[Congressional Record Volume 151, Number 162 (Friday, December 16, 2005)]
[Senate]
[Pages S13931-S13934]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TERRORISM RISK INSURANCE ACT OF 2005
Mr. FRIST. I ask unanimous consent the Chair now lay before the
Senate the House message to accompany S. 467, a bill to extend the
applicability of the Terrorism Risk Insurance Act of 2002.
The Presiding Officer laid before the Senate the following message
from the House of Representatives:
Resolved that the bill from the Senate S. 467 entitled `` An Act to
extend the applicability of the Terrorism Risk Insurance Act of 2002,''
do pass with an amendment.
Mr. REID. Mr. President, make a few remarks about final passage of
the Terrorism Risk Insurance Extension Act of 2005. Let me start by
thanking Senators Sarbanes, Dodd, Shelby and Bennett for their tireless
effort in the last several months to pass this critical piece of
legislation. These Senators worked through significant differences on
the substance of this bill and ultimately reached a compromise with the
House that extends the basic structure of this important program for
another 2 years, and I commend them for those efforts.
The Terrorism Risk Insurance Act, commonly referred to as TRIA, has
proven to be an effective program that has made terrorism risk
insurance available to commercial propertyholders and has provided
businesses meaningful access to coverage in a post-9/11 world. The
program has made sure that the American economy and markets function in
the face of a still-present threat of a terrorist attack. In my home
State of Nevada, large construction projects and jobs were threatened
because of uncertainty in the terrorism insurance market created by
TRIA's imminent expiration. Extending TRIA will eliminate that
uncertainty and provide an economic backstop in the event of another
terrorist attack in this country.
Our Nation's economy will be more stable now that TRIA will be
extended, but I remind my colleagues that this legislation only extends
the program through the end of 2007. Fortunately, the legislation
mandates that the President's Working Group on Financial Markets
consult with other stakeholders and come up with an analysis of the
long-term availability and affordability of terrorism risk insurance. I
look forward to future discussions and continued work on crafting a
permanent solution to these problems.
Mr. SARBANES. Mr. President, I join my colleagues in support of the
Terrorism Risk Insurance Extension Act of 2005. This legislation
represents a bipartisan, bi-cameral compromise to extend the Terrorism
Risk Insurance Act of 2002 for 2 years, through December 31, 2007. I
want to take this opportunity to congratulate my colleagues, as it is
through the hard work of Banking Committee Chairman Shelby and Senators
Dodd and Bennett, along with the House negotiators, led by Financial
Services Committee Chairman Oxley and ranking member Frank, that we
have been able to work out this compromise and ensure that TRIA
continues.
As I said when the Senate first considered a TRIA extension bill in
November of this year, the original TRIA was designed to address the
adverse impact on the terrorism insurance marketplace of the sudden
lack of terrorism reinsurance after the September 11th attacks.
Reinsurance is a mechanism by which insurance companies spread their
own risks, allowing them to write more policies; without it, insurers'
capacity to offer coverage for losses due to terrorism shrank
considerably. By all accounts, the federal backstop provided by TRIA
achieved its goal of making terrorism insurance coverage available and
affordable once again. The Treasury Department reported this summer,
``TRIA was effective in terms of the purposes it was designed to
achieve. TRIA provided a transitional period during which insurers had
enhanced financial capacity to write terrorism risk insurance coverage.
. . . More generally, TRIA provided an adjustment period allowing both
insurers and policyholders to adjust to the post-September 11th view of
terrorism risk.''
However, after the Treasury Department released its report, serious
disagreements emerged as to what would be the most efficient,
effective, and equitable way to assure the continued availability of
terrorism insurance. This is an issue that deserves careful analysis,
which is why this extension bill contains a requirement for a study by
the President's Working Group on Financial Markets on the long-term
availability and affordability of terrorism risk insurance. I hope that
this requirement will result in a thorough examination of the issues
and will include input from all stakeholders, which will help us answer
the question of how to insure against terrorism over the long-term.
