[Congressional Record Volume 161, Number 2 (Wednesday, January 7, 2015)]
[House]
[Pages H59-H71]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TERRORISM RISK INSURANCE PROGRAM REAUTHORIZATION ACT OF 2015
Mr. NEUGEBAUER. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 26) to extend the termination date of the Terrorism
Insurance Program established under the Terrorism Risk Insurance Act of
2002, and for other purposes.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 26
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Terrorism
Risk Insurance Program Reauthorization Act of 2015''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title and table of contents.
TITLE I--EXTENSION OF TERRORISM INSURANCE PROGRAM
Sec. 101. Extension of Terrorism Insurance Program.
Sec. 102. Federal share.
Sec. 103. Program trigger.
Sec. 104. Recoupment of Federal share of compensation under the
program.
Sec. 105. Certification of acts of terrorism; consultation with
Secretary of Homeland Security.
Sec. 106. Technical amendments.
Sec. 107. Improving the certification process.
Sec. 108. GAO study.
Sec. 109. Membership of Board of Governors of the Federal Reserve
System.
Sec. 110. Advisory Committee on Risk-Sharing Mechanisms.
Sec. 111. Reporting of terrorism insurance data.
Sec. 112. Annual study of small insurer market competitiveness.
TITLE II--NATIONAL ASSOCIATION OF REGISTERED AGENTS AND BROKERS REFORM
Sec. 201. Short title.
Sec. 202. Reestablishment of the National Association of Registered
Agents and Brokers.
TITLE III--BUSINESS RISK MITIGATION AND PRICE STABILIZATION
Sec. 301. Short title.
Sec. 302. Margin requirements.
Sec. 303. Implementation.
TITLE I--EXTENSION OF TERRORISM INSURANCE PROGRAM
SEC. 101. EXTENSION OF TERRORISM INSURANCE PROGRAM.
Section 108(a) of the Terrorism Risk Insurance Act of 2002
(15 U.S.C. 6701 note) is amended by striking ``December 31,
2014'' and inserting ``December 31, 2020''.
SEC. 102. FEDERAL SHARE.
Section 103(e)(1)(A) of the Terrorism Risk Insurance Act of
2002 (15 U.S.C. 6701 note) is amended by inserting ``and
beginning on January 1, 2016, shall decrease by 1 percentage
point per calendar year until equal to 80 percent'' after
``85 percent''.
SEC. 103. PROGRAM TRIGGER.
Subparagraph (B) of section 103(e)(1) (15 U.S.C. 6701 note)
is amended in the matter preceding clause (i)--
(1) by striking ``a certified act'' and inserting
``certified acts'';
(2) by striking ``such certified act'' and inserting ``such
certified acts''; and
(3) by striking ``exceed'' and all that follows through
clause (ii) and inserting the following: ``exceed--
``(i) $100,000,000, with respect to such insured losses
occurring in calendar year 2015;
``(ii) $120,000,000, with respect to such insured losses
occurring in calendar year 2016;
``(iii) $140,000,000, with respect to such insured losses
occurring in calendar year 2017;
``(iv) $160,000,000, with respect to such insured losses
occurring in calendar year 2018;
``(v) $180,000,000, with respect to such insured losses
occurring in calendar year 2019; and
``(vi) $200,000,000, with respect to such insured losses
occurring in calendar year 2020 and any calendar year
thereafter.''.
SEC. 104. RECOUPMENT OF FEDERAL SHARE OF COMPENSATION UNDER
THE PROGRAM.
Section 103(e) of the Terrorism Risk Insurance Act of 2002
(15 U.S.C. 6701 note) is amended--
(1) by amending paragraph (6) to read as follows:
``(6) Insurance marketplace aggregate retention amount.--
``(A) In general.--For purposes of paragraph (7), the
insurance marketplace aggregate retention amount shall be the
lesser of--
``(i) $27,500,000,000, as such amount is revised pursuant
to this paragraph; and
``(ii) the aggregate amount, for all insurers, of insured
losses during such calendar year.
``(B) Revision of insurance marketplace aggregate retention
amount.--
``(i) Phase-in.--Beginning in the calendar year of
enactment of the Terrorism Risk Insurance Program
Reauthorization Act of 2015, the amount set forth under
subparagraph (A)(i) shall increase by $2,000,000,000 per
calendar year until equal to $37,500,000,000.
``(ii) Further revision.--Beginning in the calendar year
that follows the calendar year in which the amount set forth
under subparagraph (A)(i) is equal to $37,500,000,000, the
amount under subparagraph (A)(i) shall be revised to be the
amount equal to the annual average of the sum of insurer
deductibles for all insurers participating in the Program for
the prior 3 calendar years, as such sum is determined by the
Secretary under subparagraph (C).
``(C) Rulemaking.--Not later than 3 years after the date of
enactment of the Terrorism Risk Insurance Program
Reauthorization Act of 2015, the Secretary shall--
``(i) issue final rules for determining the amount of the
sum described under subparagraph (B)(ii); and
``(ii) provide a timeline for public notification of such
determination.''; and
(2) in paragraph (7)--
(A) in subparagraph (A)--
(i) in the matter preceding clause (i), by striking ``for
each of the periods referred to in subparagraphs (A) through
(E) of paragraph (6)''; and
(ii) in clause (i), by striking ``for such period'';
(B) by striking subparagraph (B) and inserting the
following:
``(B) [Reserved.]'';
(C) in subparagraph (C)--
(i) by striking ``occurring during any of the periods
referred to in any of subparagraphs (A) through (E) of
paragraph (6), terrorism loss risk-spreading premiums in an
amount equal to 133 percent'' and inserting ``, terrorism
loss risk-spreading premiums in an amount equal to 140
percent''; and
(ii) by inserting ``as calculated under subparagraph (A)''
after ``mandatory recoupment amount''; and
(D) in subparagraph (E)(i)--
(i) in subclause (I)--
(I) by striking ``2010'' and inserting ``2017''; and
(II) by striking ``2012'' and inserting ``2019'';
(ii) in subclause (II)--
(I) by striking ``2011'' and inserting ``2018'';
(II) by striking ``2012'' and inserting ``2019''; and
(III) by striking ``2017'' and inserting ``2024''; and
(iii) in subclause (III)--
(I) by striking ``2012'' and inserting ``2019''; and
(II) by striking ``2017'' and inserting ``2024''.
SEC. 105. CERTIFICATION OF ACTS OF TERRORISM; CONSULTATION
WITH SECRETARY OF HOMELAND SECURITY.
Paragraph (1)(A) of section 102 (15 U.S.C. 6701 note) is
amended in the matter preceding clause (i), by striking
``concurrence with the Secretary of State'' and inserting
``consultation with the Secretary of Homeland Security''.
SEC. 106. TECHNICAL AMENDMENTS.
The Terrorism Risk Insurance Act of 2002 (15 U.S.C. 6701
note) is amended--
(1) in section 102--
(A) in paragraph (3)--
(i) by redesignating subparagraphs (A), (B), and (C) as
clauses (i), (ii), and (iii), respectively;
(ii) in the matter preceding clause (i) (as so
redesignated), by striking ``An entity has'' and inserting
the following:
``(A) In general.--An entity has''; and
(iii) by adding at the end the following new subparagraph:
``(B) Rule of construction.--An entity, including any
affiliate thereof, does not have `control' over another
entity, if, as of the date of enactment of the Terrorism Risk
Insurance Program Reauthorization Act of 2015, the entity is
acting as an attorney-in-fact, as defined by the Secretary,
for the other entity and such other entity is a reciprocal
insurer, provided that the entity is not, for reasons other
than the attorney-in-fact relationship, defined as having
`control' under subparagraph (A).'';
(B) in paragraph (7)--
(i) by striking subparagraphs (A) through (F) and inserting
the following:
``(A) the value of an insurer's direct earned premiums
during the immediately preceding calendar year, multiplied by
20 percent; and'';
(ii) by redesignating subparagraph (G) as subparagraph (B);
and
(iii) in subparagraph (B), as so redesignated by clause
(ii)--
(I) by striking ``notwithstanding subparagraphs (A) through
(F), for the Transition Period or any Program Year'' and
inserting ``notwithstanding subparagraph (A), for any
calendar year''; and
(II) by striking ``Period or Program Year'' and inserting
``calendar year'';
(C) by striking paragraph (11); and
(D) by redesignating paragraphs (12) through (16) as
paragraphs (11) through (15), respectively; and
(2) in section 103--
(A) in subsection (b)(2)--
(i) in subparagraph (B), by striking ``, purchase,''; and
(ii) in subparagraph (C), by striking ``, purchase,'';
(B) in subsection (c), by striking ``Program Year'' and
inserting ``calendar year'';
(C) in subsection (e)--
(i) in paragraph (1)(A), as previously amended by section
102--
(I) by striking ``the Transition Period and each Program
Year through Program Year 4 shall be equal to 90 percent, and
during Program Year 5 and each Program Year thereafter'' and
inserting ``each calendar year'';
[[Page H60]]
(II) by striking the comma after ``80 percent''; and
(III) by striking ``such Transition Period or such Program
Year'' and inserting ``such calendar year'';
(ii) in paragraph (2)(A), by striking ``the period
beginning on the first day of the Transition Period and
ending on the last day of Program Year 1, or during any
Program Year thereafter'' and inserting ``a calendar year'';
and
(iii) in paragraph (3), by striking ``the period beginning
on the first day of the Transition Period and ending on the
last day of Program Year 1, or during any other Program
Year'' and inserting ``any calendar year''; and
(D) in subsection (g)(2)--
(i) by striking ``the Transition Period or a Program Year''
each place that term appears and inserting ``the calendar
year'';
(ii) by striking ``such period'' and inserting ``the
calendar year''; and
(iii) by striking ``that period'' and inserting ``the
calendar year''.
SEC. 107. IMPROVING THE CERTIFICATION PROCESS.
(a) Definitions.--As used in this section--
(1) the term ``act of terrorism'' has the same meaning as
in section 102(1) of the Terrorism Risk Insurance Act of 2002
(15 U.S.C. 6701 note);
(2) the term ``certification process'' means the process by
which the Secretary determines whether to certify an act as
an act of terrorism under section 102(1) of the Terrorism
Risk Insurance Act of 2002 (15 U.S.C. 6701 note); and
(3) the term ``Secretary'' means the Secretary of the
Treasury.
(b) Study.--Not later than 9 months after the date of
enactment of this Act, the Secretary shall conduct and
complete a study on the certification process.
(c) Required Content.--The study required under subsection
(a) shall include an examination and analysis of--
(1) the establishment of a reasonable timeline by which the
Secretary must make an accurate determination on whether to
certify an act as an act of terrorism;
(2) the impact that the length of any timeline proposed to
be established under paragraph (1) may have on the insurance
industry, policyholders, consumers, and taxpayers as a whole;
(3) the factors the Secretary would evaluate and monitor
during the certification process, including the ability of
the Secretary to obtain the required information regarding
the amount of projected and incurred losses resulting from an
act which the Secretary would need in determining whether to
certify the act as an act of terrorism;
(4) the appropriateness, efficiency, and effectiveness of
the consultation process required under section 102(1)(A) of
the Terrorism Risk Insurance Act of 2002 (15 U.S.C. 6701
note) and any recommendations on changes to the consultation
process; and
(5) the ability of the Secretary to provide guidance and
updates to the public regarding any act that may reasonably
be certified as an act of terrorism.
(d) Report.--Upon completion of the study required under
subsection (a), the Secretary shall submit a report on the
results of such study to the Committee on Banking, Housing,
and Urban Affairs of the Senate and the Committee on
Financial Services of the House of Representatives.
(e) Rulemaking.--Section 102(1) of the Terrorism Risk
Insurance Act of 2002 (15 U.S.C. 6701 note) is amended--
(1) by redesignating subparagraph (D) as subparagraph (E);
and
(2) by inserting after subparagraph (C) the following:
``(D) Timing of certification.--Not later than 9 months
after the report required under section 107 of the Terrorism
Risk Insurance Program Reauthorization Act of 2015 is
submitted to the appropriate committees of Congress, the
Secretary shall issue final rules governing the certification
process, including establishing a timeline for which an act
is eligible for certification by the Secretary on whether an
act is an act of terrorism under this paragraph.''.
SEC. 108. GAO STUDY.
