Congressional Record, Volume 151 Issue 156 (Wednesday, December 7, 2005)

[Congressional Record Volume 151, Number 156 (Wednesday, December 7, 2005)]
[House]
[Pages H11130-H11141]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

TERRORISM RISK INSURANCE REVISION ACT OF 2005

Mr. OXLEY. Mr. Speaker, I move to suspend the rules and pass the
Senate bill (S. 467) to extend the applicability of the Terrorism Risk
Insurance Act of 2002, as amended.
The Clerk read as follows:

S. 467

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

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Terrorism Risk Insurance
Revision Act of 2005''.

SEC. 2. EXTENSION OF PROGRAM AND PROGRAM CHANGES.

(a) In General.--Title I of the Terrorism Risk Insurance
Act of 2002 (15 U.S.C. 6701 note) is amended--
(1) by striking sections 101 through 107 and inserting the
following new sections:

``SEC. 101. CONGRESSIONAL FINDINGS AND PURPOSE.

``(a) Findings.--The Congress finds that--
``(1) the ability of businesses and individuals to obtain
property, casualty, group life, and NBCR 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, casualty, and life 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, casualty, group life, and
NBCR insurers to deal with such uncertainties, either by
terminating property, casualty, group life, or NBCR 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, casualty, group life, and NBCR
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 as part of an effort to coerce the civilian
population of the United States or to influence the policy or
affect the conduct of the United States Government by
coercion.
``(B) Limitation.--No act shall be certified by the
Secretary as an act of terrorism if the act is committed as
part of the course of a war declared by the Congress, except
that

[[Page H11131]]

this clause shall not apply with respect to any coverage for
workers' compensation or group life insurance.
``(C) Determinations final.--Any certification of, or
determination not to certify, an act as an act of terrorism
under this paragraph shall be final.
``(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 insurer that owns, is owned by, or is
under common ownership with another insurer.
``(3) Casualty insurance.--The term `casualty insurance'
means--
``(A) insurance, including excess insurance and surety
insurance, against legal liability for losses caused by the
death, injury, or disability of any person or for damage to
property, with provision for medical, hospital and surgical
benefits to the injured persons; and
``(B) for the purposes of this Act, does not include any
type of commercial automobile or workers' compensation
insurance.
``(4) Covered line of insurance.--The term `covered line of
insurance' means--
``(A) commercial property insurance, commercial casualty
insurance, workers' compensation insurance and group life
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, except group life
insurance;
``(vi) flood insurance provided under the National Flood
Insurance Act of 1968 (42 U.S.C. 4001 et seq.);
``(vii) reinsurance or retrocessional reinsurance; or
``(viii) commercial automobile insurance.
``(5) Direct earned premium.--The term `direct earned
premium' means a direct earned premium for commercial
property, commercial casualty, workers' compensation, or
group life insurance issued by any insurer for insurance
against losses occurring at the locations described in
subparagraphs (A) and (B) of paragraph (10).
``(6) Exempt commercial purchaser.--The term `exempt
commercial purchaser' means any person purchasing commercial
insurance that meets the following requirements:
``(A) The person employs or retains a qualified risk
manager to negotiate insurance coverage.
``(B) The person pays annual aggregate nationwide insurance
premiums in excess of $100,000 for covered lines of
insurance.
``(C) The person meets at least one of the following
criteria:
``(i) The person possesses a net worth in excess of
$10,000,000.
``(ii) The person generates annual revenues in excess of
$10,000,000.
``(iii) The person employs more than 100 full-time or full-
time equivalent employees per individual insured or is a
member of affiliated group employing more than 250 employees
in the aggregate.
``(iv) The person is a not-for-profit organization or
public entity generating annual budgeted expenditures of at
least $25,000,000.
``(v) The person is a municipality with a population in
excess of 40,000 persons.
``(7) Exempt commercial purchaser certification.--The term
`exempt commercial purchaser certification' means a written
certification that the insurer offering a policy to an exempt
commercial purchaser has obtained, at least within the
previous 12 months, a certification signed by the qualified
risk manager, the chief executive officer, or the chief
financial officer of the exempt commercial purchaser,
certifying with respect to the insurance to which the
requirements of section 103(c)(1) apply to that insurer
that--
``(A) the purchaser has an employee that meets the
definition of a qualified risk manager under this section;
``(B) the purchaser meets the definition of an exempt
commercial purchaser in accordance with this section;
``(C) the purchaser is aware that the policy being
considered for purchase contains forms and rates that are not
subject to State regulatory review or approval;
``(D) the purchaser has or has retained the necessary
expertise to negotiate its own policy language and rates; and
``(E) the purchaser agrees to the use of exempted rates and
forms by its insurer or insurers.
``(8) Group life insurance.--The term `group life
insurance' means an insurance contract that provides term
life insurance coverage, accidental death coverage, or a
combination thereof, for a number of individuals under a
single contract, on the basis of a group selection of risks,
but does not include `Corporate Owned Life Insurance' or
`Business Owned Life Insurance,' each as defined under the
Internal Revenue Code of 1986, or any similar product.
``(9) Home state.--The term `home State' means as follows:
``(A) In the case of a policy written for commercial risks
that are primarily located in a State, such term means such
State.
``(B) If subparagraph (A) does not apply, such term means
the State where the commercial policyholder has its principal
place of business (such as where the policyholder's
headquarters are located, as determined by the predominant
physical location in the United States of the officers and
senior management of the policyholder).
``(10) 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 and group life
insurance) that is covered by primary or excess property,
casualty, workers' compensation, or group life 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.
``(11) 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 a covered line
of 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
covered line of insurance coverage, other than in the case of
entities described in subsections (d) and (f) of section 103;
and
``(C) that meets any other criteria that the Secretary may
reasonably prescribe.
``(12) 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;
``(E) for Program Year 4--
``(i) except as provided in clause (ii), the value of an
insurer's direct earned premium for a covered line of
insurance over the calendar year immediately preceding
Program Year 4, multiplied by--

``(I) for workers' compensation insurance, 16 percent;
``(II) for group life insurance, 21.5 percent;
``(III) for property insurance, 20 percent; and
``(IV) for casualty insurance, 25 percent; and

``(ii) with respect to NBCR terrorism coverage, the value
of an insurer's direct earned premium for a covered line of
insurance over the calendar year immediately preceding
Program Year 4, multiplied by the following percentages which
shall be treated as sub-deductibles that apply in lieu of the
deductibles set forth in clause (i) for NBCR terrorism
losses--

``(I) for workers' compensation insurance, 7.5 percent;
``(II) for group life insurance, 7.5 percent;
``(III) for property insurance, 7.5 percent; and
``(IV) for casualty insurance, 7.5 percent; and

``(I) for workers' compensation insurance, 2.0 percent;
``(II) for group life insurance, 2.5 percent;
``(III) for property insurance, 2.5 percent; and
``(IV) for casualty insurance, 5.0 percent; and

[[Page H11132]]

``(ii) with respect to NBCR terrorism coverage, the value
of an insurer's direct earned premium for a covered line of
insurance over the calendar year immediately preceding that
year, multiplied by the NBCR terrorism deductible for the
preceding year for that covered line of insurance plus the
following additional percentages, all of which shall be
treated as subdeductibles that apply in lieu of the
deductibles listed in clause (i) for NBCR terrorism insured
losses--

``(I) for workers' compensation insurance, 0.75 percent;
``(II) for group life insurance, 0.75 percent;
``(III) for property insurance, 0.75 percent; and
``(IV) for casualty insurance, 0.75 percent; and

