[Congressional Record (Bound Edition), Volume 147 (2001), Part 17]
[Senate]
[Pages 23537-23544]
[From the U.S. Government Publishing Office, www.gpo.gov]



          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Ms. CANTWELL:
  S. 1742. A bill to prevent the crime of identity theft, mitigate the 
harm to individuals victimized by identity theft, and for other 
purposes; to the Committee on the Judiciary.
  Ms. CANTWELL. Mr. President I rise today to introduce legislation 
that will help victims of identity theft recover from the injuries to 
their good name and good credit, the Reclaim Your Identity Act of 2001. 
Earlier this year, Washington State enacted a law to provide needed 
help to victims of identity theft that I believe serves as a good model 
for federal legislation. It gives victims of identity theft the tools 
they need to restore their good credit rating, requires businesses to 
make available records relevant to a victim's ability to restore his or 
her credit, and enables a victim to have fraudulent charges blocked 
from reporting in their consumer credit report. Currently, Federal law 
addresses the crime of identity theft, providing penalties for the 
perpetrator, but no specific assistance to the victim trying to recover 
their identity. Today I am introducing legislation modeled on the state 
of Washington law that will do just that, help the victim restore their 
credit rating and their good name.
  We need to do more to fight identity theft, a crime the Federal Trade 
Commission has described as the Nation's fastest growing. Last year 
there were over 500,000 new victims of identity theft and, according to 
the Department of Treasury, reports of identity theft to perpetrate 
fraud against financial institutions grew by 50 percent from 1999 to 
2000. From March 2001 to June 2001, the number of ID theft victims 
contacting the FTC jumped from 45,500 to 69,400--a 50 percent increase 
in just three months. One in five Americans or a member of their 
families has been a victim of identity theft. Those numbers underscore 
why I am introducing this legislation today. The problem is 
particularly apparent in my State of Washington, which ranks in the top 
10 for identity theft per capita.
  Identity theft is not a violent crime, but its victims suffer real 
harm and need help to recover their good credit and good name. On 
average, it takes 12 months for a victim to learn that he or she has 
been a victim of identity theft. It takes another 175 hours and $808 of 
out-of-pocket expenses to clear their names. Today, victims of identity 
theft are forced to become their own sleuths to clear their names, and 
all too often they do so without the help or support of the businesses 
that allowed the identity theft to take place. Believe it or not, when 
your identity is stolen, many businesses won't give you the records you 
need to reclaim your identity. My bill puts people first by requiring 
businesses to cooperate with victims.
  We already require this in Washington State, thanks to the hard work 
of Attorney General Chris Gregoire and others. Now we need to take this 
good idea to the national level and make it work on behalf of many 
others. When your TV is stolen, you know it was taken from your living 
room. But when your identity is stolen, it could be stolen from 
anywhere, and businesses from every State could be involved. That's why 
we need a Federal solution to this problem.
  The Reclaim Your Identity Act empowers consumers by establishing a 
transparent process victims can use to reclaim their identity. Under 
this bill, a victim of identity theft will have the right to request 
records related to a fraud based on an identity theft from businesses 
after proving their identity with a copy of the police report or the 
Federal Trade Commission standardized Identity Theft Affidavit or any 
other affidavit of fact of the business' choosing. The business must 
then provide, at no charge, copies of those business records to the 
victim or a law enforcement agency or officer designated by the victim 
within 10 days of the victim's request. This will make sure that the 
victims, or law enforcement investigating an identity theft on behalf 
of a victim, will be able to obtain the credit applications and other 
records a business may have that is evidence of the fraud. As a 
protective measure, the bill gives businesses the option to decline to 
disclose records where it believes the request is based on a 
misrepresentation of facts. Further, a business is exempt from 
liability for any disclosure undertaken in good faith to further a 
prosecution of identity theft or assist the victim.
  In addition, this bill reinstates consumers' right to sue credit-
reporting agencies that allow identity theft to harm their good name. 
On November 12, the Supreme Court ruled that a California woman 
couldn't sue a credit reporting agency because she filed her claim more 
than two years after her identity had been stolen and that the two-year 
statute of limitations ran from the time of the crime. The woman didn't 
even know her identity had been stolen until two years after the crime 
had been committed. In the wake of the court decision, Congress must 
revise the statute of limitations so that common sense prevails and 
that the clock doesn't begin ticking until victims know that they have 
been harmed.
  The Reclaim Your Identity Act also amends the Internet False 
Identification Prevention Act to expand the jurisdiction and membership 
of the coordinating committee currently studying enforcement of Federal 
identity theft law to examine State and local enforcement problems and 
identify ways the federal government can assist state and local law 
enforcement in addressing identity theft and related crimes. In the 
wake of the September 11 attacks we are painfully aware that identity 
theft can threaten more than our pocket books. This legislation also 
requires the Federal coordinating committee to look at how the Federal 
Government can improve the sharing of information on terrorists and 
terrorist activity as it relates to identity theft. Further, by giving 
consumers and law enforcement additional tools to fight identity theft, 
this bill will make it harder for terrorists to steal identities to 
hide their true identity.
  Importantly, this bill also requires credit-reporting agencies to 
protect a consumers' good name from bad credit generated by fraud. The 
Reclaim Your Identity Act amends the Fair Credit Reporting Act to 
require consumer credit reporting agencies to block information that 
appears on a victim's credit report as a result of identity theft 
provided the victim did not knowingly obtain goods, services or money 
as a result of the blocked transaction.
  Businesses too are victims of the fraud perpetrated in conjunction 
with identity theft. This legislation also