(a) Study.--Not later than 2 years after the date of
enactment of this Act, the Comptroller General of the United
States shall complete a study on the viability and effects of
the Federal Government--
(1) assessing and collecting upfront premiums on insurers
that participate in the Terrorism Insurance Program
established under the Terrorism Risk Insurance Act of 2002
(15 U.S.C. 6701 note) (hereafter in this section referred to
as the ``Program''), which shall include a comparison of
practices in international markets to assess and collect
premiums either before or after terrorism losses are
incurred; and
(2) creating a capital reserve fund under the Program and
requiring insurers participating in the Program to dedicate
capital specifically for terrorism losses before such losses
are incurred, which shall include a comparison of practices
in international markets to establish reserve funds.
(b) Required Content.--The study required under subsection
(a) shall examine, but shall not be limited to, the following
issues:
(1) Upfront premiums.--With respect to upfront premiums
described in subsection (a)(1)--
(A) how the Federal Government could determine the price of
such upfront premiums on insurers that participate in the
Program;
(B) how the Federal Government could collect and manage
such upfront premiums;
(C) how the Federal Government could ensure that such
upfront premiums are not spent for purposes other than claims
through the Program;
(D) how the assessment and collection of such upfront
premiums could affect take-up rates for terrorism risk
coverage in different regions and industries and how it could
impact small businesses and consumers in both metropolitan
and non-metropolitan areas;
(E) the effect of collecting such upfront premiums on
insurers both large and small;
(F) the effect of collecting such upfront premiums on the
private market for terrorism risk reinsurance; and
(G) the size of any Federal Government subsidy insurers may
receive through their participation in the Program, taking
into account the Program's current post-event recoupment
structure.
(2) Capital reserve fund.--With respect to the capital
reserve fund described in subsection (a)(2)--
(A) how the creation of a capital reserve fund would affect
the Federal Government's fiscal exposure under the Terrorism
Risk Insurance Program and the ability of the Program to meet
its statutory purposes;
(B) how a capital reserve fund would impact insurers and
reinsurers, including liquidity, insurance pricing, and
capacity to provide terrorism risk coverage;
(C) the feasibility of segregating funds attributable to
terrorism risk from funds attributable to other insurance
lines;
(D) how a capital reserve fund would be viewed and treated
under current Financial Accounting Standards Board accounting
rules and the tax laws; and
(E) how a capital reserve fund would affect the States'
ability to regulate insurers participating in the Program.
(3) International practices.--With respect to international
markets referred to in paragraphs (1) and (2) of subsection
(a), how other countries, if any--
(A) have established terrorism insurance structures;
(B) charge premiums or otherwise collect funds to pay for
the costs of terrorism insurance structures, including risk
and administrative costs; and
(C) have established capital reserve funds to pay for the
costs of terrorism insurance structures.
(c) Report.--Upon completion of the study required under
subsection (a), the Comptroller General shall submit a report
on the results of such study to the Committee on Banking,
Housing, and Urban Affairs of the Senate and the Committee on
Financial Services of the House of Representatives.
(d) Public Availability.--The study and report required
under this section shall be made available to the public in
electronic form and shall be published on the website of the
Government Accountability Office.
SEC. 109. MEMBERSHIP OF BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM.
(a) In General.--The first undesignated paragraph of
section 10 of the Federal Reserve Act (12 U.S.C. 241) is
amended by inserting after the second sentence the following:
``In selecting members of the Board, the President shall
appoint at least 1 member with demonstrated primary
experience working in or supervising community banks having
less than $10,000,000,000 in total assets.''.
(b) Effective Date.--The amendment made by this section
shall take effect on the date of enactment of this Act and
apply to appointments made on and after that effective date,
excluding any nomination pending in the Senate on that date.
SEC. 110. ADVISORY COMMITTEE ON RISK-SHARING MECHANISMS.
(a) Finding; Rule of Construction.--
(1) Finding.--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.
(2) Rule of construction.--Nothing in this Act, any
amendment made by this Act, or the Terrorism Risk Insurance
Act of 2002 (15 U.S.C. 6701 note) shall prohibit insurers
from developing risk-sharing mechanisms to voluntarily
reinsure terrorism losses between and among themselves.
(b) Advisory Committee on Risk-Sharing Mechanisms.--
(1) Establishment.--The Secretary of the Treasury shall
establish and appoint an advisory committee to be known as
the ``Advisory Committee on Risk-Sharing Mechanisms''
(referred to in this subsection as the ``Advisory
Committee'').
(2) Duties.--The Advisory Committee shall provide advice,
recommendations, and encouragement with respect to the
creation and development of the nongovernmental risk-sharing
mechanisms described under subsection (a).
(3) Membership.--The Advisory Committee shall be composed
of 9 members who are directors, officers, or other employees
of insurers, reinsurers, or capital market participants that
are participating or that desire to participate in the
nongovernmental risk-sharing mechanisms described under
subsection (a), and who are representative of the affected
sectors of the insurance industry, including commercial
property insurance, commercial casualty insurance,
reinsurance, and alternative risk transfer industries.
[[Page H61]]
SEC. 111. REPORTING OF TERRORISM INSURANCE DATA.
Section 104 (15 U.S.C. 6701 note) is amended by adding at
the end the following new subsection:
``(h) Reporting of Terrorism Insurance Data.--
``(1) Authority.--During the calendar year beginning on
January 1, 2016, and in each calendar year thereafter, the
Secretary shall require insurers participating in the Program
to submit to the Secretary such information regarding
insurance coverage for terrorism losses of such insurers as
the Secretary considers appropriate to analyze the
effectiveness of the Program, which shall include information
regarding--
``(A) lines of insurance with exposure to such losses;
``(B) premiums earned on such coverage;
``(C) geographical location of exposures;
``(D) pricing of such coverage;
``(E) the take-up rate for such coverage;
``(F) the amount of private reinsurance for acts of
terrorism purchased; and
``(G) such other matters as the Secretary considers
appropriate.
``(2) Reports.--Not later than June 30, 2016, and every
other June 30 thereafter, the Secretary shall submit a report
to the Committee on Financial Services of the House of
Representatives and the Committee on Banking, Housing, and
Urban Affairs of the Senate that includes--
``(A) an analysis of the overall effectiveness of the
Program;
``(B) an evaluation of any changes or trends in the data
collected under paragraph (1);
``(C) an evaluation of whether any aspects of the Program
have the effect of discouraging or impeding insurers from
providing commercial property casualty insurance coverage or
coverage for acts of terrorism;
``(D) an evaluation of the impact of the Program on
workers' compensation insurers; and
``(E) in the case of the data reported in paragraph (1)(B),
an updated estimate of the total amount earned since January
1, 2003.
``(3) Protection of data.--To the extent possible, the
Secretary shall contract with an insurance statistical
aggregator to collect the information described in paragraph
(1), which shall keep any nonpublic information confidential
and provide it to the Secretary in an aggregate form or in
such other form or manner that does not permit identification
of the insurer submitting such information.
``(4) Advance coordination.--Before collecting any data or
information under paragraph (1) from an insurer, or affiliate
of an insurer, the Secretary shall coordinate with the
appropriate State insurance regulatory authorities and any
relevant government agency or publicly available sources to
determine if the information to be collected is available
from, and may be obtained in a timely manner by, individually
or collectively, such entities. If the Secretary determines
that such data or information is available, and may be
obtained in a timely matter, from such entities, the
Secretary shall obtain the data or information from such
entities. If the Secretary determines that such data or
information is not so available, the Secretary may collect
such data or information from an insurer and affiliates.
``(5) Confidentiality.--
``(A) Retention of privilege.--The submission of any non-
publicly available data and information to the Secretary and
the sharing of any non-publicly available data with or by the
Secretary among other Federal agencies, the State insurance
regulatory authorities, or any other entities under this
subsection shall not constitute a waiver of, or otherwise
affect, any privilege arising under Federal or State law
(including the rules of any Federal or State court) to which
the data or information is otherwise subject.
``(B) Continued application of prior confidentiality
agreements.--Any requirement under Federal or State law to
the extent otherwise applicable, or any requirement pursuant
to a written agreement in effect between the original source
of any non-publicly available data or information and the
source of such data or information to the Secretary,
regarding the privacy or confidentiality of any data or
information in the possession of the source to the Secretary,
shall continue to apply to such data or information after the
data or information has been provided pursuant to this
subsection.
``(C) Information-sharing agreement.--Any data or
information obtained by the Secretary under this subsection
may be made available to State insurance regulatory
authorities, individually or collectively through an
information-sharing agreement that--
``(i) shall comply with applicable Federal law; and
``(ii) shall not constitute a waiver of, or otherwise
affect, any privilege under Federal or State law (including
any privilege referred to in subparagraph (A) and the rules
of any Federal or State court) to which the data or
information is otherwise subject.
``(D) Agency disclosure requirements.--Section 552 of title
5, United States Code, including any exceptions thereunder,
shall apply to any data or information submitted under this
subsection to the Secretary by an insurer or affiliate of an
insurer.''.
SEC. 112. ANNUAL STUDY OF SMALL INSURER MARKET
COMPETITIVENESS.
Section 108 (15 U.S.C. 6701 note) is amended by adding at
the end the following new subsection:
``(h) Study of Small Insurer Market Competitiveness.--
``(1) In general.--Not later than June 30, 2017, and every
other June 30 thereafter, the Secretary shall conduct a study
of small insurers (as such term is defined by regulation by
the Secretary) participating in the Program, and identify any
competitive challenges small insurers face in the terrorism
risk insurance marketplace, including--
``(A) changes to the market share, premium volume, and
policyholder surplus of small insurers relative to large
insurers;
``(B) how the property and casualty insurance market for
terrorism risk differs between small and large insurers, and
whether such a difference exists within other perils;
``(C) the impact of the Program's mandatory availability
requirement under section 103(c) on small insurers;
``(D) the effect of increasing the trigger amount for the
Program under section 103(e)(1)(B) on small insurers;
``(E) the availability and cost of private reinsurance for
small insurers; and
``(F) the impact that State workers compensation laws have
on small insurers and workers compensation carriers in the
terrorism risk insurance marketplace.
``(2) Report.--The Secretary shall submit a report to the
Congress setting forth the findings and conclusions of each
study required under paragraph (1).''.
TITLE II--NATIONAL ASSOCIATION OF REGISTERED AGENTS AND BROKERS REFORM
SEC. 201. SHORT TITLE.
This title may be cited as the ``National Association of
Registered Agents and Brokers Reform Act of 2015''.
SEC. 202. REESTABLISHMENT OF THE NATIONAL ASSOCIATION OF
REGISTERED AGENTS AND BROKERS.
(a) In General.--Subtitle C of title III of the Gramm-
Leach-Bliley Act (15 U.S.C. 6751 et seq.) is amended to read
as follows:
``Subtitle C--National Association of Registered Agents and Brokers
``SEC. 321. NATIONAL ASSOCIATION OF REGISTERED AGENTS AND
BROKERS.
``(a) Establishment.--There is established the National
Association of Registered Agents and Brokers (referred to in
this subtitle as the `Association').
``(b) Status.--The Association shall--
``(1) be a nonprofit corporation;
``(2) not be an agent or instrumentality of the Federal
Government;
``(3) be an independent organization that may not be merged
with or into any other private or public entity; and
``(4) except as otherwise provided in this subtitle, be
subject to, and have all the powers conferred upon, a
nonprofit corporation by the District of Columbia Nonprofit
Corporation Act (D.C. Code, sec. 29-301.01 et seq.) or any
successor thereto.
``SEC. 322. PURPOSE.
``The purpose of the Association shall be to provide a
mechanism through which licensing, continuing education, and
other nonresident insurance producer qualification
requirements and conditions may be adopted and applied on a
multi-state basis without affecting the laws, rules, and
regulations, and preserving the rights of a State, pertaining
to--
``(1) licensing, continuing education, and other
qualification requirements of insurance producers that are
not members of the Association;
``(2) resident or nonresident insurance producer
appointment requirements;
``(3) supervising and disciplining resident and nonresident
insurance producers;
``(4) establishing licensing fees for resident and
nonresident insurance producers so that there is no loss of
insurance producer licensing revenue to the State; and
``(5) prescribing and enforcing laws and regulations
regulating the conduct of resident and nonresident insurance
producers.
``SEC. 323. MEMBERSHIP.
