[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

       ``(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;
       ``(F) for any Additional Program Years--
       ``(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 that 
     year, multiplied by the insurer deductible for each covered 
     line of insurance for the preceding calendar year plus an 
     additional percentage, as follows--

       ``(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.

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