[[Page 23538]]

provides businesses with new tools to pursue identity thieves by 
amending Title 18 to make identity theft under State law a predicate 
for federal RICO violation. This will allow individuals and businesses 
pursuing a perpetrator of identity theft to seek treble damages and 
help prosecutors recover stolen assets for businesses victimized by 
identity theft.
  The Reclaim Your Identity Act also gives States additional legal 
tools by providing that State Attorneys General may bring a suit in 
Federal court on behalf of State citizens for violation of the Act.
  Identity theft and the fraud that can result is on the rise. We have 
the laws to discourage identity theft, but it is difficult behavior to 
attack. We have to give the tools to the victims to regain control of 
their financial life. The Consumers Union, Identity Theft Resource 
Center, and Privacy Rights Clearinghouse all support this legislation. 
The Reclaim Your Identity Act of 2001 will help victims of identity 
theft recover their identity and restore their good credit. I look 
forward to working with my colleagues to promptly enact this bill into 
law.
                                 ______
                                 
      By Mr. HOLLINGS (for himself, Mrs. Boxer, and Mr. Wyden):
  S. 1743. A bill to create a temporary reinsurance mechanism to 
enhance the availability of terrorism insurance; to the Committee on 
Commerce, Science, and Transportation.
  Mr. HOLLINGS. Mr. President, in light of the need to provide 
additional capacity and reassurance to the insurance industry for 
terrorism risks without burdening the taxpayer, balanced with the need 
to protect consumers from excessive increased in commercial insurance 
rates, I rise today to introduce the National Terrorism Reinsurance 
Fund Act.
  This legislation will create a fund from assessments on the 
commercial insurance industry as a whole to for the purpose of 
providing a temporary backstop for terrorism losses for primary 
insurance companies doing business in the U.S. The Fund and assessment 
mechanisms would provide the first $50 billion of protection for the 
insurance industry. In addition to this fund, the bill provides a 
program to provide direct Federal aid on a temporary basis for losses 
over $50 billion, in order to increase insurance market capacity and 
ensure the availability of reinsurance in relation to acts of 
terrorism. The overall program is to last for 3 years only and is to be 
administered by the Secretary of Commerce.
  All terrorism-related events causing losses beyond $50 billion will 
be governed by a direct Federal grant program. Once a company has 
incurred losses of more than 10 percent of its premiums from the 
previous year, it can apply for assistance from the Fund and the 
Federal Government. For the first year, the government will cover up to 
90 percent of a company's losses. For the second and third years, the 
government will cover up to 80 percent of that company's losses. This 
aid will be applicable up to losses of $100 billion. For events casing 
losses beyond this amount, the Secretary is required to seek guidance 
from Congress. Additionally, provisions have been included to ensure 
the industry shoulders the appropriate financial responsibility and to 
prevent unreasonable increases in insurance rates.
  Simply put the legislation accomplishes the following goals: 1. it 
provides insurance companies the assistance they need to continue 
writing terrorism coverage; 2. it ensures the availability of insurance 
coverage for American businesses and consumers; 3. it avoids an 
unnecessary and potentially massive bailout of an insurance industry by 
forcing them to use their own resources to ensure the availability of 
terrorism reinsurance while setting direct Federal aid at levels 
sufficient to account for the industry's current positive 
capitalization; and 4. it strikes the right balance regarding the 
interests of industry, taxpayers and the consumers of insurance and the 
marketplace in general.
  I look forward to working with other Senators to obtain swift passage 
of this important legislation.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1743

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

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``National 
     Terrorism Reinsurance Fund Act''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. Purpose.
Sec. 4. National terrorism reinsurance program.
Sec. 5. Fund operations.
Sec. 6. Coverage provided.
Sec. 7. Secretary to determine if loss is attributable to terrorism.
Sec. 8. Mandatory coverage by property and casualty insurers for acts 
              of terrorism.
Sec. 9. Pass-throughs and other rate increases.
Sec. 10. Credit for reinsurance.
Sec. 11. Administrative provisions.
Sec. 12. Inapplicability of certain laws.
Sec. 13. Sunset provision.
Sec. 14. Definitions.