``(a) Eligibility.--
``(1) In general.--Any insurance producer licensed in its
home State shall, subject to paragraphs (2) and (4), be
eligible to become a member of the Association.
``(2) Ineligibility for suspension or revocation of
license.--Subject to paragraph (3), an insurance producer is
not eligible to become a member of the Association if a State
insurance regulator has suspended or revoked the insurance
license of the insurance producer in that State.
``(3) Resumption of eligibility.--Paragraph (2) shall cease
to apply to any insurance producer if--
``(A) the State insurance regulator reissues or renews the
license of the insurance producer in the State in which the
license was suspended or revoked, or otherwise terminates or
vacates the suspension or revocation; or
``(B) the suspension or revocation expires or is
subsequently overturned by a court of competent jurisdiction.
``(4) Criminal history record check required.--
``(A) In general.--An insurance producer who is an
individual shall not be eligible to become a member of the
Association unless the insurance producer has undergone a
criminal history record check that complies with regulations
prescribed by the Attorney General of the United States under
subparagraph (K).
[[Page H62]]
``(B) Criminal history record check requested by home
state.--An insurance producer who is licensed in a State and
who has undergone a criminal history record check during the
2-year period preceding the date of submission of an
application to become a member of the Association, in
compliance with a requirement to undergo such criminal
history record check as a condition for such licensure in the
State, shall be deemed to have undergone a criminal history
record check for purposes of subparagraph (A).
``(C) Criminal history record check requested by
association.--
``(i) In general.--The Association shall, upon request by
an insurance producer licensed in a State, submit
fingerprints or other identification information obtained
from the insurance producer, and a request for a criminal
history record check of the insurance producer, to the
Federal Bureau of Investigation.
``(ii) Procedures.--The board of directors of the
Association (referred to in this subtitle as the `Board')
shall prescribe procedures for obtaining and utilizing
fingerprints or other identification information and criminal
history record information, including the establishment of
reasonable fees to defray the expenses of the Association in
connection with the performance of a criminal history record
check and appropriate safeguards for maintaining
confidentiality and security of the information. Any fees
charged pursuant to this clause shall be separate and
distinct from those charged by the Attorney General pursuant
to subparagraph (I).
``(D) Form of request.--A submission under subparagraph
(C)(i) shall include such fingerprints or other
identification information as is required by the Attorney
General concerning the person about whom the criminal history
record check is requested, and a statement signed by the
person authorizing the Attorney General to provide the
information to the Association and for the Association to
receive the information.
``(E) Provision of information by attorney general.--Upon
receiving a submission under subparagraph (C)(i) from the
Association, the Attorney General shall search all criminal
history records of the Federal Bureau of Investigation,
including records of the Criminal Justice Information
Services Division of the Federal Bureau of Investigation,
that the Attorney General determines appropriate for criminal
history records corresponding to the fingerprints or other
identification information provided under subparagraph (D)
and provide all criminal history record information included
in the request to the Association.
``(F) Limitation on permissible uses of information.--Any
information provided to the Association under subparagraph
(E) may only--
``(i) be used for purposes of determining compliance with
membership criteria established by the Association;
``(ii) be disclosed to State insurance regulators, or
Federal or State law enforcement agencies, in conformance
with applicable law; or
``(iii) be disclosed, upon request, to the insurance
producer to whom the criminal history record information
relates.
``(G) Penalty for improper use or disclosure.--Whoever
knowingly uses any information provided under subparagraph
(E) for a purpose not authorized in subparagraph (F), or
discloses any such information to anyone not authorized to
receive it, shall be fined not more than $50,000 per
violation as determined by a court of competent jurisdiction.
``(H) Reliance on information.--Neither the Association nor
any of its Board members, officers, or employees shall be
liable in any action for using information provided under
subparagraph (E) as permitted under subparagraph (F) in good
faith and in reasonable reliance on its accuracy.
``(I) Fees.--The Attorney General may charge a reasonable
fee for conducting the search and providing the information
under subparagraph (E), and any such fee shall be collected
and remitted by the Association to the Attorney General.
``(J) Rule of construction.--Nothing in this paragraph
shall be construed as--
``(i) requiring a State insurance regulator to perform
criminal history record checks under this section; or
``(ii) limiting any other authority that allows access to
criminal history records.
``(K) Regulations.--The Attorney General shall prescribe
regulations to carry out this paragraph, which shall
include--
``(i) appropriate protections for ensuring the
confidentiality of information provided under subparagraph
(E); and
``(ii) procedures providing a reasonable opportunity for an
insurance producer to contest the accuracy of information
regarding the insurance producer provided under subparagraph
(E).
``(L) Ineligibility for membership.--
``(i) In general.--The Association may, under reasonably
consistently applied standards, deny membership to an
insurance producer on the basis of criminal history record
information provided under subparagraph (E), or where the
insurance producer has been subject to disciplinary action,
as described in paragraph (2).
``(ii) Rights of applicants denied membership.--The
Association shall notify any insurance producer who is denied
membership on the basis of criminal history record
information provided under subparagraph (E) of the right of
the insurance producer to--
``(I) obtain a copy of all criminal history record
information provided to the Association under subparagraph
(E) with respect to the insurance producer; and
``(II) challenge the denial of membership based on the
accuracy and completeness of the information.
``(M) Definition.--For purposes of this paragraph, the term
`criminal history record check' means a national background
check of criminal history records of the Federal Bureau of
Investigation.
``(b) Authority To Establish Membership Criteria.--The
Association may establish membership criteria that bear a
reasonable relationship to the purposes for which the
Association was established.
``(c) Establishment of Classes and Categories of
Membership.--
``(1) Classes of membership.--The Association may establish
separate classes of membership, with separate criteria, if
the Association reasonably determines that performance of
different duties requires different levels of education,
training, experience, or other qualifications.
``(2) Business entities.--The Association shall establish a
class of membership and membership criteria for business
entities. A business entity that applies for membership shall
be required to designate an individual Association member
responsible for the compliance of the business entity with
Association standards and the insurance laws, standards, and
regulations of any State in which the business entity seeks
to do business on the basis of Association membership.
``(3) Categories.--
``(A) Separate categories for insurance producers
permitted.--The Association may establish separate categories
of membership for insurance producers and for other persons
or entities within each class, based on the types of
licensing categories that exist under State laws.
``(B) Separate treatment for depository institutions
prohibited.--No special categories of membership, and no
distinct membership criteria, shall be established for
members that are depository institutions or for employees,
agents, or affiliates of depository institutions.
``(d) Membership Criteria.--
``(1) In general.--The Association may establish criteria
for membership which shall include standards for personal
qualifications, education, training, and experience. The
Association shall not establish criteria that unfairly limit
the ability of a small insurance producer to become a member
of the Association, including imposing discriminatory
membership fees.
``(2) Qualifications.--In establishing criteria under
paragraph (1), the Association shall not adopt any
qualification less protective to the public than that
contained in the National Association of Insurance
Commissioners (referred to in this subtitle as the `NAIC')
Producer Licensing Model Act in effect as of the date of
enactment of the National Association of Registered Agents
and Brokers Reform Act of 2015, and shall consider the
highest levels of insurance producer qualifications
established under the licensing laws of the States.
``(3) Assistance from states.--
``(A) In general.--The Association may request a State to
provide assistance in investigating and evaluating the
eligibility of a prospective member for membership in the
Association.
``(B) Authorization of information sharing.--A submission
under subsection (a)(4)(C)(i) made by an insurance producer
licensed in a State shall include a statement signed by the
person about whom the assistance is requested authorizing--
``(i) the State to share information with the Association;
and
``(ii) the Association to receive the information.
``(C) Rule of construction.--Subparagraph (A) shall not be
construed as requiring or authorizing any State to adopt new
or additional requirements concerning the licensing or
evaluation of insurance producers.
``(4) Denial of membership.--The Association may, based on
reasonably consistently applied standards, deny membership to
any State-licensed insurance producer for failure to meet the
membership criteria established by the Association.
``(e) Effect of Membership.--
``(1) Authority of association members.--Membership in the
Association shall--
``(A) authorize an insurance producer to sell, solicit, or
negotiate insurance in any State for which the member pays
the licensing fee set by the State for any line or lines of
insurance specified in the home State license of the
insurance producer, and exercise all such incidental powers
as shall be necessary to carry out such activities, including
claims adjustments and settlement to the extent permissible
under the laws of the State, risk management, employee
benefits advice, retirement planning, and any other
insurance-related consulting activities;
``(B) be the equivalent of a nonresident insurance producer
license for purposes of authorizing the insurance producer to
engage in the activities described in subparagraph (A) in any
State where the member pays the licensing fee; and
``(C) be the equivalent of a nonresident insurance producer
license for the purpose of subjecting an insurance producer
to all laws, regulations, provisions or other action of any
State concerning revocation, suspension, or other enforcement
action related to the
[[Page H63]]
ability of a member to engage in any activity within the
scope of authority granted under this subsection and to all
State laws, regulations, provisions, and actions preserved
under paragraph (5).
``(2) Violent crime control and law enforcement act of
1994.--Nothing in this subtitle shall be construed to alter,
modify, or supercede any requirement established by section
1033 of title 18, United States Code.
``(3) Agent for remitting fees.--The Association shall act
as an agent for any member for purposes of remitting
licensing fees to any State pursuant to paragraph (1).
``(4) Notification of action.--
``(A) In general.--The Association shall notify the States
(including State insurance regulators) and the NAIC when an
insurance producer has satisfied the membership criteria of
this section. The States (including State insurance
regulators) shall have 10 business days after the date of the
notification in order to provide the Association with
evidence that the insurance producer does not satisfy the
criteria for membership in the Association.
``(B) Ongoing disclosures required.--On an ongoing basis,
the Association shall disclose to the States (including State
insurance regulators) and the NAIC a list of the States in
which each member is authorized to operate. The Association
shall immediately notify the States (including State
insurance regulators) and the NAIC when a member is newly
authorized to operate in one or more States, or is no longer
authorized to operate in one or more States on the basis of
Association membership.
``(5) Preservation of consumer protection and market
conduct regulation.--
``(A) In general.--No provision of this section shall be
construed as altering or affecting the applicability or
continuing effectiveness of any law, regulation, provision,
or other action of any State, including those described in
subparagraph (B), to the extent that the State law,
regulation, provision, or other action is not inconsistent
with the provisions of this subtitle related to market entry
for nonresident insurance producers, and then only to the
extent of the inconsistency.
``(B) Preserved regulations.--The laws, regulations,
provisions, or other actions of any State referred to in
subparagraph (A) include laws, regulations, provisions, or
other actions that--
``(i) regulate market conduct, insurance producer conduct,
or unfair trade practices;
``(ii) establish consumer protections; or
``(iii) require insurance producers to be appointed by a
licensed or authorized insurer.
``(f) Biennial Renewal.--Membership in the Association
shall be renewed on a biennial basis.
``(g) Continuing Education.--
``(1) In general.--The Association shall establish, as a
condition of membership, continuing education requirements
which shall be comparable to the continuing education
requirements under the licensing laws of a majority of the
States.
``(2) State continuing education requirements.--A member
may not be required to satisfy continuing education
requirements imposed under the laws, regulations, provisions,
or actions of any State other than the home State of the
member.
``(3) Reciprocity.--The Association shall not require a
member to satisfy continuing education requirements that are
equivalent to any continuing education requirements of the
home State of the member that have been satisfied by the
member during the applicable licensing period.
``(4) Limitation on the association.--The Association shall
not directly or indirectly offer any continuing education
courses for insurance producers.
``(h) Probation, Suspension and Revocation.--
``(1) Disciplinary action.--The Association may place an
insurance producer that is a member of the Association on
probation or suspend or revoke the membership of the
insurance producer in the Association, or assess monetary
fines or penalties, as the Association determines to be
appropriate, if--
``(A) the insurance producer fails to meet the applicable
membership criteria or other standards established by the
Association;
``(B) the insurance producer has been subject to
disciplinary action pursuant to a final adjudicatory
proceeding under the jurisdiction of a State insurance
regulator;
``(C) an insurance license held by the insurance producer
has been suspended or revoked by a State insurance regulator;
or
``(D) the insurance producer has been convicted of a crime
that would have resulted in the denial of membership pursuant
to subsection (a)(4)(L)(i) at the time of application, and
the Association has received a copy of the final disposition
from a court of competent jurisdiction.