``(iii) if, for any covered line of insurance, an insurer
incurs insured losses caused by NBCR terrorism, such NBCR
insured losses shall be applied against both the deductible
set forth in clause (i) and the NBCR terrorism deductible set
forth in clause (ii) for that covered line of insurance;
``(G) notwithstanding subparagraphs (A) through (F), for
the Transition Period and any other Program Year or other
calendar year, if an insurer has not had a full year of
operations during the calendar year immediately preceding
such Period or 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;
and
``(H) if, in any calendar year, aggregate industry insured
losses exceed $1,000,000,000, the insurer deductibles for the
next calendar year shall be reduced by 0.1 percent for each
$1,000,000,000 in insured losses that have occurred during
the preceding calendar year, except that no insurer
deductible shall be reduced below 5 percent.
``(13) NAIC.--The term `NAIC' means the National
Association of Insurance Commissioners.
``(14) Ownership.--An insurer `owns' another insurer if the
insurer, directly or indirectly or acting through one or more
other persons, owns 25 percent or more of any class of voting
securities of the other insurer.
``(15) NBCR terrorism.--The term `NBCR terrorism' means an
act of terrorism involving nuclear, biological, chemical, or
radioactive reactions, releases, or contaminations, to the
extent any insured losses are caused by any such reactions,
releases, or contaminations.
``(16) 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.
``(17) Program.--The term `Program' means the Terrorism
Insurance Program established by this title.
``(18) 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.
``(E) Program year 4.--The term `Program Year 4' means the
period beginning on January 1, 2006 and ending on December
31, 2006.
``(F) Additional program years.--The term `Additional
Program Year' means any additional one-year period after
Program Year 4 during which the Program is in effect, which
period shall begin on January 1 and end on December 31 of the
same calendar year.
``(19) Property insurance.--The term `property insurance'
means--
``(A) except as provided in subparagraph (B), insurance on
real or personal property of every kind, including excess
insurance, against loss or damage from any and all hazard or
cause and against loss consequential upon such loss or
damage, including business interruption insurance, other than
non-contractual legal liability for such loss or damage; and
``(B) does not include any type of commercial automobile or
workers' compensation insurance.
``(20) Qualified risk manager.--The term `qualified risk
manager' means any person who meets all of the following
criteria:
``(A) The person is an employee of, or third party
consultant retained by, the commercial policyholder.
``(B) The person provides skilled services in loss
prevention, loss reduction, or risk and insurance coverage
analysis, and purchase of insurance.
``(C) The person possesses at least 2 of the following
credentials:
``(i) An advanced degree in risk management issued by an
accredited college or university.
``(ii) At least 5 years of experience in one or more of the
following areas of commercial property insurance or
commercial casualty insurance:

``(I) Risk financing.
``(II) Claims administration.
``(III) Loss prevention.
``(IV) Risk and insurance coverage analysis.

``(iii) Any one of the following designations:

``(I) A designation as a Chartered Property and Casualty
Underwriter (in this clause referred to as `CPCU') issued by
the American Institute for CPCU/Insurance Institute of
America.
``(II) A designation as an Associate in Risk Management
(ARM) issued by the American Institute for CPCU/Insurance
Institute of America.
``(III) A designation as a Certified Risk Manager (CRM)
issued by the National Alliance for Insurance Education &
Research.
``(IV) A designation as RIMS Fellow (RF) issued by the
Global Risk Management Institute.
``(V) Any other designation, certification, or license
determined by the insurance regulatory agency for a State to
demonstrate minimum competency in risk management.

``(21) Secretary.--The term `Secretary' means the Secretary
of the Treasury.
``(22) 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.
``(23) 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).
``(24) Workers' compensation.--The term `workers'
compensation' means insurance against loss from liability
imposed by law upon employers to compensate employees and
their dependents for injury sustained by the employees
arising out of and in the course of the employment,
irrespective of negligence or of the fault of either party.
``(25) 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.--Each entity that meets the
definition of an insurer under section 102--
``(1) shall make available, in all of its covered lines of
insurance policies, 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) shall make available, in any of its covered lines of
insurance policies that exclude coverage for losses resulting
from NBCR terrorism, coverage for losses resulting from NBCR
terrorism that may differ materially from the terms, amounts,
and other coverage limitations applicable to losses arising
from events other than NBCR terrorism; and
``(3) shall make available, in any life insurance policy,
coverage that does not preclude future lawful foreign travel
by the person insured, and shall not charge a premium for
such coverage that is excessive and not based on a good faith
actuarial analysis.

[[Page H11133]]

``(d) State Residual Market Insurance Entities.--
``(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, State workers'
compensation funds, and State workers' compensation
reinsurance pools.
``(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.--Subject to subparagraphs (B) and (C),
the Federal share of compensation under the Program to be
paid by the Secretary for insured losses of an insurer during
each Program Year shall be equal to that portion of the
amount of such insured losses for each covered line of
insurance that exceeds the applicable insurer deductible
required to be paid during such Program Year, multiplied by a
percentage based on aggregate industry insured losses for a
Program Year, which shall be as follows:
``(i) 80 percent of the aggregate industry insured losses
of less than $10,000,000,000;
``(ii) 85 percent of the aggregate industry insured losses
between $10,000,000,000 and $20,000,000,000;
``(iii) 90 percent of the aggregate industry insured losses
between $20,000,000,000 and $40,000,000,000; and
``(iv) 95 percent of the aggregate industry insured losses
above industry losses above $40,000,000,000;

and shall be prorated by insurer based on each insurer's
percentage of the aggregate industry insured losses for that
Program Year.
``(B) Program trigger.--No compensation shall be paid by
the Secretary under subsection (a) unless the aggregate
industry insured losses exceed--
``(i) $50,000,000, with respect to insured losses occurring
in Program Year 4;
``(ii) $100,000,000, with respect to insured losses
occurring in the Additional Program Year beginning on January
1, 2007;
``(iii) with respect to each Additional Program Year
thereafter that coverage is provided under the Program, the
amount that is equal to the sum of (I) the dollar amount
applicable under this subparagraph for the Program Year
preceding such Additional Program Year, and (II) $50,000,000;

except that the applicable Program Trigger amount shall be
reduced by $10,000,000 for each $1,000,000,000 in insured
losses occurring in any preceding year, provided that the
Program Trigger shall not be reduced below $50,000,000 for
any year.
``(C) 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) TRIA capital reserve funds.--
``(A) Establishment.--Any insurer may establish a TRIA
Capital Reserve Fund (in this section referred to as a `CRF')
in which it may hold funds in a fiduciary capacity on behalf
of the Secretary.
``(B) Funding.--An insurer may fund a CRF by making an
election, in advance, to treat some or all of the premiums it
has disclosed pursuant to section 103(b)(2) as TRIA program
fee charges imposed by the Secretary. Any such premiums for
which such an election has been made must be maintained in
segregated accounts in a fiduciary capacity on behalf of the
Secretary. Such funds may be invested in any otherwise
legally permissible manner but all interest, dividends, and
capital accumulations also shall be retained in such
segregated accounts on behalf of the Secretary.
``(C) Use.--Funds from a CRF shall be collected and used by
the Secretary to offset, in whole or in part, the Federal
share of compensation provided to all insurers under the
Program as provided for in paragraph (1), except that an
insurer may first use the funds in a CRF of that insurer to
satisfy any one or more of the following:
``(i) The applicable insurer deductibles for the insurer.
``(ii) The portion of the insurer's losses that exceed the
insurer deductible but are not compensated by the Federal
share pursuant to paragraph (1).
``(iii) The insurer's obligations to pay for insured losses
if the program trigger established in paragraph (1)(B) is not
satisfied.
``(iv) Any risk sharing obligations the insurer may have
under any agreements made pursuant to or in accordance with
paragraph (3).
``(D) Termination.--
``(i) Termination of program.--Upon termination of the
Program under section 108(a), and subject to the Secretary's
continuing authority under section 108(b) to adjust claims in
satisfaction of the Federal share of compensation under the
Program as provided in paragraph (1) of this subsection, 10
percent of each insurer's CRF funds shall be remitted to the
Secretary and the remainder shall be remitted to the insurer.
The Secretary shall determine the manner in which the
remittance of such income to the insurer shall be made.
``(ii) Elimination of federal share of compensation.--If
the Program remains in effect but the Federal share of
compensation for insured losses under the Program is
eliminated from the Program, the CRF funds shall be retained
and used for the purposes set forth in subparagraph (C) of
this paragraph. At such time as an insurer's liability for
insured losses under the Program terminates, as a consequence
of the insurer's termination of its business or otherwise,
the insurer shall remit any remaining CRF funds to the
Secretary.
``(3) Risk-sharing mechanisms.--
``(A) Finding; rule of construction.--Congress finds that
it is desirable to encourage the growth of nongovernmental,
private market reinsurance capacity for protection against
losses arising from acts of terrorism. Therefore, nothing in
this title shall prohibit insurers from developing risk-
sharing mechanisms (including mutual reinsurance facilities
and agreements) to voluntarily reinsure terrorism losses
between and among themselves that are not subject to
reimbursement under this section 103.
``(B) Establishment of advisory committee.--The Secretary
shall appoint an Advisory Committee to--
``(i) encourage the creation and development of such
mechanisms;
``(ii) assist the Secretary and be available to administer
such mechanisms; and
``(iii) develop articles of incorporation, bylaws, and a
plan of operation for any long-term reinsurance facility
authorized or created in the future.
``(C) Membership.--The Advisory Committee shall be composed
of nine members who are directors, officers, or other
employees of insurers that are participating or that desire
to participate in such mechanisms, and who are representative
of the affected sectors of the insurance industry. In making
these appointments, the Secretary shall solicit major trade
associations of the insurance industry to nominate lists of
qualified individuals representative of the commercial
property insurance, commercial casualty insurance, group life
insurance, and reinsurance industries.
``(4) 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 any Program
Year (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.
``(5) Notice to congress.--The Secretary shall notify the
Congress if estimated or actual aggregate insured losses
exceed $100,000,000,000 during during any Program Year and
the Congress shall determine the procedures for and the
source of any payments for such excess insured losses.
``(6) 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.
``(7) Determinations final.--Any determination of the
Secretary under this subsection shall be final, unless
expressly provided otherwise.
``(8) Full recoupment of federal share.--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 and
group life insurance), terrorism loss risk-spreading premiums
in an amount equal to the total amount paid by the Secretary
in accordance with this section.
``(9) 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 all
covered lines of 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 covered lines of 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 may not exceed,