     SEC. 2. FINDINGS.

       The Congress finds the following:
       (1) The terrorist attacks on the World Trade Center and 
     Pentagon on September 11, 2001, have inflicted possibly the 
     largest loss ever incurred by insurers and reinsurers.
       (2) The magnitude of the loss, and its impact on the 
     current capacity of the reinsurance market, threaten the 
     ability of the property and casualty insurance market to 
     provide coverage to building owners, businesses, and American 
     citizens.
       (3) It is necessary to create a temporary reinsurance 
     mechanism to augment the capacity of private insurers to 
     provide insurance for terrorism related risks.

     SEC. 3. PURPOSE.

       The purpose of this Act is to facilitate the coverage by 
     property and casualty insurers of the peril for losses due to 
     acts of terrorism by providing additional reinsurance 
     capacity for loss or damage due to acts of terrorism 
     occurring within the United States, its territories, and 
     possessions.

     SEC. 4. NATIONAL TERRORISM REINSURANCE PROGRAM.

       (a) In General.--The Secretary of Commerce shall establish 
     and administer a program to provide reinsurance to 
     participating insurers for losses due to acts of terrorism.
       (b) Advisory Committee; Membership.--There is established 
     an advisory committee to provide advice and counsel to the 
     Secretary in carrying out the program of reinsurance 
     established by the Secretary. The advisory committee shall 
     consist of 10 members, as follows:
       (1) 3 representatives of the property and casualty 
     insurance industry, appointed by the Secretary.
       (2) A representative of property and casualty insurance 
     agents, appointed by the Secretary.
       (3) A representative of consumers of property-casualty 
     insurance, appointed by the Secretary.
       (4) A representative of a recognized national credit rating 
     agency, appointed by the Secretary.
       (5) A representative of the banking or real estate 
     industry, appointed by the Secretary.
       (6) 2 representatives of the National Association of 
     Insurance Commissioners, designated by that organization.
       (7) A representative of the Department of the Treasury, 
     designated by the Secretary of the Treasury.
       (c) National Terrorism Reinsurance Fund.--
       (1) Establishment.--To carry out the reinsurance program, 
     the Secretary shall establish a National Terrorism 
     Reinsurance Fund which shall be available, without fiscal 
     year limitations--
       (A) to make such payments as may, from time to time, be 
     required under reinsurance contracts under this Act;
       (B) to pay such administrative expenses as may be necessary 
     or appropriate to carry out the purposes of this Act, but 
     such expenses may not exceed $5,000,000 for each of fiscal 
     years 2002, 2003, and 2004; and
       (C) to repay to the Secretary of the Treasury such sums, 
     including interest thereon, as may be borrowed from the 
     Treasury for purposes of this Act.
       (2) Credits to fund.--The Fund shall be credited with--
       (A) reinsurance premiums, fees, and other charges which may 
     be paid or collected in connection with reinsurance provided 
     under this Act;
       (B) interest which may be earned on investments of the 
     Fund;
       (C) receipts from any other source which may, from time to 
     time, be credited to the Fund; and
       (D) Funds borrowed by the Secretary from the Treasury.

[[Page 23539]]

       (3) Investment in obligations issued or guaranteed by 
     united states.--If the Secretary determines that the moneys 
     of the Fund are in excess of current needs, he may request 
     the investment of such amounts as he deems advisable by the 
     Secretary of the Treasury in obligations issued or guaranteed 
     by the United States.
       (4) Loans to fund.--The Secretary of the Treasury shall 
     grant loans to the Fund in the manner and to the extent 
     provided in this Act.
       (d) Underwriting Standards.--In order to carry out the 
     responsibilities of the Secretary under this Act and protect 
     the Fund, the Secretary shall establish minimum underwriting 
     standards for participating insurers.
       (e) Monitoring of Terrorism Insurance Rates.--
       (1) Secretary to establish special committee on rates.--The 
     Secretary shall establish a special committee on rates, the 
     size and membership of which shall be determined by the 
     Secretary, except that the committee shall, at a minimum, 
     include--
       (A) representatives of providers of insurance for losses 
     due to acts of terrorism;
       (B) representatives of purchasers of such insurance;
       (C) at least 2 representatives of NAIC; and
       (D) at least 2 independent insurance actuaries.
       (2) Duties.--The special committee on rates shall meet at 
     the call of the Secretary and shall--
       (A) review reports filed with the Secretary by State 
     insurance regulatory authorities;
       (B) collect data on rate disclosure practices of 
     participating insurers for insurance for covered lines and 
     for losses due to acts of terrorism; and
       (C) provide such advice and counsel to the Secretary as the 
     Secretary may require.