``(2) Violations of association standards.--The Association
shall have the power to investigate alleged violations of
Association standards.
``(3) Reporting.--The Association shall immediately notify
the States (including State insurance regulators) and the
NAIC when the membership of an insurance producer has been
placed on probation or has been suspended, revoked, or
otherwise terminated, or when the Association has assessed
monetary fines or penalties.
``(i) Consumer Complaints.--
``(1) In general.--The Association shall--
``(A) refer any complaint against a member of the
Association from a consumer relating to alleged misconduct or
violations of State insurance laws to the State insurance
regulator where the consumer resides and, when appropriate,
to any additional State insurance regulator, as determined by
standards adopted by the Association; and
``(B) make any related records and information available to
each State insurance regulator to whom the complaint is
forwarded.
``(2) Telephone and other access.--The Association shall
maintain a toll-free number for purposes of this subsection
and, as practicable, other alternative means of communication
with consumers, such as an Internet webpage.
``(3) Final disposition of investigation.--State insurance
regulators shall provide the Association with information
regarding the final disposition of a complaint referred
pursuant to paragraph (1)(A), but nothing shall be construed
to compel a State to release confidential investigation
reports or other information protected by State law to the
Association.
``(j) Information Sharing.--The Association may--
``(1) share documents, materials, or other information,
including confidential and privileged documents, with a
State, Federal, or international governmental entity or with
the NAIC or other appropriate entity referred to paragraphs
(3) and (4), provided that the recipient has the authority
and agrees to maintain the confidentiality or privileged
status of the document, material, or other information;
``(2) limit the sharing of information as required under
this subtitle with the NAIC or any other non-governmental
entity, in circumstances under which the Association
determines that the sharing of such information is
unnecessary to further the purposes of this subtitle;
``(3) establish a central clearinghouse, or utilize the
NAIC or another appropriate entity, as determined by the
Association, as a central clearinghouse, for use by the
Association and the States (including State insurance
regulators), through which members of the Association may
disclose their intent to operate in 1 or more States and pay
the licensing fees to the appropriate States; and
``(4) establish a database, or utilize the NAIC or another
appropriate entity, as determined by the Association, as a
database, for use by the Association and the States
(including State insurance regulators) for the collection of
regulatory information concerning the activities of insurance
producers.
``(k) Effective Date.--The provisions of this section shall
take effect on the later of--
``(1) the expiration of the 2-year period beginning on the
date of enactment of the National Association of Registered
Agents and Brokers Reform Act of 2015; and
``(2) the date of incorporation of the Association.
``SEC. 324. BOARD OF DIRECTORS.
``(a) Establishment.--There is established a board of
directors of the Association, which shall have authority to
govern and supervise all activities of the Association.
``(b) Powers.--The Board shall have such of the powers and
authority of the Association as may be specified in the
bylaws of the Association.
``(c) Composition.--
``(1) In general.--The Board shall consist of 13 members
who shall be appointed by the President, by and with the
advice and consent of the Senate, in accordance with the
procedures established under Senate Resolution 116 of the
112th Congress, of whom--
``(A) 8 shall be State insurance commissioners appointed in
the manner provided in paragraph (2), 1 of whom shall be
designated by the President to serve as the chairperson of
the Board until the Board elects one such State insurance
commissioner Board member to serve as the chairperson of the
Board;
``(B) 3 shall have demonstrated expertise and experience
with property and casualty insurance producer licensing; and
``(C) 2 shall have demonstrated expertise and experience
with life or health insurance producer licensing.
``(2) State insurance regulator representatives.--
``(A) Recommendations.--Before making any appointments
pursuant to paragraph (1)(A), the President shall request a
list of recommended candidates from the States through the
NAIC, which shall not be binding on the President. If the
NAIC fails to submit a list of recommendations not later than
15 business days after the date of the request, the President
may make the requisite appointments without considering the
views of the NAIC.
``(B) Political affiliation.--Not more than 4 Board members
appointed under paragraph (1)(A) shall belong to the same
political party.
``(C) Former state insurance commissioners.--
``(i) In general.--If, after offering each currently
serving State insurance commissioner an appointment to the
Board, fewer than 8 State insurance commissioners have
accepted appointment to the Board, the President may appoint
the remaining State insurance commissioner Board members, as
required under paragraph (1)(A), of the appropriate political
party as required under subparagraph (B), from among
individuals who are former State insurance commissioners.
``(ii) Limitation.--A former State insurance commissioner
appointed as described in
[[Page H64]]
clause (i) may not be employed by or have any present direct
or indirect financial interest in any insurer, insurance
producer, or other entity in the insurance industry, other
than direct or indirect ownership of, or beneficial interest
in, an insurance policy or annuity contract written or sold
by an insurer.
``(D) Service through term.--If a Board member appointed
under paragraph (1)(A) ceases to be a State insurance
commissioner during the term of the Board member, the Board
member shall cease to be a Board member.
``(3) Private sector representatives.--In making any
appointment pursuant to subparagraph (B) or (C) of paragraph
(1), the President may seek recommendations for candidates
from groups representing the category of individuals
described, which shall not be binding on the President.
``(4) State insurance commissioner defined.--For purposes
of this subsection, the term `State insurance commissioner'
means a person who serves in the position in State
government, or on the board, commission, or other body that
is the primary insurance regulatory authority for the State.
``(d) Terms.--
``(1) In general.--Except as provided under paragraph (2),
the term of service for each Board member shall be 2 years.
``(2) Exceptions.--
``(A) 1-year terms.--The term of service shall be 1 year,
as designated by the President at the time of the nomination
of the subject Board members for--
``(i) 4 of the State insurance commissioner Board members
initially appointed under paragraph (1)(A), of whom not more
than 2 shall belong to the same political party;
``(ii) 1 of the Board members initially appointed under
paragraph (1)(B); and
``(iii) 1 of the Board members initially appointed under
paragraph (1)(C).
``(B) Expiration of term.--A Board member may continue to
serve after the expiration of the term to which the Board
member was appointed for the earlier of 2 years or until a
successor is appointed.
``(C) Mid-term appointments.--A Board member appointed to
fill a vacancy occurring before the expiration of the term
for which the predecessor of the Board member was appointed
shall be appointed only for the remainder of that term.
``(3) Successive terms.--Board members may be reappointed
to successive terms.
``(e) Initial Appointments.--The appointment of initial
Board members shall be made no later than 90 days after the
date of enactment of the National Association of Registered
Agents and Brokers Reform Act of 2015.
``(f) Meetings.--
``(1) In general.--The Board shall meet--
``(A) at the call of the chairperson;
``(B) as requested in writing to the chairperson by not
fewer than 5 Board members; or
``(C) as otherwise provided by the bylaws of the
Association.
``(2) Quorum required.--A majority of all Board members
shall constitute a quorum.
``(3) Voting.--Decisions of the Board shall require the
approval of a majority of all Board members present at a
meeting, a quorum being present.
``(4) Initial meeting.--The Board shall hold its first
meeting not later than 45 days after the date on which all
initial Board members have been appointed.
``(g) Restriction on Confidential Information.--Board
members appointed pursuant to subparagraphs (B) and (C) of
subsection (c)(1) shall not have access to confidential
information received by the Association in connection with
complaints, investigations, or disciplinary proceedings
involving insurance producers.
``(h) Ethics and Conflicts of Interest.--The Board shall
issue and enforce an ethical conduct code to address
permissible and prohibited activities of Board members and
Association officers, employees, agents, or consultants. The
code shall, at a minimum, include provisions that prohibit
any Board member or Association officer, employee, agent or
consultant from--
``(1) engaging in unethical conduct in the course of
performing Association duties;
``(2) participating in the making or influencing the making
of any Association decision, the outcome of which the Board
member, officer, employee, agent, or consultant knows or had
reason to know would have a reasonably foreseeable material
financial effect, distinguishable from its effect on the
public generally, on the person or a member of the immediate
family of the person;
``(3) accepting any gift from any person or entity other
than the Association that is given because of the position
held by the person in the Association;
``(4) making political contributions to any person or
entity on behalf of the Association; and
``(5) lobbying or paying a person to lobby on behalf of the
Association.
``(i) Compensation.--
``(1) In general.--Except as provided in paragraph (2), no
Board member may receive any compensation from the
Association or any other person or entity on account of Board
membership.
``(2) Travel expenses and per diem.--Board members may be
reimbursed only by the Association for travel expenses,
including per diem in lieu of subsistence, at rates
consistent with rates authorized for employees of Federal
agencies under subchapter I of chapter 57 of title 5, United
States Code, while away from home or regular places of
business in performance of services for the Association.
``SEC. 325. BYLAWS, STANDARDS, AND DISCIPLINARY ACTIONS.
``(a) Adoption and Amendment of Bylaws and Standards.--
``(1) Procedures.--The Association shall adopt procedures
for the adoption of bylaws and standards that are similar to
procedures under subchapter II of chapter 5 of title 5,
United States Code (commonly known as the `Administrative
Procedure Act').
``(2) Copy required to be filed.--The Board shall submit to
the President, through the Department of the Treasury, and
the States (including State insurance regulators), and shall
publish on the website of the Association, all proposed
bylaws and standards of the Association, or any proposed
amendment to the bylaws or standards of the Association,
accompanied by a concise general statement of the basis and
purpose of such proposal.
``(3) Effective date.--Any proposed bylaw or standard of
the Association, and any proposed amendment to the bylaws or
standards of the Association, shall take effect, after notice
under paragraph (2) and opportunity for public comment, on
such date as the Association may designate, unless suspended
under section 329(c).
``(4) Rule of construction.--Nothing in this section shall
be construed to subject the Board or the Association to the
requirements of subchapter II of chapter 5 of title 5, United
States Code (commonly known as the `Administrative Procedure
Act').
``(b) Disciplinary Action by the Association.--
``(1) Specification of charges.--In any proceeding to
determine whether membership shall be denied, suspended,
revoked, or not renewed, or to determine whether a member of
the Association should be placed on probation (referred to in
this section as a `disciplinary action') or whether to assess
fines or monetary penalties, the Association shall bring
specific charges, notify the member of the charges, give the
member an opportunity to defend against the charges, and keep
a record.
``(2) Supporting statement.--A determination to take
disciplinary action shall be supported by a statement setting
forth--
``(A) any act or practice in which the member has been
found to have been engaged;
``(B) the specific provision of this subtitle or standard
of the Association that any such act or practice is deemed to
violate; and
``(C) the sanction imposed and the reason for the sanction.
``(3) Ineligibility of private sector representatives.--
Board members appointed pursuant to section 324(c)(3) may
not--
``(A) participate in any disciplinary action or be counted
toward establishing a quorum during a disciplinary action;
and
``(B) have access to confidential information concerning
any disciplinary action.
``SEC. 326. POWERS.
``In addition to all the powers conferred upon a nonprofit
corporation by the District of Columbia Nonprofit Corporation
Act, the Association shall have the power to--
``(1) establish and collect such membership fees as the
Association finds necessary to impose to cover the costs of
its operations;
``(2) adopt, amend, and repeal bylaws, procedures, or
standards governing the conduct of Association business and
performance of its duties;
``(3) establish procedures for providing notice and
opportunity for comment pursuant to section 325(a);
``(4) enter into and perform such agreements as necessary
to carry out the duties of the Association;
``(5) hire employees, professionals, or specialists, and
elect or appoint officers, and to fix their compensation,
define their duties and give them appropriate authority to
carry out the purposes of this subtitle, and determine their
qualification;
``(6) establish personnel policies of the Association and
programs relating to, among other things, conflicts of
interest, rates of compensation, where applicable, and
qualifications of personnel;
``(7) borrow money; and
``(8) secure funding for such amounts as the Association
determines to be necessary and appropriate to organize and
begin operations of the Association, which shall be treated
as loans to be repaid by the Association with interest at
market rate.
``SEC. 327. REPORT BY THE ASSOCIATION.
``(a) In General.--As soon as practicable after the close
of each fiscal year, the Association shall submit to the
President, through the Department of the Treasury, and the
States (including State insurance regulators), and shall
publish on the website of the Association, a written report
regarding the conduct of its business, and the exercise of
the other rights and powers granted by this subtitle, during
such fiscal year.
``(b) Financial Statements.--Each report submitted under
subsection (a) with respect to any fiscal year shall include
audited financial statements setting forth the financial
position of the Association at the end of such fiscal year
and the results of its operations (including the source and
application of its funds) for such fiscal year.