[[Page H11134]]

on an annual basis, the amount equal to 3 percent of the
premium charged for covered lines of 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 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) Replenishment of tria capital reserve funds.--After
any funds expended directly from the United States Treasury
are fully repaid, the balance of the amounts collected under
this paragraph shall be used to fully replenish all insurer
CRFs used by the Secretary in accordance with the provisions
of paragraph (2)(C) that were not used by the insurer to
satisfy its obligations in accordance with clauses (i)
through (iv) of paragraph (2)(C).
``(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,
including amounts from a CRF used pursuant to subsection
(e)(2)(C), 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) Personal Lines Study.--
``(1) In general.--The Comptroller General of the United
States, after consultation with the NAIC, representatives of
the insurance industry, including a cross-section of
insurers, independent insurance agents and brokers,
policyholders, and other experts in the insurance field,
shall conduct a study concerning the exposure of personal
lines (including homeowners insurance) to terrorism risk, the
coverage currently available, and potential policy responses.
``(2) Report.--Not later than September 1, 2006, the
Comptroller General shall submit a report to the Congress on
the results of the study conducted under subparagraph (1),
together with specific policy recommendations.
``(i) Study of Risks Stemming From Nuclear, Biological,
Chemical and Radioactive Events.--
``(1) In general.--The Comptroller General of the United
States, after consultation with the NAIC, representatives of
the insurance industry, including a cross-section of
insurers, independent insurance agents and brokers, and
policyholders, and other experts in the insurance field,
shall conduct a study to determine the extent to which risks
associated with nuclear, biological, chemical, or radioactive
events are measuable and insurable at the Federal or private
sector level, or both.
``(2) Report.--Not later than September 1, 2006, the
Comptroller General shall submit a report to the Congress on
the results of the study conducted under paragraph (1),
together with specific policy recommendations.
``(j) Study of Need for Federal Natural Disaster
Catastrophe Program.--
``(1) In general.--The Comptroller General of the United
States, after consultation with the NAIC, representatives of
the insurance industry, including a cross-section of
insurers, independent insurance agents and brokers, and
policyholders, and other experts in the insurance field,
shall conduct a study concerning the need for a Federal
program that provides for a system of shared public and
private compensation for insured losses resulting from
natural disaster.
``(2) Issues.--The study under this section shall include
an analysis of whether, and in what manner, such a Federal
program should incorporate any or all of the following
concepts: tax-free capital reserves; voluntary mutual
reinsurance pools; a distinction between sophisticated and
non-sophisticated commercial purchasers for the purposes of
exemption from regulation; or Federal support for the
purchase of reinsurance by State disaster insurance programs.
``(3) Report.--Not later than September 1, 2006, the
Comptroller General shall submit a report to the Congress on
the results of the study conducted under this subsection
together with specific policy recommendations.

``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

[[Page H11135]]

compensation for insured losses under the Program to the
extent such Federal share exceeds funds collected by the
Secretary pursuant to section 103(e)(2).
``(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. ESTABLISHMENT OF COMMISSION ON TERRORISM RISK
INSURANCE.

``(a) In General.--There is hereby established the
Commission on Terrorism Risk Insurance (in this section
referred to as the `Commission').
``(b) Membership.--
``(1) The Commission shall consist of 11 members, as
follows:
``(A) The Secretary of the Treasury or his designee.
``(B) One State insurance commissioner designated by the
members of the NAIC.
``(C) Nine members appointed by the President, who shall
be--
``(i) a representative of group life insurers;
``(ii) a representative of property and casualty insurers
with direct written premium of $1,000,000,000 or less;
``(iii) a representative of property and casualty insurers
with direct written premium of more than $1,000,000,000;
``(iv) a representative of multiline insurers;
``(v) a representative of independent insurance agents;
``(vi) a representative of insurance brokers;
``(vii) a policyholder representative;
``(viii) a representative of the survivors of the victims
of the attacks of September 11, 2001; and
``(ix) a representative of the reinsurance industry.
``(2) Secretary.--The Program Director of the Terrorism
Risk Insurance Act shall serve as Secretary of the
Commission. The Secretary of the Commission shall determine
the manner in which the Commission shall operate, including
funding and staffing.
``(c) Duties.--
``(1) In general.--The Commission shall identify and make
recommendations regarding--
``(A) possible actions to encourage, facilitate, and
sustain provision by the private insurance industry in the
United States of affordable coverage for losses due to an act
or acts of terrorism;
``(B) possible actions or mechanisms to sustain or
supplement the ability of the insurance industry in the
United States to cover losses resulting from acts of
terrorism in the event that--
``(i) such losses jeopardize the capital and surplus of the
insurance industry in the United States as a whole; or
``(ii) other consequences from such acts occur, as
determined by the Commission, that may significantly affect
the ability of the insurance industry in the United States to
independently cover such losses; and
``(C) significantly reducing the expected Federal role over
time in any continuing Federal terrorism risk insurance
program.
``(2) Evaluations.--In identifying and making the
recommendations required under paragraph (1), the Commission
shall specifically evaluate the utility and viability of TRIA
Capital Reserve Funds made available under section 103(e)(2),
any risk sharing mechanism created or made available under
section 103(e)(3), a Federally created or mandated
reinsurance facility, empowering such a facility to issue
pre-event financing bonds, post-event financing bonds,
assessments, single or multiple pooling arrangements, and
other risk sharing arrangements to accomplish, in whole or in
part, the specified objectives, taking into consideration the
studies and reports to the Congress pursuant to subsections
(h) and (i) of section 103.
``(3) Report.--Not later than December 31, 2006, the
Commission shall submit a report to Congress evaluating and
making recommendations regarding whether there is a need for
a Federal terrorism risk insurance program and, if so, shall
make a specific, detailed recommendation for the replacement
of the Program, including specific, detailed recommendations
for the creation of a terrorism reinsurance facility or
facilities or single or multiple pooling arrangements, or
both.
``(d) Effect on Existing Program.--For purposes of section
108(a), the Secretary shall make a determination not later
than January 31, 2007, of whether the Commission has
satisfied its obligations under subsection (c)(3).