To allow time for that examination to take place, this compromise
legislation continues the TRIA program for 2 additional years, with
certain modifications, which I will briefly summarize.
Following the model of the extension bill passed by the Senate in
November of this year, this legislation narrows the scope of the TRIA
program, further targeting the program toward the types of terrorism
insurance that are the most difficult to provide. Under the terms of
the extension, the federal backstop will no longer be available for
insurance policies covering commercial automobiles, professional
liability, burglary and theft, farm owners, multiple peril, and surety.
Just as the original TRIA did, this extension places more of the risk
on the insurance industry, and correspondingly less on the Federal
Government, in each year. For example, in 2005, under the current
program, the amount of terrorism losses that an insurer must cover
before federal assistance becomes available is 15 percent of the
premiums collected by that insurer in lines covered by the TRIA
program. Under this extension, this ``insurance company deductible''
will rise to 17.5 percent of premiums in 2006, and 20 percent of
premiums in 2007. Moreover, the amount that insurers must pay above
their deductible also increases, rising from 10 percent of losses in
2006, to 15 percent of losses in 2007.
In addition to the individual insurance companies' deductible, the
insurance industry as a whole must cover a certain amount of losses
before federal assistance becomes available. In 2005, the last year of
the current TRIA program, that amount is $15 billion. Under this
legislation, that amount will rise to $25 billion in 2006, and $27.5
billion in 2007, an increase from the amounts included in the
legislation originally passed by the Senate in November.
Also, after March 31, 2006, no federal assistance will be available
at all under the program for a terrorist attack in which total losses
do not exceed $50 million, a level which rises to $100 million in 2007.
The starting date for this increase in the trigger level is later than
it was in the bill passed by the Senate in November, to allow the
insurance industry and policyholders a grace period in which to adapt
to the new level.
Finally, I want to emphasize that this compromise legislation, like
the extension bills passed by both the Senate and the House earlier
this year, retains a critically important piece of the current TRIA
program: the requirement that insurers make terrorism coverage
available to policyholders in all of the lines covered by TRIA.
These provisions follow the framework of the existing TRIA program,
keeping the federal backstop in place so that insurers will continue
writing terrorism policies, while placing progressively more of the
costs onto the industry itself. As with any compromise product, no one
would say that
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the legislation is perfect. But it is a serious effort to address the
concerns we have heard raised regarding TRIA and the potential effects
of its expiration, and I urge my colleagues to join me in supporting
it.
Mr. SCHUMER. Mr. President, I express my unwavering support for S.
467, the Terrorism Risk Insurance Revision Act of 2005, introduced by
my friend, Senator Dodd of Connecticut.
I would like to commend Senators Dodd, Bennett, Shelby, and Sarbanes
for getting a bill done that we can all stand here and be proud to
support. A bill that is good for this country and good for the State of
New York.
At long last builders and insurers of major projects in large cities,
particularly New York, can breathe a sigh of relief; terrorism
insurance will be renewed. It never should have taken this long, but at
least we know this protection will be available for another 2 years.
We still live in America, and particularly in my city of New York, in
the shadow of 9/11, of the terrorism that occurred. Obviously, the
thousands of families who have had a loved one taken from their midst
live with it every moment of their remaining lives, but the rest of us
live with it too, not only in empathy for them but also in terms of the
economic consequences of terrorism.
The bottom line is very simple, and that is, because of terrorism,
the insurance industry, in terms of insuring risk of large structures
in America--whether it be large buildings that make us so proud of the
Manhattan skyline, or large arenas such as the football stadiums that
dot America, or larger facilities such as Disneyland, Disney World, and
amusement parks--all have difficulty getting insurance.
Insurers are worried that if, God forbid, another terrorist act
occurs it will be so devastating that it will put them out of business.