     SEC. 5. FUND OPERATIONS.

       (a) Funding by Premium.--
       (1) In general.--For the year beginning January 1, 2002, 
     and each subsequent year of operation, participating insurers 
     shall pay into the Fund an annual reinsurance contract 
     premium of not less than 3 percent of their respective gross 
     direct written premiums for covered lines for the calendar 
     year. The annual premium shall be paid in installments at the 
     end of each calendar quarter. The reinsurance contract 
     premium and any annual assessment may be recovered by a 
     participating insurer from its covered lines policyholders as 
     a direct surcharge calculated as a uniform percentage of 
     premium.
       (2) Additional credit risk premium.--If the Secretary 
     determines that a participating insurer has a credit rating 
     that is lower than the second from highest credit rating 
     awarded by nationally recognized credit rating agencies, the 
     Secretary may charge an additional credit risk premium, of up 
     to 0.5 percent of gross direct written premiums for covered 
     lines received by that insurer, to compensate the Fund for 
     credit risk associated with providing reinsurance to that 
     insurer.
       (b) Initial Capital.--
       (1) Loan.--The Fund shall have an initial capital of 
     $2,000,000,000, which the Secretary shall borrow from the 
     Treasury of the United States. Upon application by the 
     Secretary, the Secretary of the Treasury shall transfer that 
     amount to the Fund, out of amounts in the Treasury not 
     otherwise appropriated, at standard market rates.
       (2) Repayment of start-up loan.--The Secretary shall use 
     premiums received from assessments in calendar year 2002 to 
     repay the loan provided to the Fund under paragraph (1).
       (c) Shortfall Loans.--
       (1) In general.--If the Secretary determines that the 
     balance in the accounts of the Fund is insufficient to cover 
     anticipated claims, administrative expenses, and maintain 
     adequate reserves for any other reason, after taking into 
     account premiums assessed under subsection (a) and any other 
     amounts receivable, the Secretary shall borrow from the 
     Treasury an amount sufficient to satisfy the obligations of 
     the Fund and to maintain a positive balance of $2,000,000,000 
     in the accounts of the Fund. Upon application by the 
     Secretary, the Secretary of the Treasury shall transfer to 
     the Fund, out of amounts in the Treasury not otherwise 
     appropriated, the requested amount as an interest-bearing 
     loan.
       (2) Interest rate.--The rate of interest on any loan made 
     to the Fund under paragraph (1) shall be established by the 
     Secretary of the Treasury and based on the weighted average 
     credit rating of the Fund before the loss that made the loan 
     necessary.
       (3) $50 billion loan limit.--Notwithstanding any other 
     provision of this Act, the total amount of loans outstanding 
     at any time from the Treasury to the Fund may not exceed the 
     amount by which $50,000,000,000 exceeds the Fund's assets.
       (4) Repayment of loans by assessment.--Any loan under 
     paragraph (1) shall be repaid from reserves of the Fund, 
     assessments of participating insurers, or a combination 
     thereof. If an assessment is necessary, the maximum annual 
     assessment under this subsection shall be not more than 3 
     percent of the direct written premium for covered lines. The 
     reinsurance contract premium and any annual assessment may be 
     recovered by a participating insurer from its covered lines 
     policyholders as a direct surcharge calculated as a uniform 
     percentage of premium.

     SEC. 6. COVERAGE PROVIDED.