``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; and
``(B) 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; and
``(3) except that with respect to coverage required to be
made available under section 103(c)--
``(A) no laws or regulations of a State imposing a diligent
search requirement for the placement of a surplus lines
policy shall apply in connection with the purchase of such
insurance by an exempt commercial purchaser; and
``(B) no laws or regulations of a State, except of the home
State, imposing a diligent search requirement for the
placement of a surplus lines policy shall apply with respect
to the placement of a multi-State surplus lines commercial
insurance policy, provided the contract of insurance insures
risks in the home State.
``(b) Streamlined Rate and Form Filing.--The Congress
intends that, by December 31, 2007, all States, with respect
to submission of a commercial property insurance policy or
commercial casualty insurance policy that includes coverage
for acts of terrorism--
``(1) implement and fully utilize the System for Electronic
Rate and Form Filing (in this section referred to as
`SERFF'), developed by the NAIC, without deviation to provide
a single point for electronic filing of property insurance
and casualty insurance forms for review;
``(2) update SERFF to provide a single coordinated
checklist for inputting the required information used by
various States for filing reviews and designating to which
States the information will be submitted;
``(3) allow the option of filing of self-certified
commercial property insurance and commercial casualty
insurance forms through a substantially nationwide
coordinated electronic filing system that--
``(A) includes a review checklist with uniform nomenclature
clearly establishing what is required under the laws of such
State for a compliant filing of such forms;
``(B) uses a single input system and transmittal document
that allows the filer to submit such form for review without
required format deviations to any combination of the States
participating in the system;
``(C) does not require prior approval for such self-
certified form filing;
``(D) keeps such filings confidential until they are
implemented, deemed implemented, or disapproved; and
``(E) only allows disapproval of such filings in writing
based on specific standards that are published in statute,
rule, or regulation.
``(c) Streamlined Surplus Lines Placement.--The Congress
intends that, by December 31, 2007, all States streamline
their surplus lines diligent search rules with respect to the
placement of surplus lines policies in any covered line of
insurance that includes coverage for acts of terrorism by
providing for--
``(1) automatic export for exempt commercial purchasers,
under which a surplus lines broker seeking to obtain,
provide, or place insurance in a State for an insured that
qualifies as an exempt commercial purchaser may procure
surplus lines insurance from or place surplus lines insurance
with any nonadmitted insurer without making a diligent search
to determine whether the full amount or type of insurance
sought by the exempt commercial purchaser can be obtained
from admitted insurers in such State.
``(2) home State regulation of diligent search
requirements, that provides that, except as provided in
paragraph (1), only the home State may impose a diligent
search requirement for the placement of a multi-State surplus
lines commercial insurance policy, provided the contract of
insurance insures risks in the Home State.
``(d) 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.''; and
(2) in section 108--
(A) by striking subsection (a) and inserting the following
new subsection:
``(a) Termination of Program.--
``(1) In general.--Except as provided in paragraph (2), the
Program shall terminate on December 31, 2008.
``(2) Failure of commission to submit report.--If the
Secretary determines pursuant to section 105(d) that the
Commission on Terrorism Risk Insurance established under
section 105 has not satisfied its obligations under section
105(c)(3), the Program shall terminate on December 31,
2007.''; and
(B) in subsection (c)(1), by striking ``paragraph (4), (5),
(6), (7), or (8) of''.
(b) Applicability.--The amendments made by subsection (a)
shall take effect and apply beginning on January 1, 2006.

The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Ohio (Mr. Oxley) and the gentleman from Massachusetts (Mr. Frank) each
will control 20 minutes.
The Chair recognizes the gentleman from Ohio.

General Leave

Mr. OXLEY. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days within which to

[[Page H11136]]

revise and extend their remarks and include extraneous material on S.
467.
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 such time as I may consume.
Mr. Speaker, in the aftermath of the brutal terrorist attacks on our
Nation on September 11, 2001, America's economic and financial security
was put at risk. Thousands of innocent people were victimized and our
insurance industry was brought to its knees.
Insurers could not predict when or where or how damaging the next
attack would be. As a result, the insurance markets pulled back and
businesses were unable to obtain terrorism insurance at any price.
Business development plans stalled and our economy was put at risk.
President Bush immediately called on Congress to pass legislation
that would prevent severe economic disruptions caused by a lack of
available terrorism insurance. The Financial Services Committee worked
closely with the administration and the Senate to draft the Terrorism
Risk Insurance Act of 2002, or TRIA. TRIA provided a temporary Federal
backstop to protect against future catastrophic terrorist attacks. This
program, by any measure, has been a resounding success.
On June 30, 2005, the Treasury Department submitted a report to
Congress on the effectiveness of the TRIA program, the availability and
affordability of terrorism insurance for various policyholders, and the
likely capacity of the property and causality insurance industry to
offer insurance for terrorism risk after TRIA expires on December 31 of
this year. According to the report, the removal of TRIA would result in
``less terrorism insurance written by insurers, higher prices, and
lower policyholder take-up.''
The administration stated that it wanted to reform the TRIA program
and foster the development of a private market for terrorism insurance.
The legislation before us today would temporarily extend the
terrorism risk backstop for policyholders, but would also add a number
of critical reforms. Perhaps most importantly, this bill is the only
proposal providing significant taxpayer protections.
Unlike the current TRIA program which sets a limit on the amount of
Federal assistance taxpayers may recoup, this legislation may have full
100 percent taxpayer payback. Every dollar the Federal Government pays
out gets repaid over time. This bill also significantly increases
industry co-shares, providing further taxpayer relief in the short run.
The bill raises the program trigger from $5 million to $50 million in
the first year of the extension and then to $100 million for the second
year. It also eliminates commercial automobile insurance from the
terrorism insurance program, for a reduction of over $30 billion
dollars in covered line premiums. The bill raises the deductibles on
all lines of insurance from the current level of 15 percent to an
average of over 20 percent, the biggest increase among all of the
proposals.
The legislation encourages insurers to make coverage available for
nuclear, biological, chemical and radioactive risk attacks, which are
currently excluded from most insurance policies. Without these
provisions, policyholders will continue to be unprotected for the most
catastrophic of events.
Any Federal terrorism insurance program must be temporary. Because
terrorism risk will not go away, one of our major goals must be to
decrease the role of the Federal Government over time and provide real,
lasting market reforms that will increase industry responsibility for
terrorism insurance.
It is important that industry have more ``skin in the game'' to ease
the transition to the private market for terrorism insurance. In
addition to a raised trigger and deductibles, this bill is the only
legislation that requires that development of a long-term solution
shifting the backstop to the private sector and phasing out the Federal
role.
A public-private entity is created and is required to issue specific
proposals within a short period of time, and the bill sets up various
risk-pooling mechanisms and dedicated terrorism capital accounts to
immediately begin the transition. Without these provisions, we will be
back here in 12 months arguing over another extension with no improved
reforms.
This legislation is identical to the bill that passed our Financial
Services Committee overwhelmingly by a vote of 64-3, with the exception
of striking certain provisions that are within the jurisdiction of the
Judiciary Committee by agreement, a slight change in the definition of
exempt commercial purchasers, and other technical and conforming
changes.
I applaud my friend and colleague, the gentleman from Louisiana (Mr.
Baker), chairman of the Subcommittee on Capital Markets, Insurance, and
Government Sponsored Enterprises, for introducing this legislation.
I would also like to thank the gentlewoman from New York (Mrs.
Kelly), the gentleman from Texas (Mr. Sessions), the gentlewoman from
Ohio (Ms. Price), the gentleman from Kentucky (Mr. Davis), the
gentleman from New York (Mr. Fossella), the gentleman from Arizona (Mr.
Renzi), the gentleman from New Jersey (Mr. Ferguson), the ranking
member from Massachusetts (Mr. Frank), the gentleman from Pennsylvania
(Mr. Kanjorski), and the gentleman from Massachusetts (Mr. Capuano) for
their leadership and commitment to this important matter.
I urge my colleagues to vote in favor of this bill.
Mr. Speaker, I reserve the balance of my time.
Mr. FRANK of Massachusetts. Mr. Speaker, the ranking member of the
subcommittee, the gentleman from Pennsylvania (Mr. Kanjorski), is on
his way over. He has taken the lead for us on this bill.
I would just ask at this point unanimous consent for me to turn over
to him the management of our time when he arrives.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Massachusetts?
There was no objection.
Mr. FRANK of Massachusetts. Mr. Speaker, this is a bill to which my
response is, ``Better late than never.'' I wish we would have done this
earlier. We have known for some time the deadline was coming. I
appreciate the efforts of the chairman of the committee to get the
attention of the House to this bill. We passed it in committee some
time ago before the break. It frankly could have come to the floor
before that.
I say that because I am pleased with this bill in general. I think it
is useful that we are producing it. And there are differences between
this bill and the one passed by the Senate, and we do need some time to
work them out.