``SEC. 328. LIABILITY OF THE ASSOCIATION AND THE BOARD
MEMBERS, OFFICERS, AND EMPLOYEES OF THE
ASSOCIATION.
``(a) In General.--The Association shall not be deemed to
be an insurer or insurance
[[Page H65]]
producer within the meaning of any State law, rule,
regulation, or order regulating or taxing insurers, insurance
producers, or other entities engaged in the business of
insurance, including provisions imposing premium taxes,
regulating insurer solvency or financial condition,
establishing guaranty funds and levying assessments, or
requiring claims settlement practices.
``(b) Liability of Board Members, Officers, and
Employees.--No Board member, officer, or employee of the
Association shall be personally liable to any person for any
action taken or omitted in good faith in any matter within
the scope of their responsibilities in connection with the
Association.
``SEC. 329. PRESIDENTIAL OVERSIGHT.
``(a) Removal of Board.--If the President determines that
the Association is acting in a manner contrary to the
interests of the public or the purposes of this subtitle or
has failed to perform its duties under this subtitle, the
President may remove the entire existing Board for the
remainder of the term to which the Board members were
appointed and appoint, in accordance with section 324 and
with the advice and consent of the Senate, in accordance with
the procedures established under Senate Resolution 116 of the
112th Congress, new Board members to fill the vacancies on
the Board for the remainder of the terms.
``(b) Removal of Board Member.--The President may remove a
Board member only for neglect of duty or malfeasance in
office.
``(c) Suspension of Bylaws and Standards and Prohibition of
Actions.--Following notice to the Board, the President, or a
person designated by the President for such purpose, may
suspend the effectiveness of any bylaw or standard, or
prohibit any action, of the Association that the President or
the designee determines is contrary to the purposes of this
subtitle.
``SEC. 330. RELATIONSHIP TO STATE LAW.
``(a) Preemption of State Laws.--State laws, regulations,
provisions, or other actions purporting to regulate insurance
producers shall be preempted to the extent provided in
subsection (b).
``(b) Prohibited Actions.--
``(1) In general.--No State shall--
``(A) impede the activities of, take any action against, or
apply any provision of law or regulation arbitrarily or
discriminatorily to, any insurance producer because that
insurance producer or any affiliate plans to become, has
applied to become, or is a member of the Association;
``(B) impose any requirement upon a member of the
Association that it pay fees different from those required to
be paid to that State were it not a member of the
Association; or
``(C) impose any continuing education requirements on any
nonresident insurance producer that is a member of the
Association.
``(2) States other than a home state.--No State, other than
the home State of a member of the Association, shall--
``(A) impose any licensing, personal or corporate
qualifications, education, training, experience, residency,
continuing education, or bonding requirement upon a member of
the Association that is different from the criteria for
membership in the Association or renewal of such membership;
``(B) impose any requirement upon a member of the
Association that it be licensed, registered, or otherwise
qualified to do business or remain in good standing in the
State, including any requirement that the insurance producer
register as a foreign company with the secretary of state or
equivalent State official;
``(C) require that a member of the Association submit to a
criminal history record check as a condition of doing
business in the State; or
``(D) impose any licensing, registration, or appointment
requirements upon a member of the Association, or require a
member of the Association to be authorized to operate as an
insurance producer, in order to sell, solicit, or negotiate
insurance for commercial property and casualty risks to an
insured with risks located in more than one State, if the
member is licensed or otherwise authorized to operate in the
State where the insured maintains its principal place of
business and the contract of insurance insures risks located
in that State.
``(3) Preservation of state disciplinary authority.--
Nothing in this section may be construed to prohibit a State
from investigating and taking appropriate disciplinary
action, including suspension or revocation of authority of an
insurance producer to do business in a State, in accordance
with State law and that is not inconsistent with the
provisions of this section, against a member of the
Association as a result of a complaint or for any alleged
activity, regardless of whether the activity occurred before
or after the insurance producer commenced doing business in
the State pursuant to Association membership.
``SEC. 331. COORDINATION WITH FINANCIAL INDUSTRY REGULATORY
AUTHORITY.
``The Association shall coordinate with the Financial
Industry Regulatory Authority in order to ease any
administrative burdens that fall on members of the
Association that are subject to regulation by the Financial
Industry Regulatory Authority, consistent with the
requirements of this subtitle and the Federal securities
laws.
``SEC. 332. RIGHT OF ACTION.
``(a) Right of Action.--Any person aggrieved by a decision
or action of the Association may, after reasonably exhausting
available avenues for resolution within the Association,
commence a civil action in an appropriate United States
district court, and obtain all appropriate relief.
``(b) Association Interpretations.--In any action under
subsection (a), the court shall give appropriate weight to
the interpretation of the Association of its bylaws and
standards and this subtitle.
``SEC. 333. FEDERAL FUNDING PROHIBITED.
``The Association may not receive, accept, or borrow any
amounts from the Federal Government to pay for, or reimburse,
the Association for, the costs of establishing or operating
the Association.
``SEC. 334. DEFINITIONS.
``For purposes of this subtitle, the following definitions
shall apply:
``(1) Business entity.--The term `business entity' means a
corporation, association, partnership, limited liability
company, limited liability partnership, or other legal
entity.
``(2) Depository institution.--The term `depository
institution' has the meaning as in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813).
``(3) Home state.--The term `home State' means the State in
which the insurance producer maintains its principal place of
residence or business and is licensed to act as an insurance
producer.
``(4) Insurance.--The term `insurance' means any product,
other than title insurance or bail bonds, defined or
regulated as insurance by the appropriate State insurance
regulatory authority.
``(5) Insurance producer.--The term `insurance producer'
means any insurance agent or broker, excess or surplus lines
broker or agent, insurance consultant, limited insurance
representative, and any other individual or entity that
sells, solicits, or negotiates policies of insurance or
offers advice, counsel, opinions or services related to
insurance.
``(6) Insurer.--The term `insurer' has the meaning as in
section 313(e)(2)(B) of title 31, United States Code.
``(7) Principal place of business.--The term `principal
place of business' means the State in which an insurance
producer maintains the headquarters of the insurance producer
and, in the case of a business entity, where high-level
officers of the entity direct, control, and coordinate the
business activities of the business entity.
``(8) Principal place of residence.--The term `principal
place of residence' means the State in which an insurance
producer resides for the greatest number of days during a
calendar year.
``(9) State.--The term `State' includes any State, the
District of Columbia, any territory of the United States, and
Puerto Rico, Guam, American Samoa, the Trust Territory of the
Pacific Islands, the Virgin Islands, and the Northern Mariana
Islands.
``(10) State law.--
``(A) In general.--The term `State law' includes all laws,
decisions, rules, regulations, or other State action having
the effect of law, of any State.
``(B) Laws applicable in the district of columbia.--A law
of the United States applicable only to or within the
District of Columbia shall be treated as a State law rather
than a law of the United States.''.
(b) Technical Amendment.--The table of contents for the
Gramm-Leach-Bliley Act is amended by striking the items
relating to subtitle C of title III and inserting the
following new items:
``Subtitle C--National Association of Registered Agents and Brokers
``Sec. 321. National Association of Registered Agents and Brokers.
``Sec. 322. Purpose.
``Sec. 323. Membership.
``Sec. 324. Board of directors.
``Sec. 325. Bylaws, standards, and disciplinary actions.
``Sec. 326. Powers.
``Sec. 327. Report by the Association.
``Sec. 328. Liability of the Association and the Board members,
officers, and employees of the Association.
``Sec. 329. Presidential oversight.
``Sec. 330. Relationship to State law.
``Sec. 331. Coordination with financial industry regulatory authority.
``Sec. 332. Right of action.
``Sec. 333. Federal funding prohibited.
``Sec. 334. Definitions.''.
TITLE III--BUSINESS RISK MITIGATION AND PRICE STABILIZATION
SEC. 301. SHORT TITLE.
This title may be cited as the ``Business Risk Mitigation
and Price Stabilization Act of 2015''.
SEC. 302. MARGIN REQUIREMENTS.
(a) Commodity Exchange Act Amendment.--Section 4s(e) of the
Commodity Exchange Act (7 U.S.C. 6s(e)), as added by section
731 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act, is amended by adding at the end the following
new paragraph:
``(4) Applicability with respect to counterparties.--The
requirements of paragraphs (2)(A)(ii) and (2)(B)(ii),
including the initial and variation margin requirements
imposed by rules adopted pursuant to paragraphs (2)(A)(ii)
and (2)(B)(ii), shall not apply to a swap in which a
counterparty qualifies for an exception under section
2(h)(7)(A), or an exemption issued under section 4(c)(1) from
the requirements of section 2(h)(1)(A)
[[Page H66]]
for cooperative entities as defined in such exemption, or
satisfies the criteria in section 2(h)(7)(D).''.
(b) Securities Exchange Act Amendment.--Section 15F(e) of
the Securities Exchange Act of 1934 (15 U.S.C. 78o-10(e)), as
added by section 764(a) of the Dodd-Frank Wall Street Reform
and Consumer Protection Act, is amended by adding at the end
the following new paragraph:
``(4) Applicability with respect to counterparties.--The
requirements of paragraphs (2)(A)(ii) and (2)(B)(ii) shall
not apply to a security-based swap in which a counterparty
qualifies for an exception under section 3C(g)(1) or
satisfies the criteria in section 3C(g)(4).''.
SEC. 303. IMPLEMENTATION.
The amendments made by this title to the Commodity Exchange
Act shall be implemented--
(1) without regard to--
(A) chapter 35 of title 44, United States Code; and
(B) the notice and comment provisions of section 553 of
title 5, United States Code;
(2) through the promulgation of an interim final rule,
pursuant to which public comment will be sought before a
final rule is issued; and
(3) such that paragraph (1) shall apply solely to changes
to rules and regulations, or proposed rules and regulations,
that are limited to and directly a consequence of such
amendments.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Texas (Mr. Neugebauer) and the gentlewoman from New York (Mrs. Carolyn
B. Maloney) each will control 20 minutes.
The Chair recognizes the gentleman from Texas.
General Leave
Mr. NEUGEBAUER. Mr. Speaker, I ask unanimous consent that all Members
may have 5 legislative days in which to revise and extend their remarks
and to insert extraneous material for the Record on H.R. 26, currently
under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
Mr. NEUGEBAUER. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, for those of you watching at home today, this is not a
C-SPAN rerun. I stand before you today to discuss the Terrorism Risk
Insurance Program Reauthorization Act, a bill that passed this House
417-7 at the end of the previous Congress.
This bill is a result of long and difficult bicameral and bipartisan
negotiations. But for whatever reason, the previous Senate decided that
it was more important to go home a couple of days earlier rather than
reauthorize the TRIA program. As a result, the program expired at the
end of the year.
So, today, the House will act on this important piece of legislation
once again. Doing so will provide certainty to the terrorism risk
insurance market and ensure that the American economy remains resilient
against the threat of terrorism.
Congress passed the Terrorism Risk Insurance Act of 2002 in the
aftermath of 9/11. It was intended to provide a 2-year transition
period in which the market participants could develop resources that
would enable them to offer private terrorism insurance coverage once
the program expired. For various reasons, that transition has not taken
hold.
Throughout the last 2 years, my subcommittee learned how evolved the
terrorism risk insurance marketplace has become since the last
reauthorization. Since the advent of TRIA in 2002, markets have
stabilized, risk management practices have improved, terrorism risk
modeling and underwriting has advanced, and the price of terrorism risk
coverage has actually declined by 70 percent.
But we have also learned that this evolution of TRIA has failed to
keep up with marketplace realities. In fact, the program remains
largely unchanged over the last 12 years. This has hindered the growth
of private market participation in terrorism risk insurance and
resulted in a bad deal for the taxpayers.
The bill before us today is an effort to recognize and to keep pace
with the market developments of the terrorism risk insurance
marketplace over the past decade. The bill strengthens taxpayer
protections without altering the program's fundamental functions,
brings greater certainty and stability to the terrorism risk market,
and lays a foundation for a more robust private market for terrorism
risk.
With regard to the taxpayer protection, the program's trigger doubles
from $100 million to $200 million. It also decreases the Federal share
of insurers' losses from 85 percent to 80 percent and enhances the
taxpayer repayment requirements. And for the first time, we will have
meaningful data on the program to increase accountability and
transparency.