So 2 years ago, the Senate, House, and the President got together at
sort of the end of the day, just like today, and passed terrorism risk
insurance.
It has been a large success. That no one can dispute.
Insurance rates have come down, terrorism insurance is available, and
insurance companies know if, God forbid, the worst happens there will
be a backstop, and they are willing to issue policies.
In turn, that meant developers, builders who wanted to build new
large structures in America, did so, employing thousands and thousands
of people, creating profits and new businesses as well.
Well today we are all here to do the right thing. Yesterday, the
Banking Committee, of which I am member, passed unanimously a bill to
extend the TRIA. In this bill we have kept the trigger levels
manageable for the policyholder community. We kept the retention levels
at a responsible level for the private market, retaining the public/
private nature of the program.
The bottom line is that we have made some necessary modifications to
the program without losing the major protections. We did not all agree
what should have been in the bill. Many of us felt strongly about
including Group Life and protections against nuclear, biological,
chemical and radiological attacks. But the beauty of the process is
that it is a negotiation where we all give and take.
This bill is a good compromise.
The continuation of this program is vital to our Nation's economic
stability. By passing this bill on the floor today, we will be sending
a message to the world that our financial markets will be protected.
That our country will be able to bounce back in the event of any
disruptions or financial dislocation caused by another possible
terrorist attack.
It is still my strong belief that there needs to be a long-term
solution--a permanent program. The President has continued to say that
we are fighting a war on terrorism.
The bombing in Jordan last week, the London bombings this past July,
and the recent threat to the New York subway system are a few examples
of why we must continue fighting this war on terrorism.
It would have been my preference to get a bill that extended beyond 2
years. But I am at least pleased to know that there was a serious
effort to address this concern by including a provision to create a
commission that would begin to analyze the long-term availability and
affordability of insurance for terrorism risk.
I would particularly like to thank Senators Dodd and Shelby for
specifically including the language I requested which directs the
President's Working Group to analyze the long-term affordability and
availability of coverage for chemical, nuclear, biological and
radiological events.
This is an issue of great importance to many New Yorkers. Many
retailers and business owners in Lower Manhattan are afraid of a
possible dirty bombs attack and the availability of insurance for such
an event. This must be addressed and right away.
The bottom line is that financial dislocation caused by another
possible terrorist attack--God forbid--is too much for our country to
risk. I urge the entire Senate to pass this legislation today. It is
only right that we let the markets, let the insurance world, and, most
of all, let jobs and construction go forth.
(At the request of Mr. Reid, the following statement was ordered to
be printed in the Record.)
Mr. DODD. Mr President, I rise to lend my strong support for
S. 467, the Terrorism Risk Insurance Extension Act of 2005, which I
originally introduced with Senator Bennett and 34 cosponsors earlier
this year. The product before the Senate today was amended in committee
with the hard work and leadership of Banking Committee Chairman Shelby
and Ranking Member Sarbanes. Additionally, S. 467 addresses many of the
ideas and concerns raised by the House in its version of the
legislation. I would like to thank House Financial Services Committee
Chairman Oxley and Ranking Member Frank for their hard work in finding
consensus on this measure.
I would like to commend the members on the Banking Committee:
Senators Johnson, Reed, Schumer, Bayh, Carper, Stabenow, Corzine,
Hagel, Bunning and Dole as well as the other cosponsors of the
legislation for recognizing-- very early on--how important extending
the Terrorism Risk Insurance Act, TRIA, was to our Nation's economy and
for their efforts on this legislation.
I would also like to thank the staff who worked on this legislation,
particularly Sarah Kline and Steve Harris from Senator Sarbane's staff,
Mike Nielsen from Senator Bennett's staff, Alex Sternhell from my staff
and Jim Johnson, Andrew Olmem, Mark Oesterle and Kathy Casey from
Senator Shelby's staff.