{time} 1215

None of them is of enormous difficulty, it seems to me, they all have
a similar capacity, but it would have been better if we had done this
earlier.
Having said that, I want to stress what is so important about this
bill to me, and it is it establishes or maintains the principle that we
will try to minimize the extent to which terrorists influence decisions
that we make here in America. I do not regard this as a favor to the
insurance companies. Frankly, terrorism insurance would, I believe, not
exist if it were not for this bill or, if it did exist, it would be at
very high premiums. The insurance industry would have the option either
of walking away from offering this or of charging high premiums. I do
not think the insurance industry would be greatly disadvantaged.
The losers, if we do not reenact terrorism risk insurance, are people
who want to build and particularly in those cities that are seen as
potential targets of terrorism. We have been told by people who want to
do large commercial buildings, very important to the big cities of this
country, to the areas that would be the targets of terrorism, that they
would not be able to get loans that are necessary obviously to build if
they are not fully insured. Lenders are telling us, yes, we cannot now
lend large amounts of money, tens, hundreds of millions of dollars to a
building that might be at risk from terrorism and be uninsured against
that risk.
I think we ought to have a responsible insurance system so that where
we can minimize risk we can give people an incentive to be responsible
in dealing with them. I do not think it is

[[Page H11137]]

good public policy to say to people who want to build in New York or
Chicago or Los Angeles or here in Washington, D.C., There are
terrorists out there and they want to blow things up and you will bear
that financial responsibility; that is up to you. That is unfair to the
cities, and it gives the terrorists leverage over our economy.
So this is a bill which, in my mind, is not for benefit of the
insurers but for the insured, and it is for the benefit of the insured
so that we can go forward with the development of our economy.
Indeed, there is one issue here regarding the World Trade Center that
we have not yet fully resolved, and I appreciate the chairman showing
some interest in this. We were asked, both of us, by Members from the
New York area about some provisions to deal with the possibility that
the World Trade Center reconstruction will take too long. Frankly,
those in charge in New York did not come to us until very late in the
process, and it was not possible to accommodate something of that
complexity now. I hope we do not rule it out for the future, but if
they had come to us earlier, we might have been able to deal with it
somewhat differently, but that illustrates the point.
This is a bill to make sure that economic activity in our biggest
cities can go on uninterrupted, and the alternative is to let the
terrorists put a terrorist tax on building large buildings in our big
cities, and we should not allow that.
Let me just say, finally, I want to acknowledge, and my friend from
Pennsylvania is here and will be taking this over, but this has been a
cooperative effort with the chairman of the committee, the gentleman
from New York (Mr. Israel), the gentleman from New York (Mr. Crowley).
The gentleman from Massachusetts (Mr. Capuano) has done a lot.
Last point. Some of the consumer groups have raised what I think are
misguided objections here. I do not see that this, in any way, impinges
on the consumers negatively, but thanks to the gentlewoman from
Florida, who will be speaking later, it has a very important
proconsumer piece, and I appreciate the chairman's agreeing to add it,
that protects Americans from arbitrary treatment if they are traveling
to certain parts of the world.
So I am very supportive of this, and I would now turn over the
management of the time to the gentleman from Pennsylvania.
Mr. OXLEY. Mr. Speaker, I am pleased to yield 2 minutes to the
gentlewoman from New York (Mrs. Kelly), the chairman of the Oversight
Subcommittee.
Mrs. KELLY. Mr. Speaker, I rise today in strong support of H.R. 4314,
the Terrorism Risk Insurance Revision Act of 2005. This is important
legislation. It builds on the success of the Terrorism Risk Insurance
Act we passed after 9/11.
In New York, the terrorist attacks of September 11 caused many
insurers to eliminate coverage in the area. At a time when the economy
was suffering, business leaders who wanted to rebuild were stopped by a
lack of insurance coverage. Some of my own constituents had this
problem.
The passage of TRIA in 2002 allowed job growth and construction to
resume in New York and nationwide.
The Treasury Department reported this year that TRIA has lowered
premiums and increased coverage for cities across the country that face
the risk of terror.
The bill before us today recognizes the successes of TRIA and changes
the program to even make it better. It recognizes that after the London
bombings, there can be no real distinction between domestic and
international acts of terror.
It provides coverage for group life plans from attacks that could
target a single employer or an industry. Perhaps most importantly, this
bill creates a commission to examine the long-term provision of
terrorism insurance in this country.
Making terror insurance available after the expiration of this bill,
particularly at the World Trade Center and any other locations that
have been victims of terror and face special challenges in obtaining
insurance, will be a vital responsibility of this commission.
The bill does not exist to benefit insurers. It benefits the
taxpayers. The House bill will protect taxpayers from losses from
terrorist attack, while ensuring that taxpayers can insure their homes
and property against terror.
Failure to pass this bill will be an open invitation for economic
attacks against this country and against our citizens.
I urge the Members of this House to support this bill, and I urge an
immediate conference with the Senate so that we can act before the
current program expires.
Mr. KANJORSKI. Mr. Speaker, I yield 2 minutes to the gentleman from
New York (Mr. Israel).
Mr. ISRAEL. Mr. Speaker, I thank the gentleman for the time.
Mr. Speaker, I want to thank Chairman Oxley and Ranking Member Frank
for their hard work in getting this important legislation to the floor.
This is an example of the kind of bipartisan cooperation that we have
in the Financial Services Committee.
Mr. Speaker, just over a year and a half ago, the committee held its
first hearing in the 108th Congress on the extension of terrorism risk
insurance. At that time, I announced I would be working with the
gentleman from Massachusetts (Mr. Capuano) on a TRIA reauthorization
bill, and at the same time, I said that, in my view, this was the most
important issue facing our committee. It was then; it still is now.
After 9/11, the businesses in my district and throughout the New York
metropolitan area saw firsthand the result of a lack of availability of
terrorism insurance. New development was held up. Existing businesses
were left to choose between unmanageable risk and astronomical
insurance premiums. Certain high profile industries and buildings faced
both at once. The passage of TRIA changed that by stabilizing the
insurance market and allowing all businesses an affordable option for
terrorism coverage.
Unfortunately, we are now staring at the sunset of that program, and
although strides have been made, the private sector is not yet able to
independently price and make available terrorism insurance.
Passage of this bipartisan bill is a critical step toward ensuring
the continued stability of our national economy, and of particular
importance to me is the inclusion of group life. As I have said often
in the past, if we are going to provide a Federal backstop for the
insurance of buildings, for bricks and mortars and steel and glass, we
should also provide for the people who are residing and working within
those buildings.
We have 2 weeks left in this session, and a great many differences
between the two bills that need to be worked out. I am positive that we
will come to an agreement that will enable us to keep this program
available uninterrupted.
Mr. Speaker, I would like to conclude by making one final point. An
attack on this country is not an attack on a building. It is not an
attack on the insurance industry. It is not an attack on a bunch of
companies. It is an attack on our country, and the Federal Government
has an obligation to help defend against the economic consequences of
that attack, which is what TRIA's extension does.
Mr. OXLEY. Mr. Speaker, I yield 2 minutes to the gentleman from
Georgia (Mr. Price).
Mr. PRICE of Georgia. Mr. Speaker, I rise to thank the chairman for
bringing this bill forward and to express to him, as he understands,
the extreme importance of this, and I rise to support the underlying
bill.
Mr. Speaker, as the gentleman knows, in committee there was an
amendment that was added regarding the lawful international travel and
the life insurance coverage, and I expressed concern about that
amendment at that time and the language that was included in that
amendment, which I believe not to be consistent with either current law
or insurance practice.
Although we have been working to correct that language, we have not
yet gotten to an agreement on that, and I would simply ask the chairman
for his commitment that we have the opportunity to correct that
language in conference prior to reporting this bill back to the House.
Mr. OXLEY. If the gentleman would yield, the gentleman has my
assurances. I know we had some discussions in the committee, in the
markup. Going forward, we have not been able to close that circle yet,
but I see the