To provide certainty, the program is extended for 6 years but makes
no changes for the first year so that the market will have time to
adjust. It also clarifies it streamlines the terrorism certification
process so that policyholders are better protected.
Most importantly, the bill today creates a framework that will allow
for a more healthy private market terrorism risk over time that slowly
replaces taxpayer-funded reinsurance with private sector capital.
Finally, the bill before us today includes some bipartisan reforms
that will help boost the economy and job opportunities for all
Americans. These Dodd-Frank fixes will help America's hardworking
farmers, ranchers, and business owners. They did not cause the
financial crisis, and they deserve immediate relief.
I am also proud of the inclusion of the reestablishment of the
National Association of Registered Agents and Brokers, or NARAB, which
is an efficient and effective way to enable insurance agents and
brokers to be licensed on a multistate basis while retaining essential
State regulatory authority.
I thank Chairman Hensarling for trusting me to reform this important
program, and I urge my colleagues to vote ``yes'' on H.R. 26.
I reserve the balance of my time.
Mrs. CAROLYN B. MALONEY of New York. Mr. Speaker, I yield myself such
time as I may consume.
Mr. Speaker, I rise in strong support of H.R. 26, the TRIA
Reauthorization Act of 2015. This bill passed in the last Congress
overwhelmingly 417-7.
I first want to thank Speaker Boehner and Leader Pelosi for acting so
quickly to reauthorize the Terrorism Risk Insurance Act, or TRIA.
Unfortunately, this critical program expired on January 1, and unless
Congress swiftly reauthorizes TRIA, our economy will be dangerously
exposed if we have another terrorist attack.
In fact, one of the financial rating agencies--Fitch--has said that
if Congress doesn't reauthorize TRIA by the end of January, they are
going to start downgrading companies and major construction projects,
which would hurt the American economy. The other rating agencies have
made equally strong statements about the importance to reauthorize
TRIA.
Already, companies are having trouble getting terrorism insurance,
and many companies that had terrorism insurance have now lost it
because there were clauses written into their policies that said if
TRIA is not there they do not have the insurance coverage.
I also want to thank very much Chairman Hensarling and Chairman
Neugebauer, as well as Ranking Member Waters and the Democrats on the
Financial Services Committee, for their very hard work on this bill,
which represents a true bipartisan compromise. I especially want to
thank my colleagues from New York, Peter King and Senator Schumer, who
have worked very hard on this bill, which is critical to the State of
New York, and I would say every State in our Union.
I believe that this compromise will ensure that terrorism insurance
remains available and at affordable prices. This has always been the
purpose of TRIA, and I believe that this bill will accomplish that
goal.
After the last terrorist attack on our homeland--9/11--insurers
realized that they couldn't accurately model for terrorism risk--it was
simply too unpredictable--and the market for terrorism insurance
completely shut down. Without terrorism insurance, all construction
stopped in New York City. We couldn't build anything, and thousands and
thousands of jobs were lost.
In response, Congress came together in a bipartisan way and passed
TRIA, which provides a government backstop for terrorism insurance. The
goal of TRIA was to make terrorism insurance both available and
affordable, and that is exactly what it has done. This has come at no
additional expense whatsoever or cost to the taxpayer.
Initially, the House TRIA bill raised the trigger for the
government's backstop by a whopping 500 percent from
[[Page H67]]
$100 million to $500 million. This would have forced small- and medium-
sized insurers out of the market entirely and would have actually
reduced the amount of terrorism insurance available to American
businesses.
I was strongly opposed to increasing the trigger to $500 million
because it would make terrorism insurance unavailable and unaffordable
to businesses all across this country.
Fortunately, this compromise bill will only raise the trigger for the
government backstop from $100 million to $200 million. This modest
increase will ensure that small- and medium-sized insurers are not
forced out of the market entirely, while also protecting taxpayers, and
I fully support this compromise approach.
This bill also slightly increases the amount that the government
recoups from the industry after TRIA is triggered, which will ensure
that taxpayers are fully repaid for TRIA if it is needed.
Importantly, the compromise does not include the so-called
bifurcation proposal, which would have treated nuclear, biological,
chemical, and radiological attacks differently from other so-called
conventional attacks. This made no sense whatsoever, and this
compromise sensibly drops this proposal entirely. A terrorist attack is
a terrorist attack.
Finally, I am pleased that the bill reauthorizes TRIA for a full 6
years. This will provide much needed certainty to businesses across the
country as they expand and create more American jobs. Support for
reauthorization of TRIA is deep and it is strong in the business
community across this country.
Mr. Speaker, I enter into the Record a letter from 28 different
business stakeholders strongly supporting the reauthorization and the
need for TRIA.
Dear Representative: American businesses strongly support
H.R. 26--the Terrorism Risk Insurance Program Reauthorization
Act of 2015. This bill is the same as the TRIA legislation
that passed the House by a bipartisan vote of 417-7 on
December 10, 2014. Our coalition represents a diverse and
broad majority of business stakeholders. We urge you to
SUPPORT the bill when it is considered under suspension of
the rules this week.
The Terrorism Risk Insurance Act is vital to the millions
of businesses, job creators, and workers across the country
reliant on TRIA to secure terrorism insurance and protect our
economic growth. Following the attacks of September 11, 2001,
Congress created TRIA to address a void in the marketplace,
foster economic stability, and provide certainty to for-
profit and non-profit entities across the country. For the
past dozen years, the United States has relied on TRIA as a
fiscally responsible terrorism risk management plan to
protect taxpayers and our national security and stability.
It is critical that Congress act immediately to keep our
terrorism insurance protection program in place. We urge your
support of this important bill.
Sincerely,
American Association of Managing General Agents (AAMGA),
American Gaming Association (AGA),
American Hotel & Lodging Association (AH&LA),
American Insurance Association (AIA),
American Land Title Association (ALTA),
American Society of Workers Compensation Professionals
(AmCOMP),
Associated Builders and Contractors (ABC),
California Insurance Wholesalers Association (CIWA),
CCIM Institute,
Coalition to Insure Against Terrorism (CIAT),
Council of Insurance Agents and Brokers (CIAB),
CRE Finance Council (CREFC),
Financial Services Roundtable (FSR),
Independent Insurance Agents & Brokers of America (Big
``I'').
Institute of Real Estate Management (IREM),
Mortgage Bankers Association (MBA),
National Apartment Association (NAA),
National Association of Home Builders (NAHB),
National Association of Mutual Insurance Companies (NAMIC),
National Association of Real Estate Investment Trusts
(NAREIT),
National Association of REALTORS (NAR),
National Multifamily Housing Council (NMHC),
Property Casualty Insurers Association of America (PCI),
Reinsurance Association of America (RAA),
Texas Surplus Lines Association (TSLA),
The Real Estate Roundtable (The Roundtable),
The Risk and Insurance Management Society (RIMS),
U.S. Chamber of Commerce.
Mrs. CAROLYN B. MALONEY of New York. The bill also includes the NARAB
bill--the National Association of Registered Agents and Brokers--which
has passed this Congress multiple times, many, many times, and this
would merely recognize insurance brokers and agents licensed in other
States across this country, increasing efficiency and saving and
reducing costs for these businesses.
I urge my colleagues to vote for TRIA because it is the right thing
to do for America, and I reserve the balance of my time.
Mr. NEUGEBAUER. Mr. Speaker, I enter into the Record an exchange of
letters between the Financial Services Committee and the House
Agriculture Committee.
House of Representatives,
Committee on Agriculture,
Washington, DC, January 7, 2015.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services, Rayburn House
Office Building, Washington, DC.
Dear Chairman Hensarling: I am writing concerning H.R. 26,
Terrorism Risk Insurance Program Reauthorization Act of 2015.
As you know, provisions of H.R. 26 are within the
jurisdiction of the Committee on Agriculture. In order to
expedite floor consideration of the bill, the Committee on
Agriculture will forgo action on H.R. 26. Further, the
Committee will not oppose the bill's consideration on the
suspension calendar. This is also being done with the
understanding that it does not in any way prejudice the
Committee with respect to the appointment of conferees or its
jurisdictional prerogatives on this or similar legislation.
I would appreciate your response to this letter, confirming
this understanding with respect to H.R. 26, and would ask
that a copy of our exchange of letters on this matter be
included in the Congressional Record during Floor
consideration.
Sincerely,
K. Michael Conaway,
Chairman.
____
House of Representatives,
Committee on Financial Services,
Washington, DC, January 7, 2015.
Hon. K. Michael Conaway,
Chairman, Committee on Agriculture, Longworth House Office
Building, Washington, DC.
Dear Chairman Conaway: Thank you for your letter of even
date herewith regarding H.R. 26, the Terrorism Risk Insurance
Program Reauthorization Act of 2015.
I am most appreciative of your decision to forego
consideration of H.R. 26 so that it may move expeditiously to
the House floor. I acknowledge that although you are waiving
formal consideration of the bill, the Committee on
Agriculture is in no way waiving its jurisdiction over any
subject matter contained in the bill that falls within its
jurisdiction. In addition, if a conference is necessary on
this legislation, I will support any request that your
committee be represented therein.
Finally, I shall be pleased to include your letter and this
letter in the Congressional Record during floor consideration
of H.R. 26.
Sincerely,
Jeb Hensarling,
Chairman.
Mr. NEUGEBAUER. Mr. Speaker, I yield 3 minutes to the gentleman from
Texas (Mr. Conaway), my neighbor to the south, our new committee
chairman for the House Agriculture Committee.
Mr. CONAWAY. Mr. Speaker, I thank Mr. Neugebauer for yielding.
I rise today in support of H.R. 26, a bill to extend the expiration
date of the Terrorism Risk Insurance Act.
I want to thank my good friend and vice chairman of the Agriculture
Committee, Randy Neugebauer, for his work in shepherding this bill to
the floor again.
I would also like to thank him and Chairman Hensarling for fighting
hard to include the Business Risk Mitigation and Price Stabilization
Act as title III of today's bill. The House Committee on Agriculture,
along with the Financial Services Committee, has made moving this
legislation a priority.
Despite the lengthy title, the Business Risk Mitigation and Price
Stabilization Act is not a complicated bill. It fulfills the promise
that this body made to our farmers, ranchers, and small businesses when
Dodd-Frank was drafted and signed into law that end users would not be
treated as financial firms.
{time} 1245
Yet regulators have narrowly interpreted the exemptions in the black
letter of the law, forcing some businesses to leave capital idle in
margin accounts, rather than investing in new production and creating
jobs.
Forcing businesses to post margin not only ties up capital, but also
makes it more expensive for firms to
[[Page H68]]
utilize the risk management tools that they need to protect their
businesses from uncertainty.
Today's bill clarifies in statute that Congress meant what it said
when it exempted end users from margin and clearing requirements.
Specifically, it ensures that those businesses which are exempt from
clearing their hedges are also exempt from margining those hedges.
This well-reasoned legislation has broad bipartisan support. As a
stand-alone bill, the House overwhelmingly supported it last year in
June by a vote of 411-12. Since then, we have passed it four more
times--and if we pass it today, a fifth time--which means we will keep
doing it until we get it right.
I am hopeful that with today's vote, we can finally offer farmers,
ranchers, and businesses the relief we promised them almost 5 years
ago.
Again, I thank Chairman Hensarling and Chairman Neugebauer for
including the Business Risk Mitigation and Price Stabilization Act in
today's bill, and I urge my colleagues to support H.R. 26.
House of Representatives,
Committee on Agriculture,
Washington, DC, January 7, 2014.
Mr. Speaker: I am pleased to see the inclusion H.R. 634,
Business Risk Mitigation and Price Stability Act, from the
113th Congress as Title III of the Terrorism Risk Insurance
Program Reauthorization Act. This language, which was also
included as Subtitle of Title III of H.R. 4413, Customer
Protection and End-User Relief Act, from the 113th Congress
provides an important protection to end-users from costly
margining requirements that will divert much needed capital
away from job creation.
In support of this title, I would like to request that the
pertinent portions of the Committee on Agriculture report to
accompany H.R. 4413 be included in the appropriate place in
the Congressional Record.
Sincerely,
K. Michael Conaway,
Chairman.