Like many bills, this legislation is a document of compromise. We
have carefully taken into consideration the recommendations of
policyholders, insurers, consumers, academics, thinktanks, the Treasury
Department and others to craft this important extension legislation.
Let me take a few brief moments to provide my colleagues with a
little background on TRIA and why it needs to be extended today.
As a result of the tragic terrorist acts events of 9/11, we
repeatedly heard from businesses, large and small, from labor unions
and manufacturers, from hospitals to hotels, from professional sports
teams to utility companies, from insurers and the insured about the
need for the Federal Governmment to act to help them receive financial
protection from future terrorist attacks.
Congress listened, and we acted--creating the Terrorism Risk
Insurance Act, TRIA.
In November 2002, TRIA was passed by both the House and Senate by
significant margins and was signed into law. It created a 3-year
program establishing a Federal backstop against catastrophic losses in
the property and casualty insurance marketplace.
And we heard an ovehelming response trom policyholders across the
country--TRIA has worked. It has achieved its primary goal--continued
availability and affordability of insurance against future terrorist
attacks.
Industries as diverse as commercial real estate, shipping,
construction, manufacturing, and even ``mom and pop'' retailers require
insurance to obtain credit, loans, and investments necessary for their
normal business operations. TRIA was designed to do just that--restore
``business as usual'' in every State across our Nation.
I believe that the greatest indicator of the success of TRIA is what
we have
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heard over the past 3 years since the enactment of TRIA--public outcry
from businesses and workers whose livelihoods are threatened by their
inability to purchase coverage against acts of terror.
Construction projects are no longer stalled, mortgages are no longer
in doubt, jobs are no longer in jeopardy as a result of the inability
to receive terrorism insurance.
Not only has TRIA been effective in ensuring that terrorism is
available and affordable, and that our economy remains vibrant, it is
also an incredibly important taxpayer protection law. With relatively
little money necessary to fund the administration of the TRIA program,
we have ensured that insurers and policyholders take the first $30 to
$40 billion of losses of a potential terrorist attack.
Additionally, there is one provision in this legislation that I
believe is an important component--the mandate for the President's
Working Group--our Nation's Federal financial regulators--to do an
analysis of the long-term availability and affordability of terrorism
risk insurance.
This legislation provides for a 2-year extension of TRIA--and in
these next 2 years we need to find a long-term solution to this issue.
It may be determined that this is an unwritable risk for the private
sector and that a continued Federal role is needed or we may find that
insurers are able to return to underwriting this risk without a Federal
backstop. But we need to start work on developing this information and
potential solutions as soon as possible.
The enactment of this legislation will extend the TRIA program and
will ensure that our Nation and its economy are best prepared to deal
with a future terrorist attack. I urge my colleagues to support this
important legislation.
Mr. FRIST. Mr. President, I ask unanimous consent the Senate concur
in the House amendment with a further amendment which is at the desk,
the amendment be agreed to, the motion to reconsider be laid upon the
table, and any statements be printed in the Record.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment (No. 2689) was agreed to, as follows:
(Purpose: To provide for a complete substitute)
In lieu of the matter proposed to be inserted, insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Terrorism Risk Insurance
Extension Act of 2005''.
SEC. 2. EXTENSION OF TERRORISM RISK INSURANCE PROGRAM.
(a) Program Extension.--Section 108(a) of the Terrorism
Risk Insurance Act of 2002 (15 U.S.C. 6701 note; 116 Stat.
2336) is amended by striking ``2005'' and inserting ``2007''.
(b) Mandatory Availability.--Section 103(c) of the
Terrorism Risk Insurance Act of 2002 (15 U.S.C. 6701 note;
116 Stat. 2327) is amended--
(1) by striking paragraph (2);
(2) by striking ``AVAILABILITY.--'' and all that follows
through ``each entity'' and inserting ``AVAILABILITY.--During
each Program Year, each entity''; and
(3) by redesignating subparagraphs (A) and (B) as
paragraphs (1) and (2), respectively, and moving the margins
2 ems to the left.