       (a) In General.--The Fund shall provide reinsurance for 
     losses resulting from acts of terrorism covered by 
     reinsurance contracts entered into between the Fund and 
     participating insurers that write covered lines of insurance 
     within the meaning of section 14(5)(A) or that have elected, 
     under section 14(5)(C), to voluntarily include another line 
     of insurance.
       (b) Retention.--The Fund shall reimburse participating 
     insurers for losses resulting from acts of terrorism on 
     direct losses in any calendar year in excess of 10 percent of 
     a participating insurer's average gross direct written 
     premiums and policyholders' surplus for covered lines for the 
     most recently ended calendar year for which data are 
     available, based on each participating insurer's annual 
     statement for that calendar year as reported to NAIC.
       (c) Reimbursement Amount.--If a participating insurer 
     demonstrates to the satisfaction of the Secretary that it has 
     paid claims for losses resulting from acts of terrorism equal 
     to or in excess of the amount of retention required by 
     subsection (b), then the Fund shall reimburse the 
     participating insurer for--
       (1) 90 percent of its covered losses in calendar year 2002; 
     and
       (2) a percentage of its covered losses in calendar years 
     beginning after calendar year 2002 equal to--
       (A) 90 percent if the insurer pays an assessment equal to 4 
     percent of the insurer's average gross direct written 
     premiums and policyholders' surplus for the most recently 
     ended calendar year;
       (B) 80 percent if the insurer pays an assessment equal to 3 
     percent of the insurer's average gross direct written 
     premiums and policyholders' surplus for the most recently 
     ended calendar year; and
       (C) 70 percent if the insurer pays an assessment equal to 2 
     percent of the insurer's average gross direct written 
     premiums and policyholders' surplus for the most recently 
     ended calendar year.
       (d) $50,000,000,000 Limit.--Except as provided in 
     subsection (e), the Fund may not reimburse participating 
     insurers for covered losses in excess of a total Fund 
     reimbursement amount for all participating insurers of 
     $50,000,000,000.
       (e) Losses Exceeding $50,000,000,000 Limit.--If the 
     Secretary determines that reimbursable losses in a calendar 
     year from an event exceed $50,000,000,000, the Secretary--
       (1) shall pay, out of amounts in the Treasury not otherwise 
     appropriated--
       (A) 90 percent of the covered losses occurring in calendar 
     year 2002 in excess, in the aggregate, of $50,000,000,000 but 
     not in excess of $100,000,000; and
       (B) 80 percent of the covered losses occurring in calendar 
     year 2003 or 2004 in excess, in the aggregate, of 
     $50,000,000,000 but not in excess of $100,000,000; and
       (2) shall notify the Congress of that determination and 
     transmit to the Congress recommendations for responding to 
     the insufficiency of available amounts to cover reimbursable 
     losses.
       (f) Reports to State Regulator; Certification.--
       (1) Reporting terrorism coverage.--A participating insurer 
     shall--
       (A) report the amount of its terrorism insurance coverage 
     to the insurance regulatory authority for each State in which 
     it does business; and
       (B) obtain a certification from the State that it is not 
     providing terrorism insurance coverage in excess of its 
     capacity under State solvency requirements.
       (2) Reports to secretary.--The State regulator shall 
     furnish a copy of the certification received under paragraph 
     (1) to the Secretary.

     SEC. 7. SECRETARY TO DETERMINE IF LOSS IS ATTRIBUTABLE TO 
                   TERRORISM.

       (a) Initial Determination.--If a participating insurer 
     files a claim for reimbursement from the Fund, the Secretary 
     shall make an initial determination as to whether the losses 
     or expected losses were caused by an act of terrorism.
       (b) Notice and Hearing.--The Secretary shall give public 
     notice of the initial determination and afford all interested 
     parties an opportunity to be heard on the question of whether 
     the losses or expected losses were caused by an act of 
     terrorism.
       (c) Final Determination.--Within 30 days after the 
     Secretary's initial determination, the Secretary shall make a 
     final determination as to whether the losses or expected 
     losses were caused by an act of terrorism.
       (d) Standard of Review.--The Secretary's determination 
     shall be upheld upon judicial review if based upon 
     substantial evidence.

     SEC. 8. MANDATORY COVERAGE BY PROPERTY AND CASUALTY INSURERS 
                   FOR ACTS OF TERRORISM.

       (a) In General.--An insurer that provides lines of coverage 
     described in section 14(5)(A) or 14(5)(B) may not--
       (1) exclude or limit coverage in those lines for losses 
     from acts of terrorism in the United States, its territories, 
     and possessions in property and casualty insurance policy 
     forms; or

[[Page 23540]]

       (2) deny or cancel coverage solely due to the risk of 
     losses from acts of terrorism in the United States.
       (b) Terms and Conditions.--Insurance against losses from 
     acts of terrorism in the United States shall be covered with 
     the same deductibles, limits, terms, and conditions as the 
     standard provisions of the policy for non-catastrophic 
     perils.

     SEC. 9. PASS-THROUGHS AND OTHER RATE INCREASES.