____
Title 3--End User Relief
SUBTITLE A--END-USER EXEMPTION FROM MARGIN REQUIREMENTS
Section 311--End-user margin requirements
Section 311 amends Section 4s(e) of the Commodity Exchange
Act (CEA) as added by Section 731 of the Dodd-Frank Act to
provide an explicit exemption from margin requirements for
swap transactions involving end-users that qualify for the
clearing exception under 2(h)(7)(A).
``End-users'' are thousands of companies across the United
States who utilize derivatives to hedge risks associated with
their day-to-day operations, such as fluctuations in the
prices of raw materials. Because these businesses do not pose
systemic risk, Congress intended that the Dodd-Frank Act
provide certain exemptions for end-users to ensure they were
not unduly burdened by new margin and capital requirements
associated with their derivatives trades that would hamper
their ability to expand and create jobs.
Indeed, Title VII of the Dodd-Frank Act includes an
exemption for non-financial end-users from centrally clearing
their derivatives trades. This exemption permits end-users to
continue trading directly with a counterparty, (also known as
trading ``bilaterally,'' or over-the-counter (OTC)) which
means their swaps are negotiated privately between two
parties and they are not executed and cleared using an
exchange or clearinghouse. Generally, it is common for non-
financial end-users, such as manufacturers, to avoid posting
cash margin for their OTC derivative trades. End-users
generally will not post margin because they are able to
negotiate such terms with their counterparties due to the
strength of their own balance sheet or by posting non-cash
collateral, such as physical property. End-users typically
seek to preserve their cash and liquid assets for
reinvestment in their businesses. In recognition of this
common practice, the Dodd-Frank Act included an exemption
from margin requirements for end-users for OTC trades.
Section 731 of the Dodd-Frank Act (and Section 764 with
respect to security-based swaps) requires margin requirements
be applied to swap dealers and major swap participants for
swaps that are not centrally cleared. For swap dealers and
major swap participants that are banks, the prudential
banking regulators (such as the Federal Reserve or Federal
Deposit Insurance Corporation) are required to set the margin
requirements. For swap dealers and major swap participants
that are not banks, the CFTC is required to set the margin
requirements. Both the CFTC and the banking regulators have
issued their own rule proposals establishing margin
requirements pursuant to Section 731.
Following the enactment of the Dodd-Frank Act in July of
2010, uncertainty arose regarding whether this provision
permitted the regulators to impose margin requirements on
swap dealers when they trade with end-users, which could then
result in either a direct or indirect margin requirement on
end-users. Subsequently, Senators Blanche Lincoln and Chris
Dodd sent a letter to then-Chairmen Barney Frank and Collin
Peterson on June 30, 2010, to set forth and clarify
congressional intent, stating:
The legislation does not authorize the regulators to impose
margin on end-users, those exempt entities that use swaps to
hedge or mitigate commercial risk. If regulators raise the
costs of end-user transactions, they may create more risk. It
is imperative that the regulators do not unnecessarily divert
working capital from our economy into margin accounts, in a
way that would discourage hedging by end-users or impair
economic growth.
In addition, statements in the legislative history of
section 731 (and Section 764) suggests that Congress did not
intend, in enacting this section, to impose margin
requirements on nonfinancial end-users engaged in hedging
activities, even in cases where they entered into swaps with
swap entities.
In the CFTC's proposed rule on margin, it does not require
margin for uncleared swaps when non-bank swap dealers
transact with non-financial end-users. However, the
prudential banking regulators proposed rules would require
margin be posted by non-financial end-users above certain
established thresholds when they trade with swap dealers that
are banks. Many of end-users' transactions occur with swap
dealers that are banks, so the banking regulators' proposed
rule is most relevant, and therefore of most concern, to end-
users.
By the prudential banking regulators' own terms, their
proposal to require margin stems directly from what they view
to be a legal obligation under Title VII. The plain language
of section 731 provides that the Agencies adopt rules for
covered swap entities imposing margin requirements on all
non-cleared swaps. Despite clear congressional intent, those
sections do not, by their terms, exclude a swap with a
counterparty that is a commercial end-user. By providing an
explicit exemption under Title VII through enactment of this
provision, the prudential regulators will no longer have a
perceived legal obligation and the congressional intent they
acknowledge in their proposed rule will be implemented.
The Committee notes that in September of 2013, the
International Organization of Securities Commissions (IOSCO)
and the Bank of International Settlements published their
final recommendations for margin requirements for uncleared
derivatives. Representatives from a number of U.S.
regulators, including the CFTC and the Board of Governors of
the Federal Reserve participated in the development of those
margin requirements, which are intended to set baseline
international standards for margin requirements. It is the
intent of the Committee that any margin requirements
promulgated under the authority provided in Section 4s of the
Commodity Exchange Act should be generally consistent with
the international margin standards established by IOSCO.
On March 14, 2013, at a hearing entitled ``Examining
Legislative Improvements to Title VII of the Dodd-Frank
Act,'' the following testimony was provided to the Committee
with respect to provisions included in Section 311:
In approving the Dodd-Frank Act, Congress made clear that
end-users were not to be subject to margin requirements.
Nonetheless, regulations proposed by the Prudential Banking
Regulators could require end-users to post margin. This stems
directly from what they view to be a legal obligation under
Title VII. While the regulations proposed by the CFTC are
preferable, they do not provide end-users with the certainty
that legislation offers. According to a Coalition for
Derivatives End-Users survey, a 3% initial margin requirement
could reduce capital spending by as much as $5.1 to $6.7
billion among S&P 500 companies alone and cost 100,000 to
130,000 jobs. To shed some light on Honeywell's potential
exposure to margin requirements, we had approximately $2
billion of hedging contracts outstanding at year-end that
would be defined as a swap under Dodd-Frank. Applying 3%
initial margin and 10% variation margin implies a potential
margin requirement of $260 million. Cash deposited in a
margin account cannot be productively deployed in our
businesses and therefore detracts from Honeywell's financial
performance and ability to promote economic growth and
protect American jobs.--Mr. James E. Colby, Assistant
Treasurer, Honeywell International Inc.
On May 21, 2013, at a hearing entitled ``The Future of the
CFTC: Market Perspectives,'' Mr. Stephen O'Connor, Chairman,
ISDA, provided the following testimony with respect to
provisions included in Section 311:
Perhaps most importantly, we do not believe that initial
margin will contribute to the shared goal of reducing
systemic risk and increasing systemic resilience. When robust
variation margin practices are employed, the additional step
of imposing initial margin imposes an extremely high cost on
both market participants and on systemic resilience with very
little countervailing benefit. The Lehman and AIG situations
highlight the importance of variation margin. AIG did not
follow sound variation margin practices, which resulted in
dangerous levels of credit risk building up, ultimately
leading to its bailout. Lehman, on the other hand, posted
daily variation margin, and while its failure caused shocks
in many markets, the variation margin prevented outsized
losses in the OTC derivatives markets. While industry and
regulators agree on a robust variation margin regime
including all
[[Page H69]]
appropriate products and counterparties, the further step of
moving to mandatory IM [initial margin] does not stand up to
any rigorous cost-benefit analysis.
Based on the extensive background that accompanies the
statutory change provided explicitly in Section 311, the
Committee intends that initial and variation margin
requirements cannot be imposed on uncleared swaps entered
into by cooperative entities if they similarly qualify for
the CFTC's cooperative exemption with respect to cleared
swaps. Cooperative entities did not cause the financial
crisis and should not be required to incur substantial new
costs associated with posting initial and variation margin to
counterparties. In the end, these costs will be borne by
their members in the form of higher prices and more limited
access to credit, especially in underserved markets, such as
in rural America. Therefore, the Committee's clear intent
when drafting Section 311 was to prohibit the CFTC and
prudential regulators, including the Farm Credit
Administration, from imposing margin requirements on
cooperative entities.
Mrs. CAROLYN B. MALONEY of New York. Mr. Speaker, I yield 3 minutes
to the gentleman from the great State of Georgia (Mr. Scott).
Mr. DAVID SCOTT of Georgia. Mr. Speaker, I certainly want to
recognize and appreciate the gentlewoman from Manhattan for the
excellent leadership job that she is doing on this.
Mr. Speaker, this bill, TRIA, is so important. It is very important
to note that it hasn't cost the taxpayers anything, and it has been
very successful where needed; but, Mr. Speaker, this bill contains
another very important piece: we affectionately call it NARAB, which is
the National Association of Registered Agents and Brokers--just think
if TRIA and the NARAB portion of this bill had been in place in 1999,
before we had the terrorism risk, before we had the terrorist strikes
of 9/11, and other terrorist attacks.
But in the middle of all of that, even with the downturn of the
economic calamity, standing in the middle of this storm were our
insurance agents, the lifeline of the American people. What NARAB is
doing here is making sure that we streamline the process and make sure
that our insurance agents are able to operate across State lines.
Mr. Speaker, we all realize that insurance is a State-licensed,
State-authorized operation. NARAB does not interfere with that. As a
matter of fact, all 50 of the insurance agents of our States have all
agreed with NARAB.
This is an important bill because our insurance agents, our small
businesses, are the lifeline in tragedy and distress. We live in a
highly mobile society now. It is very important for our agents to be
able to go across State lines with one licensing procedure that is held
to the highest standard while at the same time being licensed in their
own State.
We have had great cooperation from all of our insurance agents,
including the insurance agents' association. Our financial advisers and
our brokers all agree.
The other thing, Mr. Speaker, is that many of us on the Financial
Services Committee have been working on this measure for 10 years. For
10 years, we have been toiling in the vineyards on this and so have
others in the Senate.
Now is the time to give our insurance agents the respect and the
nobility of purpose of their very fine profession and at the same time
reach our primary goal, which is to give the American insurance
consumers the choice, the competition, and the benefits that they need.
Mr. NEUGEBAUER. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, I want to thank the gentleman from Georgia for his
tireless efforts on NARAB. I think we are going to get it done this
time. I know he has worked on it a number of years. He and I have
worked together to try to get this done. It is a commonsense piece of
legislation, and I am hopeful that this will be the time to get it
passed.
I am now pleased to yield 3 minutes to the gentleman from New York
(Mr. King), who has been a tireless advocate for the TRIA program.
Mr. KING of New York. Mr. Speaker, I thank Chairman Neugebauer for
yielding and for all his efforts on this. I also appreciate the fact
that he said my efforts were tireless. Chairman Hensarling, at times,
thought they were tiresome.
I want to thank the chairman for putting a good spin on it, but very
seriously, I want to thank him for his efforts. This is a bill where a
number of us started off from different positions, from different
perspectives. In true legislative form, we came together.
This bill that we passed in December was a solid bill. Unfortunately,
it was not taken up by the Senate, but it is essential that we pass it
today because, as my good friend Mrs. Maloney said, this could have a
devastating effect on the construction industry and on the American
economy if it is not renewed as quickly as possible. This has to be
reauthorized. It is absolutely essential.
I want to thank Chairman Hensarling again for his efforts throughout
this. Again, it has been a long process, but we stayed at it, and I
thank him for that. Obviously, I thank Mrs. Maloney and the ranking
member, Ms. Waters. Also, Mr. Capuano has been a fighter on this from
the start. Again, we came together.
This is a bill that, as I have said a number of times, was absolutely
essential after September 11, when terrorism risk insurance could not
be obtained. It even became more obvious as time went on how essential
it was, how we desperately need it, and we have to preserve it.
Also, not one Federal dollar has been expended on it; yet billions of
dollars in revenue, construction projects, jobs, and expansion of the
economy has resulted because of it.
We are voting today, in a way, on a bill which, as Mrs. Maloney said,
is going to go on for another 6 years. That gives it permanence and
stability. It gives the construction industry, the real estate
industry, and the people on the ground who want those construction jobs
the ability to go forward. It lets municipalities know there is going
to be construction going ahead in their jurisdictions. It is a plus-
plus all the way.
The changes that were made, the reforms that were made, I didn't
believe they had to be done, but the fact is they are done, and they
are not going to change the overall impact. They are not going to have
any meaningful determinative effect whatsoever.
Again, I am proud to support this bill in all its aspects. Mr. Scott
from Georgia had a great concern about the insurers. I share that also.
I think it is important that be in this bill. I know that was a bit of
an obstacle in the Senate, but it shouldn't be. It had overwhelming
support in the House. I know the great majority of the Members in the
Senate support it.
Now, we pass this on suspension today, sending a strong signal how we
support this bill in its entirety. From my conversations--and I think
Mrs. Maloney has had the same conversations--we feel confident that the
Senate is going to pass it.