SEC. 3. AMENDMENTS TO DEFINED TERMS.
(a) Program Years.--Section 102(11) of the Terrorism Risk
Insurance Act of 2002 (15 U.S.C. 6701 note; 116 Stat. 2326)
is amended by adding at the end the following:
``(E) Program year 4.--The term `Program Year 4' means the
period beginning on January 1, 2006 and ending on December
31, 2006.
``(F) Program year 5.--The term `Program Year 5' means the
period beginning on January 1, 2007 and ending on December
31, 2007.''.
(b) Exclusions From Covered Lines.--
(1) In general.--Section 102(12)(B) of the Terrorism Risk
Insurance Act of 2002 (15 U.S.C. 6701 note; 116 Stat. 2326)
is amended--
(A) in clause (vi), by striking ``or'' at the end;
(B) in clause (vii), by striking the period at the end and
inserting a semicolon; and
(C) by adding at the end the following:
``(viii) commercial automobile insurance;
``(ix) burglary and theft insurance;
``(x) surety insurance;
``(xi) professional liability insurance; or
``(xii) farm owners multiple peril insurance.''.
(2) Conforming amendment.--Section 102(12)(A) of the
Terrorism Risk Insurance Act of 2002 (15 U.S.C. 6701 note;
116 Stat. 2326) is amended by striking ``surety insurance''
and inserting ``directors and officers liability insurance''.
(c) Insurer Deductibles.--Section 102(7) of the Terrorism
Risk Insurance Act of 2002 (15 U.S.C. 6701 note; 116 Stat.
2325) is amended--
(1) in subparagraph (D), by striking ``and'' at the end;
(2) by redesignating subparagraph (E) as subparagraph (G);
(3) by inserting after subparagraph (D), the following:
``(E) for Program Year 4, the value of an insurer's direct
earned premiums over the calendar year immediately preceding
Program Year 4, multiplied by 17.5 percent;
``(F) for Program Year 5, the value of an insurer's direct
earned premiums over the calendar year immediately preceding
Program Year 5, multiplied by 20 percent; and''; and
(4) in subparagraph (G), as so redesignated, by striking
``through (D)'' and all that follows through ``Year 3''and
inserting the following: ``through (F), for the Transition
Period or any Program Year''.
SEC. 4. INSURED LOSS SHARED COMPENSATION.
Section 103(e) of the Terrorism Risk Insurance Act of 2002
(15 U.S.C. 6701 note; 116 Stat. 2328) is amended--
(1) in paragraph (1)--
(A) by inserting ``through Program Year 4'' before ``shall
be equal''; and
(B) by inserting ``, and during Program Year 5 shall be
equal to 85 percent,'' after ``90 percent''; and
(2) in each of paragraphs (2) and (3), by striking
``Program Year 2 or Program Year 3'' each place that term
appears and inserting ``any of Program Years 2 through 5''.
SEC. 5. AGGREGATE RETENTION AMOUNTS AND RECOUPMENT OF FEDERAL
SHARE.
(a) Aggregate Retention Amounts.--Section 103(e)(6) of the
Terrorism Risk Insurance Act of 2002 (15 U.S.C. 6701 note;
116 Stat. 2329) is amended--
(1) in subparagraph (B), by striking ``and'' at the end;
(2) in subparagraph (C), by striking the period at the end
and inserting a semicolon; and
(3) by adding at the end the following:
``(D) for Program Year 4, the lesser of--
``(i) $25,000,000,000; and
``(ii) the aggregate amount, for all insurers, of insured
losses during such Program Year; and
``(E) for Program Year 5, the lesser of--
``(i) $27,500,000,000; and
``(ii) the aggregate amount, for all insurers, of insured
losses during such Program Year.''.