       (a) Limitation on Rate Increases for Covered Risks.--Except 
     as provided in subsection (b), a participating insurer that 
     provides lines of coverage described in section 14(5)(A) or 
     14(5)(B) may not increase annual rates on covered risks 
     during any period in which the insurer participates in the 
     Fund by a percent in excess of the sum of--
       (1) the percent used to determine the insurer's assessment 
     under section 5(a)(1); and
       (2) if there is an assessment against the insurer under 
     section 5(c)(4), a percent equivalent to the percent 
     assessment of the insurer's gross direct written premium for 
     covered lines.
       (b) Terrorism-related increases in excess of pass-
     throughs.--
       (1) Reports by insurers.--Not less than 30 days before the 
     date on which a participating insurer increases the premium 
     rate for insurance on any covered line of insurance described 
     in section 14(5) based, in whole or in part, on risk 
     associated with insurance against losses due to acts of 
     terrorism, the insurer shall file a report with the State 
     insurance regulatory authority for the State in which the 
     premium increase is effective that--
       (A) explains the need for the increased premium; and
       (B) identifies the portion of the increase properly 
     attributable to risk associated with insurance offered by 
     that insurer against losses due to acts of terrorism; and
       (C) demonstrates, by substantial evidence, why that portion 
     of the increase is warranted.
       (2) Reports by state regulators.--Within 15 days after a 
     State insurance regulatory authority receives a report from 
     an insurer required by paragraph (1), the authority--
       (A) shall transmit a copy of the report to the Secretary;
       (B) may include a determination with respect to whether an 
     insurer has met the requirement of paragraph (1)C); and
       (C) may include with the report any commentary or analysis 
     it deems appropriate.

     SEC. 10. CREDIT FOR REINSURANCE.

       Each State shall afford an insurer obtaining reinsurance 
     from the Fund credit for such reinsurance on the same basis 
     and to the same extent that credit for reinsurance would be 
     available to that insurer under applicable State law when 
     reinsurance is obtained from an assuming insurer licensed or 
     accredited in that State.

     SEC. 11. ADMINISTRATIVE PROVISIONS; REPORTS AND ANALYSIS.

       (a) In General.--In carrying out this Act, the Secretary 
     may--
       (1) issue such rules and regulations as may be necessary to 
     administer this Act;
       (2) enter into reinsurance contracts, adjust and pay claims 
     as provided in this Act, and carry out the activities 
     necessary to implement this Act;
       (3) set forth the coverage provided by the Fund to 
     accomplish the purposes of this Act;
       (4) provide for an audit of the books and records of the 
     Fund by the General Accounting Office;
       (5) take appropriate action to collect premiums or 
     assessments under this Act; and
       (6) audit the reports, claims, books, and records of 
     participating insurers.
       (b) Reports From Insurers.--Participating insurers shall 
     submit reports on a quarterly or other basis (as required by 
     the Secretary) to the Secretary, the Federal Trade 
     Commission, and the General Accounting Office setting forth 
     rates, premiums, risk analysis, coverage, reserves, claims 
     made for reimbursement from the Fund, and such additional 
     financial and actuarial information as the Secretary may 
     require regarding lines of coverage described in section 
     14(5)(A) or 14(5)(B).
       (c) FTC Analysis and Enforcement.--The Federal Trade 
     Commission shall review the reports submitted under 
     subsection (b), treating the information contained in the 
     reports as privileged and confidential, for the purpose of 
     determining whether any insurer is engaged in unfair methods 
     of competition or unfair or deceptive acts or practices in or 
     affecting commerce (within the meaning of section 5 of the 
     Federal Trade Commission Act (15 U.S.C. 45)).
       (d) GAO Review.--The Comptroller General shall provide for 
     review and analysis of the reports submitted under subsection 
     (b), and, if necessary, provide of audit of reimbursement 
     claims filed by insurers with the Fund.
       (e) Reports by Secretary.--No later than March 31st of each 
     calendar year, the Secretary shall transmit to the Senate 
     Committee on Commerce, Science, and Technology and the House 
     of Representatives Committee on Commerce an annual report on 
     insurance rate increases for the preceding calendar year in 
     the United States based upon the reports received by the 
     Secretary under this Act. The Secretary may include in the 
     report a recommendation for legislation to impose Federal 
     regulation of insurance rates on covered lines of insurance 
     if the Secretary determines that premium rates for insurance 
     on covered lines of insurance are--
       (A) unreasonable; and
       (B) attributable to insurance for losses from acts of 
     terrorism.

     SEC. 12. INAPPLICABILITY OF CERTAIN LAWS.

       (a) In General.--State laws relating to insurance rates, 
     insurance policy forms, insurance rates on any covered lines 
     of insurance described in section 14(5)(A) or 14(5)(B), 
     insurer financial requirements, and insurer licensing do not 
     apply to contracts entered into by the Fund. The Fund is not 
     subject to State tax and is exempt from Federal income tax. 
     The reinsurance contract premium paid and assessments 
     collected by insurers shall not be subject to local, State, 
     or Federal tax. The reinsurance contract premium and 
     assessments recovered from policyholders shall not be subject 
     to local, State, or Federal tax.
       (b) Exception for Unfair Trade Practice Laws.--
     Notwithstanding subsection (a), nothing in this Act 
     supersedes or preempts a State law that prohibits unfair 
     methods of competition in commerce, unfair or deceptive acts 
     or practices in commerce, or unfair insurance claims 
     practices.