When they do, it will be a victory for the American people, a victory
for American business, a victory for American labor, and a victory for
the American people to show that we have fought all the way back from
the horrors of 9/11, and we are going to make sure that never again are
we put in that position as far as the damage it can have on our
economy.
I would end this by saying that when we saw the attack in Paris
today, we realized what can happen with a terrorist attack, how it can
happen at any moment, and why it is essential this be reauthorized.
Again, I thank the chairman for his efforts and patience over the
last several years.
Mrs. CAROLYN B. MALONEY of New York. Mr. Speaker, I do want to
comment that it has been reported in the press that the Senate has
announced they will bring up this bill next week, which is very, very
important to move it forward.
I yield 3 minutes to the gentleman from the great State of
Massachusetts (Mr. Capuano), who has been a fighter, advocate, and an
effective spokesperson.
Mr. CAPUANO. I thank the gentlewoman for yielding.
Mr. Speaker, I, too, want to add my words congratulating everybody
for finally getting this done, but I also want to be real clear. I wish
we could have done this a year ago, so we could have been working on
things that we have some differences on that need to be done.
Where we are today on this bill could have easily been reached in a
bipartisan manner with 400-plus Members voting for it over a year ago.
I am only aware of two outside groups--both
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think tanks, not in business, not in labor--that opposed this bill; yet
we let them run the agenda here because people couldn't get off the
dime.
For me, that is a huge mistake. We are here to make agreements, to
make compromise, to get things done. For instance, we are sitting here
today with Fannie and Freddie not resolved after all these years
because we can't get off the dime of a few ideological disagreements
that clearly are not going to be settled, the way they are going.
There is plenty of room for compromise, plenty of room to get
together and talk about it and get something done for the American
people and the American economy.
That is just one example. We have to get beyond the outside
ideological groups telling us what we can and cannot do. Even if we
agree with them, we have to understand we are elected to lead, to
argue, and then to compromise.
We are here today, finally. Thank you. Let's not get bogged down any
further in this new Congress. We will have our differences, and we will
have some differences that cannot be resolved. This was never one of
them. I think there is plenty of room on Fannie and Freddie. I think
there are issues on insurance.
I think there are plenty of issues we can and should work on. We both
have our outside groups to deal with. We both have to turn to them with
loving attention and tell you: ``We love you, we agree with you, but I
was elected to move the ball forward.''
That is what we are doing here today, and I congratulate those people
that have finally done it, including the two people leading this bill,
both the chairman and the ranking member of the committee, and other
members of this committee that have worked on this for so long.
I can't honestly say that I am looking forward to doing this again in
6 years, but I hope that when we get there, we can do it a little bit
more quickly than we did this time.
Mr. NEUGEBAUER. I thank the gentleman from Massachusetts. I want to
tell him how much I enjoyed working with him. He was the ranking Member
of the Housing and Insurance Subcommittee, and we had an opportunity to
work together. It was a pleasure to do.
Mr. Speaker, it is my pleasure to yield 2 minutes to the gentleman
from Indiana (Mr. Stutzman), a distinguished member of the Financial
Services Committee.
Mr. STUTZMAN. Mr. Speaker, I rise today in support of the Terrorism
Risk Program Reauthorization Act of 2015.
Mr. Speaker, as we have all recently seen, terrorism and violence
continues to be a threat not only to our friends on the other side of
the globe, but also to our homeland. The rise of ISIS has demonstrated
that the American people and our interests are constant targets.
Because these dangers continue to grow, it is our job to make sure we
are taking the necessary steps to protect ourselves. The terror attacks
on September 11, 2001, not only brought a devastating loss of innocent
human life, they also wreaked havoc on our economy, costing insurers
tens of billions of dollars, taking years to recover.
We have to take the necessary steps to protect and prevent any
physical harm to America and make sure we are doing what we can to
protect our economic interests. That is what today's legislation is all
about.
When first passed in 2002, TRIA provided much-needed stability to
ease any economic pain of another attack. Today's reauthorization will
continue to provide a necessary backstop and the financial security
that will allow major commercial and real estate projects so vital to
the economy to move forward.
Reauthorizing this legislation is an opportunity for both parties to
stand together in a bipartisan fashion and strengthen our national
security.
I would like to thank Chairman Hensarling, Representative Neugebauer,
and the rest of the members of the Financial Services Committee for
their hard work on this issue. It has taken time to get to this point,
but I believe this is a good way for us to start this Congress, working
together to pass a bill that is in the best interest of our national
security.
Mrs. CAROLYN B. MALONEY of New York. Mr. Speaker, I yield 3 minutes
to the gentleman from the great State of Maryland (Mr. Hoyer), the
distinguished minority leader.
(Mr. HOYER asked and was given permission to revise and extend his
remarks.)
Mr. HOYER. Mr. Speaker, I thank the gentlewoman from New York for
yielding. I appreciate her work. I also appreciate the work of Mr.
Neugebauer for bringing this bill to the floor.
This bill could have been--should have been, as Mr. Capuano said--
passed a long time ago with an overwhelming vote. I brought this up on
regular conferences and colloquies that I had with Mr. Cantor and more
recently with Mr. McCarthy, but it is always timely to do the right
thing. Today, we are doing the right thing, and I rise in strong
support of the passage of this bill.
Reauthorizing the Terrorism Risk Program Reauthorization Act will
provide much-needed certainty to businesses and insurers, certainty
that will help our economy and prevent harm to job creation. I believe
Congress has the responsibility to reauthorize the TRIA program, and I
encourage all of my colleagues to join me in voting to do so today.
{time} 1300
This program expired at the end of 2014, and Congress must take
action on TRIA without delay. I would reiterate that this program as
incorporated in this piece of legislation has had well over 250 votes
for at least the last year and a half, but it is never too late to do
the right thing. The longer Congress waits, the worse the effects will
be on our economy and job creation.
I want to thank Ranking Member Waters. I want to thank Ranking Member
Velazquez for her work on this as well and, as I said, the leadership
on the majority side that finally got us to a point where we could make
an agreement last year.
We passed a bill last year. I regret that the Senate didn't pass it,
but I applaud the majority's bringing it to the floor as one of the
first pieces of business that we do. All sides deserve, therefore,
credit for their efforts to help restore certainty to businesses and
protect against the slowdown in job growth that would result from not
reauthorizing TRIA.
So, today we do the right thing; we do it in a bipartisan fashion.
Let's hope we can continue to do this.
Mr. NEUGEBAUER. Mr. Speaker, it is now my pleasure to yield 1 minute
to the gentleman from New Hampshire (Mr. Guinta), a distinguished
member of the Financial Services Committee.
Mr. GUINTA. Mr. Speaker, I rise in strong support of H.R. 26, the
Terrorism Risk Insurance Program Reauthorization Act of 2015. As the
recent tragic events in Boston have shown, terrorism is still alive,
and we must be ever vigilant in the fight against it.
This overwhelmingly bipartisan piece of legislation will ensure
market stability for Main Street, businesses, construction projects,
public events, and more by maintaining their ability to access
terrorism insurance to keep job-creating businesses and projects moving
forward with certainty.
TRIA is an important piece of legislation for protecting taxpayers by
requiring insurers to step up and manage more of their own risk. I urge
my colleagues to vote ``yes,'' and I ask that the Senate bring up this
bill immediately.
Mrs. CAROLYN B. MALONEY of New York. Mr. Speaker, I yield 2\1/2\
minutes to my good friend from the great State of New York (Ms.
Velazquez), who is the ranking member on the Small Business Committee.
(Ms. VELAZQUEZ asked and was given permission to revise and extend
her remarks.)
Ms. VELAZQUEZ. Mr. Speaker, I want to take this opportunity to thank
the gentlelady from New York for yielding.
Today, I call on my colleagues to reauthorize the Terrorism Risk
Insurance Program, a public-private partnership that is vital to
continued economic development across the country.
Following the tragic events of 9/11, terrorism became uninsurable,
the marketplace evaporated, and rates skyrocketed. Many businesses were
impacted, causing job losses and hindering the recovery effort. To
address the growing problem, Congress swiftly
[[Page H71]]
passed the Terrorism Risk Insurance Act, creating a Federal backstop
and restoring coverage.
Today I can say without a doubt, our efforts were successful. I have
witnessed firsthand how this program has substantially helped New York
City recover and prosper over the past 12 years. The program has also
tripled the number of small businesses nationwide that have terrorism
protection. As a direct result of TRIA, over 60 percent of small firms
carry some form of coverage.
Some stakeholders have already reported disruptions since TRIA lapsed
last week, especially in high-risk cities such as New York. It should
be noted that the lapse is not only affecting insurance coverage, but
also the financing efforts of many job-creating construction projects.
Is this bill perfect? No, but it will restore certainty to the
marketplace and prevent a rate spike that could force two-thirds of
small businesses out of the market.
Mr. Speaker, acts of terrorism remain too risky to cover for the vast
majority of carriers, especially for the small- and medium-sized firms
that dominate the insurance industry. As a result, the Terrorism Risk
Insurance Program, which has not cost taxpayers $1, continues to be a
vital component of our economic growth and national security.
Mr. Speaker, I urge my colleagues to support this bill.
Mr. NEUGEBAUER. Mr. Speaker, I reserve the balance of my time.
Mrs. CAROLYN B. MALONEY of New York. Mr. Speaker, I yield myself such
time as I may consume.
Mr. Speaker, we had other speakers scheduled from New York, but they
are not on the floor now, so I would just like to say, in closing, that
this is critically important legislation.
I can speak from personal experience, having represented New York
during and after 9/11, that after 9/11 you could not even build a hot
dog stand. All construction stopped. No one could get any insurance.
The only insurance available was from Lloyds of London, and it was
incredibly expensive and people could not afford it. We lost thousands
and thousands of jobs.
And it happened also, when we came together and started to rebuild
not only in New York but the Pentagon and Pennsylvania, I would say, of
all the programs that this body put forward--and there were many, and I
thank my colleagues on both sides of the aisle for their support--I
truly believe that this particular one was certainly the most important
in helping New York rebuild and rebound.
I want to add that it did not cost our taxpayers one single dime. It
is an innovative way to get building and construction happening across
this country. So it is tremendously important to the economy. It is an
important bill, and I am so pleased that it has been a bipartisan
effort.
This body passed the bill. It stalled in the Senate, but we do need
to reauthorize it as swiftly and as quickly as possible. I hope it is
an example of how this body can work together on legislation that is
critical to this country to rebuild and expand the jobs and our economy
and to help strengthen our country in other ways.
So again I thank the leadership on both sides of the aisle for moving
so swiftly to bring it to the floor and, really, to Mr. Neugebauer, who
was the point person in many ways in the compromise legislation that
moved forward.
I urge my colleagues to vote for it. It is the right thing to do for
America.
Mr. Speaker, I yield back the balance of my time.
Mr. NEUGEBAUER. Mr. Speaker, I yield myself as much time as I may
consume.
Mr. Speaker, in closing, I think what you can see by the comments
today is that we have a bipartisan piece of legislation. It is a piece
of legislation that passed overwhelmingly in the House in the 113th
Congress. Unfortunately, it was not taken up by the Senate.
This is a win-win bill. It does a number of really good things for
the country; and, more importantly, for the taxpayers, it begins to
bring reform in a program that originally was meant to be a temporary
program but somehow has become a permanent program, beginning to
stairstep-up the private market participation and stairstep-down the
taxpayers' participation. It increases the trigger; it increases the
amount of recovery that the taxpayers would be able to recover in the
case of an event.
Another thing you heard many people talk about is this end-user
provision that is going to help farmers and ranchers and small
businesses not have to put up additional capital so they can use that
capital to create jobs for America.
Another provision in this bill is the NARAB II, which is a small
business provision allowing your local insurance agent, maybe he or she
can sell insurance in multiple States by being a member of NARAB and
being able to not have to get a license in each individual State, but
if they are licensed and meet the qualifications in that State, that is
recognized by other States.
So this is a great bipartisan effort. It has been, as mentioned, a
long process, and so I urge my colleagues to support H.R. 26.
Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Texas (Mr. Neugebauer) that the House suspend the rules
and pass the bill, H.R. 26.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds
being in the affirmative, the ayes have it.
Mr. NEUGEBAUER. 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, further
proceedings on this motion will be postponed.
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