[[Page H11138]]

gentlewoman from Florida there nodding, and the gentleman has my
assurances, as do all the other members of the committee, that we will
address that issue. I think there were some drafting issues and the
like that we will certainly take care of before the conference is
concluded.
Mr. PRICE of Georgia. Mr. Speaker, I thank the chairman, and I look
forward to working on this positively and productively and look forward
to this bill coming back.
Mr. OXLEY. I thank the gentleman for his support.
Mr. KANJORSKI. Mr. Speaker, I yield myself 3 minutes.
(Mr. KANJORSKI asked and was given permission to revise and extend
his remarks.)
Mr. KANJORSKI. Mr. Speaker, I rise in support of the Terrorism Risk
Insurance Revision Act.
The terrorist attacks on the World Trade Center and the Pentagon
altered how we each assess risk. This adjustment was especially
apparent in the insurance industry.
Terrorism insurance is critical to protecting jobs and promoting
America's economic security. Unfortunately, the supply of terrorism
reinsurance after the September 11 attacks significantly decreased.
Eventually, we approved the Terrorism Risk Insurance Act to address
this problem. At recent hearings, we have learned that this law has
worked to increase the availability of terrorism risk insurance,
lowered the cost of such insurance, contributed significantly to
stabilizing the overall insurance marketplace, and advanced delayed
economic development projects.
We also wisely designed this program as a temporary backstop to get
our Nation through a period of economic uncertainty until the private
sector could develop the models to price for terrorism reinsurance.
Unlike hurricanes and fires, acts of terrorism in the American
experience currently remain inherently unpredictable in frequency and
scale. As a result, the private sector has not yet returned to the
terrorism reinsurance marketplace.
Many studies support this finding. The Government Accountability
Office, for example, has determined that the industry has made little
progress to date in providing terrorism insurance without government
involvement. A report by the Rand Corporation also found that TRIA is
needed, but because of its gaps, it is not robust enough to protect
against evolving threats like those posed by nuclear, biological,
chemical and radioactive events.
Many have, therefore, called upon us to modify and extend the life of
the terrorism risk insurance program in order to prevent short-term
market disruptions and better protect the economy. The consensus bill
before us today wisely extends the program up to 3 years and adopts
other prudent reforms.
I am especially pleased that the bill includes group life insurance
as a covered line. The original TRIA omitted such coverage. This bill
fixes that oversight. We need, after all, to insure the people inside
the buildings, not just the buildings themselves.
In closing, Mr. Speaker, this is not a Democratic issue or a
Republican issue. It is an American issue, a business issue and an
economic security issue.
With less than 4 weeks remaining before the current program expires,
we need to expeditiously pass this important economic stabilization
legislation and move forward with a conference. I urge my colleagues to
support this bill.
Mr. Speaker, I reserve the balance of my time.
Mr. OXLEY. Mr. Speaker, I am pleased to yield whatever time he may
consume to the gentleman from Louisiana (Mr. Baker), the chairman of
the subcommittee.
Mr. BAKER. Mr. Speaker, I thank the chairman for yielding.
I rise today in strong support of this measure which represents the
work product of the Committee on Financial Services not for a matter of
hours but, frankly, a matter of years.
The committee first authorized a terrorism reinsurance program some
years ago, initially after the events of 9/11. That program has now
exceeded its lifespan and is due to expire at the end of this year.
The consequences of letting the program expire are consequential. The
inability to underwrite an indeterminate risk is of great consequence
to particularly our real estate and development community, but to all
business enterprises which are vulnerable to and concerned with the
potential of a terrorism event.
The collective impact of this program will not be felt by taxpayers
until and unless there is a terrorist attack. It is something that some
appear to not understand. We are not creating a job bureaucracy. We are
not spending tens of millions of taxpayer dollars. We are only saying
that in the event another unexpected terrible calamity that struck New
York some years ago should ever reoccur, that there be in place a
governmental mechanism to help us through the crisis.
Some are concerned that this represents a way in which to funnel
hundreds of millions of dollars to private interests of taxpayer money
without recourse.
The principal reason why the House approach is the only approach that
we should adopt is the requirement for the industry, once solvent, once
stable, once economic conditions have returned to normality, that there
would be repayment of the credit extended by the United States
taxpayer. This is not a giveaway. This is a bridge loan in the time of
national crisis.

{time} 1230

I cannot conceive of how this Congress could go home and walk away
from this responsibility to act for a preventive measure. It only gives
our economic system the assurance that there will be continuity; that
there will be the ability for our economic systems to function should
we be called upon to respond to an event of enormous proportions that
all of us hope will never occur.
We also are sensitive to the scale of the insurance industry. There
are very large companies who can withstand enormous losses and pay them
off quite well. There are regional and smaller providers who provide an
essential service in our economy that would be disastrously impacted if
the provisions contained in the House measure are not adopted.
I cannot speak highly enough about the long-suffering work of our
chairman, Chairman Oxley, and the kind assistance offered by the
ranking member, Mr. Frank, in really making this a bipartisan
recommendation to meet what is an identified and obvious need in the
most responsible manner possible.
Let me say it again, because it is so important. If, and only if, the
provisions of this act are necessary will it be brought into life. At
such time any assistance offered to any private entity who is a for-
profit entity and taxpayer resources are expended, there will be a
requirement to repay the taxpayers of this country when the solvency of
that enterprise is clear and established. Emergency purposes for
emergency needs in a time of crisis.
I commend both Members for their leadership and hard work on this
measure.
Mr. KANJORSKI. Mr. Speaker, I yield 2 minutes to the gentleman from
Massachusetts (Mr. Capuano).
Mr. CAPUANO. Mr. Speaker, I rise to congratulate the chairman of the
committee and the subcommittee and the ranking members of the committee
and subcommittee. This is a classic example of perfect legislation
because no one involved with it is happy, but we are all satisfied. We
are satisfied on a bill that will not get any one of us a single vote
or win us a single friend at home.
This bill is being done for the simple reason it must be done for the
security and stability of the American economy. And the fact that we
are getting it done, I think, is an amazing statement of progress. All
congratulations are due to the people who sat around the table, worked
out some deep philosophical differences of opinion, and did it in a way
that lived up to the chairman's commitment, his public commitment a few
months ago that some people questioned, though I never did, that this
bill would be done before we went home.
Again, I just stand to congratulate him and to thank him and the
other people involved with this bill for getting it done in a manner
that should make us all proud.
Mr. OXLEY. Mr. Speaker, I am pleased now to yield 2 minutes to the