     SEC. 13. SUNSET PROVISION.

       (a) Assessment and Collection of Premiums.--The Secretary 
     shall continue the premium assessment and collection 
     operations of the Fund under this Act as long as loans due 
     from the Fund to the United States Treasury are outstanding.
       (b) Provision of Reinsurance.--The Secretary shall suspend 
     other operations of the Fund for new contract years on the 
     close of business on December 31, 2004, and may suspend the 
     offering of reinsurance contracts for new contract years at 
     any time before that date if the Secretary determines that 
     the reinsurance provided by the Fund is no longer needed for 
     covered lines due to market conditions.
       (c) Review of Private Reinsurance Availability.--The 
     Secretary shall review the cost and availability of private 
     reinsurance for acts of terrorism at least annually and shall 
     report the findings and any recommendations to Congress by 
     June 1 of each year the Fund is in operation.
       (d) Dissolution of Fund.--
       (1) Distribution for reserves.--When the Secretary 
     determines that all Fund operations have been terminated, the 
     Secretary shall dissolve the Fund. Any unencumbered Fund 
     assets remaining after the satisfaction of all outstanding 
     claims, loans from the Treasury, and other liabilities of the 
     Fund shall be distributed, on a pro rata basis based on 
     premiums paid, to any insurer that--
       (A) participated in the Fund during its operation; and
       (B) demonstrates, to the satisfaction of the Secretary, 
     that any amount received as a distribution from the Fund will 
     be permanently credited to a reserve account maintained by 
     that insurer against claims for industrywide aggregate losses 
     of $2,000,000,000 from--
       (i) acts of terrorism in the United States; or
       (ii) the effects of earthquakes, volcanic eruptions, 
     tsunamis, or hurricanes.
       (2) Retention requirement for tapping reserve.--Amounts 
     credited to a reserve under paragraph (a) may not be used by 
     an insurer to pay claims until the insurer has paid claims 
     for losses resulting from acts or events described in 
     paragraph (1)(B) in excess of 10 percent of that insurer's 
     average gross direct written premiums and policyholders' 
     surplus for covered lines for the most recently ended 
     calendar year for which data are available.
       (3) Officer and director penalties for misuse of 
     reserves.--Any officer or director of an insurer who 
     knowingly authorizes or directs the use of any amount 
     received from the Fund under paragraph (1) for any purpose 
     other than an appropriate use of amounts in the reserve to 
     which the amount is credited shall be guilty of a Class E 
     felony and sentenced in accordance with the provisions of 
     section 3551 of title 18, United States Code.
       (4) Residual distribution to treasury.--Any unencumbered 
     Fund assets remaining after the distribution under paragraph 
     (1) shall be covered into the Treasury of the United States 
     as miscellaneous receipts.

     SEC. 14. DEFINITIONS.

       In this Act:
       (1) Secretary.--Except where otherwise specifically 
     provided, the term ``Secretary'' means the Secretary of 
     Commerce.
       (2) NAIC.--The term ``NAIC'' means the National Association 
     of Insurance Commissioners.
       (3) Fund.--The term ``Fund'' means the National Terrorism 
     Reinsurance Fund established under section 4.
       (4) Participating insurer.--The term ``participating 
     insurer'' means every property and casualty insurer writing 
     on a direct basis a covered line or lines of insurance in any 
     jurisdiction of the United States, its territories, or 
     possessions, including residual market insurers.
       (5) Covered line.--
       (A) In general.--The term ``covered line'' means any one or 
     a combination of the following, written on a direct basis, as 
     reported by property and casualty insurers in required 
     financial reports on Statutory Page 14 of the NAIC Annual 
     Statement Blank:

[[Page 23541]]