(b) Recoupment of Federal Share.--Section 103(e)(7) of the
Terrorism Risk Insurance Act of 2002 (15 U.S.C. 6701 note;
116 Stat. 2329) is amended--
(1) in subparagraph (A), by striking ``, (B), and (C)'' and
inserting ``through (E)''; and
(2) in each of subparagraphs (B) and (C), by striking
``subparagraph (A), (B), or (C)'' each place that term
appears and inserting ``any of subparagraphs (A) through
(E)''.
SEC. 6. PROGRAM TRIGGER.
Section 103(e)(1) of the Terrorism Risk Insurance Act of
2002 (15 U.S.C. note, 116 Stat. 2328) is amended--
(1) by redesignating subparagraph (B) as subparagraph (C);
and
(2) by inserting after subparagraph (A) the following:
``(B) Program trigger.--In the case of a certified act of
terrorism occurring after March 31, 2006, no compensation
shall be paid by the Secretary under subsection (a), unless
the aggregate industry insured losses resulting from such
certified act of terrorism exceed--
``(i) $50,000,000, with respect to such insured losses
occurring in Program Year 4; or
``(ii) $100,000,000, with respect to such insured losses
occurring in Program Year 5.''.
SEC. 7. LITIGATION MANAGEMENT.
Section 107(a) of the Terrorism Risk Insurance Act of 2002
(15 U.S.C. 6701 note; 116 Stat. 2335) is amended by adding at
the end the following:
``(6) Authority of the secretary.--Procedures and
requirements established by the Secretary under section 50.82
of part 50 of title 31 of the Code of Federal Regulations (as
in effect on the date of issuance of that section in final
form) shall apply to any cause of action described in
paragraph (1) of this subsection.''.
SEC. 8. ANALYSIS AND REPORT ON TERRORISM RISK COVERAGE
CONDITIONS AND SOLUTIONS.
Section 108 of the Terrorism Risk Insurance Act of 2002 (15
U.S.C. 6701 note; 116 Stat. 2336) is amended by adding at the
end the following:
``(e) Analysis of Market Conditions for Terrorism Risk
Insurance.--
``(1) In general.--The President's Working Group on
Financial Markets, in consultation with the National
Association of Insurance Commissioners, representatives of
the insurance industry, representatives of the securities
industry, and representatives of policy holders, shall
perform an analysis regarding the long-term availability and
affordability of insurance for terrorism risk, including--
``(A) group life coverage; and
``(B) coverage for chemical, nuclear, biological, and
radiological events.
``(2) Report.--Not later than September 30, 2006, the
President's Working Group on Financial Markets shall submit a
report to the Committee on Banking, Housing, and Urban
Affairs of the Senate and the Committee on Financial Services
of the House of Representatives on its findings pursuant to
the analysis conducted under subsection (a).''.
The bill (S. 467), as amended, was passed.
Mr. FRIST. This bill, the Terrorism Risk Extension Act, was enacted 3
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years ago in the aftermath of the September 11 attacks and was intended
at the time to provide temporary mechanisms to allow the marketplace to
adapt after the economic dislocations that resulted from those attacks
on September 11.
This summer, Treasury Secretary Snow issued a report highlighting the
importance of allowing private insurance companies to regain their hold
in the marketplace. As the report showed, TRIA successfully bridged
that gap created by the September 11 terrorist attacks and very
effectively enabled the insurance marks to stabilize.
The continued presence of the federally backed subsidy risked
crowding out private market initiatives and slowing down, impeding the
development of private market solutions. That is why I called for an
extension of TRIA that was narrow, that was targeted and minimized
interference with our markets.
The bill we just passed achieves that goal. The taxpayers' exposure
is lessened by reducing the lines of coverage subject to the Federal
backstop, and the insurance industry's exposure is increased.
I am gratified we passed the bill. Over the long term the Federal
Government cannot be a substitute for market-based solutions.
I thank Chairman Shelby and Senator Dodd for their hard work on this
very important bill. It hasn't been easy, but it has now been
accomplished.
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