[[Page H11139]]

gentleman from New York (Mr. Reynolds).
(Mr. REYNOLDS asked and was given permission to revise and extend his
remarks.)
Mr. REYNOLDS. Mr. Speaker, I thank the gentleman from Ohio for
yielding me this time and allowing me to speak on this legislation. I
think that first we should salute the hard work of Chairman Oxley and
Ranking Member Frank, as well as the hard work of Subcommittee Chairman
Richard Baker, who just so eloquently explained why this legislation is
so important not only to New York in the aftermath of 9/11 but to every
city in the country that finds themselves in the plight of terrorism
and the reinsurance markets.
This is an opportunity for us to continue where the free market will
not be able to indemnify building owners as we look at this across the
country. I think that the authors of this legislation, as the House
passes this later today, give us a real opportunity to move forward
with a 2-year opportunity to help the marketplace, the building owners
who are affected by the need for coverage of this exposure, while also
recognizing that the free marketplace is not able to absorb this
without the governmental mechanism that has been outlined as the intent
of the bill.
So I wholeheartedly support it. It is something that will affect the
buildings and the marketplace throughout the country, and certainly my
State is one where it is vitally needed in order to have coverage for
the markets.
Mr. KANJORSKI. Mr. Speaker, I yield 2 minutes to the charming
gentlewoman from Florida (Ms. Wasserman Schultz).
Ms. WASSERMAN SCHULTZ. Mr. Speaker, I am privileged to serve on the
Financial Services Committee under the leadership of Chairman Oxley and
Ranking Member Frank, because this bill is yet another example of what
we can accomplish when both sides of the aisle work together. And this
is not the first time that that has occurred, and I am sure it will not
be the last when it comes to the results that come out of this
committee.
As outgoing Federal Reserve Chairman Alan Greenspan once said, ``Free
markets presume peaceful societies.'' The infinite risks associated
with terrorism have demonstrated their potential to destabilize our
markets, so I rise to express my full support for the version of TRIA
before the House today.
I want to thank Chairman Oxley, Ranking Member Frank, Representative
Baker, and Representative Kanjorski for their stalwart leadership on
this issue. I also want to thank all members and staff from the
Financial Services Committee who have worked so hard to bring this to
the floor.
The House version of the bill includes critical reforms that will
help protect the American economy in the event of another terrorist
attack. It includes important group life provisions, streamlines
insurance filings, and gives consumers more options and protections. I
am proud that this legislation has gleaned broad-based bipartisan
support, and I encourage all my colleagues to support the House version
of the bill today and in conference.
Mr. Speaker, I look forward to working with the chairman and the
ranking member and any other interested parties on the language related
to the life insurance fairness-for-travelers issue.
Mr. OXLEY. Mr. Speaker, I reserve the balance of my time.
Mr. KANJORSKI. Mr. Speaker, I yield 2 minutes to the gentlewoman from
New York (Mrs. Maloney).
Mrs. MALONEY. Mr. Speaker, part of our war against terror is putting
our economic house in order, and this bill is essential to achieving
that goal. Businesses and real estate and development tell me in New
York City now that it is absolutely impossible to get insurance until
this bill passes.
After 9/11, of all the aid that my colleagues gave which helped New
York, in my opinion the absolute most important act was passing TRIA,
the Terrorism Risk Insurance Act. We were not able to build anything or
to move forward in any way until the insurance package was in place. So
this bill today is tremendously important.
There are many important features in it. I would like to particularly
point out that the House bill adds group life insurance, since it is
not only property that is at risk in a terrorist attack but also human
lives.
Secondly, the bill creates a commission of private sector experts to
come forward with long-term private sector solutions. It gives the
private sector the responsibility to develop a private sector solution
for Congress to consider.
It also has a third year as a transition for a long-term solution
that the commission will hopefully come forward with. Without the
benefits and the flexibility provided in the House bill, I am afraid
that in 2 years we will be at the same place we are now, having no new
outside government thinking and no ability to implement new ideas or
accommodate marketplace developments.
I urge my colleagues to support this; and I congratulate the
leadership of Congress, the leadership of the committee, Mr. Oxley, who
did a fantastic job on this. I regret that he will not be running for
reelection again. He has been a tremendous leader along with Ranking
Member Frank.
I hope that the features that are in the House bill will be preserved
in the committee report.
Mr. OXLEY. Mr. Speaker, I yield such time as she may consume to the
gentlewoman from New York (Mrs. Kelly).
Mrs. KELLY. Mr. Chairman, I know that the amendment that we put into
the bill that was authored by the gentlewoman from Florida (Ms.
Wasserman Schultz) that prevents restrictions from being put on lawful
foreign travel and prohibits excessive rates on foreign travel was not
the subject of a hearing in our committee. I would like to explore the
possibility of working with the chairman on possibly having a hearing
about that to see the extent of what actually is occurring with regard
to restrictions on travel to different countries.
I would be interested in the chairman's response to that. While I
fully support travel to Israel, I do not know how many other countries
this might be affecting.
Mr. OXLEY. Mr. Speaker, I thank the gentlewoman for her inquiry, and
clearly the committee on the point that she mentioned did not have
hearings on the amendment offered, but I think it may be ripe for
further exploration by the committee because the gentlewoman raises
some interesting issues regarding foreign travel, particularly as it
relates to life insurance policies.
I thank the gentlewoman for her interest and expertise.
Mr. KANJORSKI. Mr. Speaker, this has been a difficult time, because
so many of us over the last year have desired to move this legislation
along. But I would be remiss if I did not take this occasion to perhaps
illuminate an example for this entire Congress as represented by the
financial services industry.
I would have to say, without doing an in-depth study, that the
Financial Services Committee of the House of Representatives has proven
that even in the 109th Congress we can have bipartisan activity of an
extraordinary amount, and that to a large extent is due to the
incredibly good leadership of our gentleman friend, the chairman from
Ohio, and the ranking member, the gentleman from Massachusetts (Mr.
Frank). I also would be remiss if I did not suggest a strong and hard
effort by our friend, the subcommittee chairman, Mr. Baker of
Louisiana.
Perhaps the full House could take note that in pressing times of need
for legislation that can be contentious and has philosophical
differences of great order, both sides of the aisle on this piece of
legislation, and so many more in this session of Congress, have come
together to perform the people's work; and I think the congratulations
to a large extent for that effort go to the gentleman from Ohio, the
chairman, Mr. Oxley.
With those remarks, Mr. Speaker, and urging all my colleagues in the
House to vote ``yes'' on this legislation, I yield back the balance of
my time.
Mr. OXLEY. Mr. Speaker, just in conclusion, I thank the gentleman
from Pennsylvania for his kind words, and all the members on the
committee who worked so hard on this, particularly Mr. Kanjorski and
Mr. Frank on that side, and many, many others.

[[Page H11140]]

Mr. Speaker, when we had the hearing on this legislation with the
Treasury Secretary after the Treasury report came out, I made the
comment it would be irresponsible on the part of this Congress if we
did not address the issue of terrorism risk insurance. It was far too
important to ignore; it had too many implications for our economy going
forward.
And Mr. Frank was right when he said this is not about the insurers.
It is about the insured, the people out there creating jobs and making
our economy work. And it is also a recognition that an act of terrorism
is almost impossible to try to get actuarial information on to be able
to set rates. It is virtually impossible. Anybody that knows anything
about insurance knows that it is virtually impossible to work that in
to any kind of an insurance scheme in which they would charge premiums.
So that is why we needed this bottom-up, and that is why we need to
continue this bottom-up.
And the idea is to transition during that period to a market-based
solution, creating the incentive for insurance companies to create a
pool, not unlike what the Brits have, the pool-rate concept, so you
have this pool that could guard against losses. It is something that
hopefully over the next year, as we finish this Congress, we can set
the stage for that transition that will enable our economy to continue
to grow and provide a robust insurance protection for those activities
at the same time.

