for
year 2; and $15 billion for year 3. The recoupment will be accomplished
through a surcharge on policyholders. The Secretary has discretion on
the timing of the surcharge, but the surcharge cannot be more than 3
percent of the premium paid for a policy in a given year. Losses
covered by the program will be capped at $100 billion; above this
amount, Congress is to determine the procedures for and the source of
any payments. The Secretary may assess civil penalties on participating
insurance companies for submission of false or misleading information
or failure to repay the Secretary for any amount required to be
repaid.''
I lend my support to this bill. Congress can and must act to protect
the most vulnerable sectors of our economy, and those who most need
assistance. The underlying bill holds the promise of protecting the
insurance industry and the millions of Americans dependent on it. The
version of the bill before us today goes a long way toward restoring
confidence to our nations lenders and should help bolster our
struggling economy. As such, I urge my colleagues to support the
measure before us tonight.
Mr. NEY. Mr. Speaker, I just want to take a quick moment to comment
on an important part of this legislation, group life insurance. H.R.
3210 contains a study of group life insurance and I would like to
clarify that it was the intent of the House that the term ``group life
insurance,'' as it appears in the text, is used in it's typical and
customary sense to mean ``an insurance contract that provides life
insurance coverage, accidental death coverage, or a combination of both
for a number of persons under a single contract and that provides such
coverage on the basis of a group selection of risks.''
Mr. BEREUTER. Mr. Speaker, this Member rises today to express his
support for the conference report of the Terrorism Risk Protection Act
(H.R. 3210). This conference report will help ensure that businesses
are able to acquire property and casualty insurance while still
providing taxpayer protection against terrorist losses. This Member is
pleased that the House and Senate conferees have reached an agreement
on terrorism insurance which President President George W. Bush is
expected to sign. This Member is a cosponsor of H.R. 3210, which the
House first passed on November 29, 2001, by a vote of 227-193.
This Member would first like to thank the distinguished gentleman
from Ohio (Mr. Oxley), the Chairman of the House Financial Services
committee, for both introducing this legislation and for his efforts in
bringing this conference report to the House Floor. Additional
appreciation is expressed to the distinguished gentleman from Louisiana
(Mr. Baker) who also played a crucial role in crafting the conference
report on H.R. 3210. Moreover, this Member would also like to thank the
distinguished gentleman from New York (Mr. LaFalce), the Ranking
Minority Member of the Financial Services Committee, for his bipartisan
cooperation and assistance on this conference report.
The uncertainty caused by the terrorist events on September 11, 2001,
has resulted in the possibility of serious problems for the insurance
industry and the insured from additional severe terrorist attacks. To
illustrate this, reinsurance companies provide insure against massive
losses for insurance companies. Since this terrorist attack, many
primary companies, because they cannot receive reinsurance, have sent
notice cancellations to businesses indicating that they will not
receive coverage for losses caused by terrorist activities. If both
small and large businesses continue to be unable to receive insurance,
it will contribute to the further instability of the American economy.
Insurance provides a very important element of the stability needed by
businesses to continue functioning and investing and for bankers to
continue lending to businesses.
As a Member of the House Financial Services Committee, which has
jurisdiction over the important elements of the limited Federal role in
commercial insurance, this Member supports this conference report for
the following two reasons. First, obviously it helps ensure that
commercial insurance continues to be available for businesses--and
available at affordable costs. Second, it provides necessary taxpayer
protections against possible severe terrorist losses to businesses.
Under this conference report, a temporary Federal terrorism insurance
program would be established within the Treasury Department. Under this
program, Federal funds would be provided to property and casualty
insurance companies when losses reach the ``trigger'' level. In
particular, Federal funds would pay 90 percent of the terrorism-related
losses of insurance companies that exceed 7 percent of the company's
premiums in 2003; 10 percent of a company's premiums in 2004; and 15
percent of a company's premiums in 2005. Each insurance company would
pay for 100 percent of insured losses up to those thresholds and 10
percent of the losses above those levels. This Federal terrorism
insurance program would cover industry-wide losses up to $100 billion
per year.
It is also very important to note that this conference report
provides for the mandatory repayment of some of the Federal funds used
to cover insured losses. Under this conference report, for 2003, the
insurance industry must repay the Federal assistance which is the
difference between the sum of all insured losses paid by the industry
and $10 billion. For 2004 and 2005, these repayments would be made for
the difference between the sum of all insured losses and $12.5 billion
and $15 billion, respectively. These repayments would be collected
through a surcharge on the policies of all commercial insurance
policyholders. Therefore, this conference report is not an insurance
company bailout; it protects the American taxpayer against a big hit
while continuing to maintain insurability against terrorist attacks.
Furthermore, this conference report also provides taxpayer protection
from punitive damages in lawsuits which claim terror-related losses or
injuries. To illustrate this, this conference report requires all
terror-related lawsuits to be considered in Federal court, rather than
in state courts. Moreover, this conference report does not set a
Federal standard for awarding punitive damages in terror-related
lawsuits. However, it instead allows the state law in which the
terrorist act occurred to prevail with respect to punitive damages.
Most importantly, the conference report requires that punitive damages
awarded through these lawsuits will not be paid for by Federal funds
used to cover losses from terrorism. For my Nebraska constituents, it
is important to note that punitive damages are not allowed under
Nebraska state law in Nebraska state courts.
In conclusion, Mr. Speaker, this conference report balances the need
of businesses to continue to receive commercial insurance
[[Page H8809]]
against terrorist acts at affordable costs, with taxpayer liability
protection. As a result, this Member urges his colleagues to support
the conference report of H.R. 3210.
Mr. OXLEY. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Simpson). Without objection, the
previous question is ordered on the conference report.
There was no objection.
The SPEAKER pro tempore. The question is on the conference report.
The conference report was agreed to.
A motion to reconsider was laid on the table.
____________________