{time} 1245

This is, in my estimate, as the gentleman from Pennsylvania pointed
out, the legislative process at its best and I am very proud of the
committee and the job that we have done. I ask for support of the
legislation.
Mr. PAUL. Mr. Speaker, 4 years ago, when the Congress considered the
bill creating the terrorism insurance program, I urged my colleagues to
reject it. One of the reasons I opposed the bill was my concern that,
contrary to the claims of the bill's supporters, terrorism insurance
would not be allowed to sunset after 3 years. As I said then:

The drafters of H.R. 3210 claim that this creates a
``temporary'' government program. However, Mr. Speaker, what
happens in 3 years if industry lobbyists come to Capitol Hill
to explain that there is still a need for this program
because of the continuing threat of terrorist attacks. Does
anyone seriously believe that Congress will refuse to
reauthorize this ``temporary'' insurance program or provide
some other form of taxpayer help to the insurance industry? I
would like to remind my colleagues that the Federal budget is
full of expenditures for long-lasting programs that were
originally intended to be ``temporary.''

I am disappointed to be proven correct. I am also skeptical that,
having renewed the program once, Congress will ever allow it to expire,
regardless of the recommendations made by the commission created by
this bill.
As Congress considers extending this program, I renew my opposition
to it for substantially the same reasons I stated 4 years ago. However,
I do have a suggestion on how to improve the program. Since one claimed
problem with allowing the private market to provide terrorism insurance
is the difficulty of quantifying the risk of an attack, the taxpayers'
liability under the terrorism reinsurance program should be reduced for
an attack occurring when the country is under orange or red alert.
After all, because the point of the alert system is to let Americans
know when there is an increased likelihood of an attack it is
reasonable to expect insurance companies to demand that their clients
take extra precautionary measures during periods of high alert.
Reducing taxpayer subsidies will provide an incentive to ensure private
parties take every possible precaution to minimize the potential damage
from possible terrorists attack.
While this bill does contain some provisions making it more favorable
to taxpayers than the original program, my fundamental objections to
the program remain the same as 4 years ago. Therefore, I am attaching
my statement regarding H.R. 3210, which created the terrorist insurance
program in the 107th Congress:
Mr. Speaker, no one doubts that the government has a role to play in
compensating American citizens who are victimized by terrorist attacks.
However, Congress should not lose sight of fundamental economic and
constitutional principles when considering how best to provide the
victims of terrorist attacks just compensation. I am afraid that H.R.
3210, the Terrorism Risk Protection Act, violates several of those
principles and therefore passage of this bill is not in the best
interests of the American people.
Under H.R. 3210, taxpayers are responsible for paying 90 percent of
the costs of a terrorist incident when the total cost of that incident
exceeds a certain threshold. While insurance companies technically are
responsible under the bill for paying back monies received from the
Treasury, the administrator of this program may defer repayment of the
majority of the subsidy in order to ``avoid the likely insolvency of
the commercial insurer,'' or avoid ``unreasonable economic disruption
and market instability.'' This language may cause administrators to
defer indefinitely the repayment of the loans, thus causing taxpayers
to permanently bear the loss. This scenario is especially likely when
one considers that ``avoid . . . likely insolvency, unreasonable
economic disruption, and market instability'' are highly subjective
standards, and that any administrator who attempts to enforce a strict
repayment schedule likely will come under heavy political pressure to
be more ``flexible'' in collecting debts owed to the taxpayers.
The drafters of H.R. 3210 claim that this creates a ``temporary''
government program. However, Mr. Speaker, what happens in 3 years if
industry lobbyists come to Capitol Hill to explain that there is still
a need for this program because of the continuing threat of terrorist
attacks. Does anyone seriously believe that Congress will refuse to
reauthorize this ``temporary'' insurance program or provide some other
form of taxpayer help to the insurance industry? I would like to remind
my colleagues that the Federal budget is full of expenditures for long-
lasting programs that were originally intended to be ``temporary.''
H.R. 3210 compounds the danger to taxpayers because of what
economists call the ``moral hazard'' problem. A moral hazard is created
when individuals have the costs incurred from a risky action subsidized
by a third party. In such a case individuals may engage in unnecessary
risks or fail to take steps to minimize their risks. After all, if a
third party will bear the costs of negative consequences of risky
behavior, why should individuals invest their resources in avoiding or
minimizing risk?
While no one can plan for terrorist attacks, individuals and
businesses can take steps to enhance security. For example, I think we
would all agree that industrial plants in the United States enjoy
reasonably good security. They are protected not by the local police,
but by owners putting up barbed wire fences, hiring guards with guns,
and requiring identification cards to enter. One reason private firms
put these security measures in place is because insurance companies
provide them with incentives, in the form of lower premiums, to adopt
security measures. H.R. 3210 contains no incentives for this private
activity. The bill does not even recognize the important role insurance
plays in providing incentives to minimize risks. By removing an
incentive for private parties to avoid or at least mitigate the damage
from a future terrorist attack, the government inadvertently increases
the damage that will be inflicted by future attacks.

Instead of forcing taxpayers to subsidize the costs of terrorism
insurance, Congress should consider creating a tax credit or deduction
for premiums paid for terrorism insurance, as well as a deduction for
claims and other costs borne by the insurance industry connected with
offering terrorism insurance. A tax credit approach reduces
government's control over the insurance market. Furthermore, since a
tax credit approach encourages people to devote more of their own
resources to terrorism insurance, the moral hazard problems associated
with federally funded insurance is avoided.
The version of H.R. 3210 passed by the Financial Services committee
took a good first step in this direction by repealing the tax penalty
which prevents insurance companies from properly reserving funds for
human-created catastrophes. I am disappointed that this sensible
provision was removed from the final bill. Instead, H.R. 3210 instructs
the Treasury Department to study the benefits of allowing insurers to
establish tax-free reserves to cover losses from terrorist events. The
perceived need to study the wisdom of cutting taxes while expanding the
federal government without hesitation demonstrates much that is wrong
with Washington.
In conclusion, Mr. Speaker, H.R. 3210 may reduce the risk to
insurance companies from future losses, but it increases the costs
incurred by American taxpayer. More significantly, by ignoring the
moral hazard problem this bill may have the unintended consequence of
increasing the losses suffered in any future terrorist attacks.
Therefore, passage of this bill is not in the long-term interests of
the American people.
Mr. SHAYS. Mr. Speaker, I am grateful for the hard work that took
place to bring the Terrorism Risk Insurance Revision Act to the floor
and urge my colleagues to support its passage today.
Extending TRIA is important for so many facets of our economy; and
revising the Act by requiring insurers to take on greater
responsibility in the event of a catastrophic attack is a prudent
measure for the taxpayers.

[[Page H11141]]

As a strong believer in free markets, I am fully aware and
sympathetic to concerns that TRIA exposes the government and taxpayers
to a risk that should be fully assumed by the marketplace. TRIA was
never intended to be a permanent program, and we are wise to include in
this legislation provisions directing the Treasury Department to work
on the creation of risk sharing mechanisms and requiring a full payback
to the Treasury in the event that TRIA is triggered.
I also strongly support the creation of a commission to study how
best to reduce the Federal Government's role and increase the private
sector's capacity to underwrite terrorism risk. It is crucial we
maintain this provision in the final version of this legislation.
While this legislation takes several important steps to place greater
responsibilities on insurance companies, in my judgment it is
appropriate and wise for us to expand the program to include group life
insurance. Quite simply, those who provide group life insurance face
the same challenges as property and casualty and other insurers that
were covered under the original TRIA Act. Failure to include group life
has placed these insurers in a precarious position of choosing to
remain in the marketplace without reinsurance or exiting from the
market.
Although TRIA has not yet been triggered, it is important we both
extend and improve it for the future. Again, I appreciate the
Chairman's hard work and urge my colleagues to support passage.
Mr. OXLEY. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Simpson). The question is on the motion
offered by the gentleman from Ohio (Mr. Oxley) that the House suspend
the rules and pass the Senate bill, S. 467, as amended.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of
those present have voted in the affirmative.
Mr. KANJORSKI. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the
Chair's prior announcement, further proceedings on this question will
be postponed.

____________________