       (i) Fire.
       (ii) Allied lines.
       (iii) Commercial multiple peril.
       (iv) Ocean marine.
       (v) Inland marine.
       (vi) Workers compensation.
       (vii) Products liability.
       (viii) Commercial auto no-fault (personal injury 
     protection), other commercial auto liability, or commercial 
     auto physical damage.
       (ix) Aircraft (all peril).
       (x) Fidelity and surety.
       (xi) Burglary and theft.
       (xii) Boiler and machinery.
       (xiii) Any other line of insurance that is reported by 
     property and casualty insurers in required financial reports 
     on Statutory Page 14 of the NAIC Annual Statement Blank which 
     is voluntarily elected by an participating insurer to be 
     included in its reinsurance contract with the Fund.
       (B) Other lines.--For purposes of clause (xiii), the lines 
     of business that may be voluntarily selected are the 
     following:
       (i) Farmowners multiple peril.
       (ii) Homeowners multiple peril.
       (iii) Mortgage guaranty.
       (iv) Financial guaranty.
       (v) Private passenger automobile insurance.
       (C) Election.--The election to voluntarily include another 
     line of insurance, if made, must apply to all affiliated 
     insurers that are members of an insurer group. Any voluntary 
     election is on a one-time basis and is irrevocable.
       (6) Losses.--The term ``losses'' means direct incurred 
     losses from an act of terrorism for covered lines, plus 
     defense and cost containment expenses. Notwithstanding the 
     preceding sentence, a loss shall not be recognized as a loss 
     for the purpose of determining the amount of an insurer's 
     retention or reimbursement under this Act unless the claim 
     for the loss has been paid within 12 months after the 
     terrorism event occurs and other loss adjustments.
       (7) Covered losses.--The term ``covered losses'' means 
     direct losses in excess of the participating insurer's 
     retention.
       (8) Terrorism; act of terrorism.--
       (A) In general.--The terms ``terrorism'' and ``act of 
     terrorism'' mean any act, certified by the Secretary in 
     concurrence with the Secretary of State and the Attorney 
     General, as a violent act or act dangerous to human life, 
     property or infrastructure, within the United States, its 
     territories and possessions, that is committed by an 
     individual or individuals acting on behalf of foreign agents 
     or foreign interests (other than a foreign government) as 
     part of an effort to coerce or intimidate the civilian 
     population of the United States or to influence the policy or 
     affect the conduct of the United States government.
       (B) Acts of war.--No act shall be certified as an act of 
     terrorism if the act is committed in the course of a war 
     declared by the Congress of the United States or by a foreign 
     government.
       (C) Finality of certification.--Any certification, or 
     determination not to certify, by the Secretary under 
     subparagraph (A) is final and not subject to judicial review.
       (9) Insurer.--
       (A) In general.--The term ``insurer'' means an entity 
     writing covered lines on a direct basis and licensed as a 
     property and casualty insurer, risk retention group, or other 
     entity authorized by law as a residual market mechanism 
     providing property or casualty coverage in at least one 
     jurisdiction of the United States, its territories, or 
     possessions.
       (B) Voluntary participation.--A State workers' 
     compensation, auto, or property insurance Fund may 
     voluntarily participate as an insurer.
       (10) Contract year.--The term ``contract year'' means the 
     period of time that obligations exist between a participating 
     insurer and the Fund for a given annual reinsurance contract.



       (11) Retention.--The term ``retention'' means the level of 
     direct losses retained by a participating insurer for which 
     the insurer is not entitled to reimbursement by the Fund.
                                 ______
                                 
      By Mr. McCAIN:
  S. 1744. A bill to ensure the continued financial capacity of 
insurers to provide coverage for risks from terrorism; to the Committee 
on Commerce, Science, and Transportation.
  Mr. McCAIN. Mr. President, while there are few people in the Senate 
more skeptical than I of providing Federal assistance to corporations 
or involving the Federal Government in private industry, the proposed 
wholesale cancellation of terrorism insurance coverage following the 
devastating events of September 11, dictates that Congress act before 
the end of this session to ensure that this coverage continues to be 
available and affordable. Since 1945 when Congress delegated the 
responsibility of regulating insurance to the States, the Federal 
Government has honored this delegation and, with the encouragement of 
state regulators, kept out of the business of insurance.
  In a recent letter to Treasury Secretary O'Neill, however, the 
National Association of Insurance Commissioners, NAIC, implored the 
Federal Government for help. ``What has not been widely reported is 
that insurers are now issuing notices of non-renewal and filing across-
the-board property and casualty exclusions for terrorist risk with 
state insurance regulators,'' the NAIC wrote. ``[W]e need the Federal 
Government to act soon to give certainty to this situation * * * 
further delay inadvertently could cause greater market disruption, thus 
making the need for quick action imperative.'' I agree.
  The bill I am introducing today draws from the many good ideas 
proposed by members of Congress and by the Administration to deal with 
the imminent cancellation of terrorism insurance coverage, and attempts 
also to address concerns raised with each of these proposals. It is by 
no means a perfect bill and I look forward to working with the 
Administration, my colleagues, state insurance commissioners, and other 
interested parties to improve it. While rough, the bill does reflect, 
however, what I believe to be the core principles that should be 
included in any legislation designed to keep terrorism insurance 
affordable and available. These principles include making Federal 
intervention short-term; deferring to states on questions of rate 
regulation; requiring insurance companies and the insurance industry to 
bear enough risk to promote responsible claims handling and to ensure 
that incentives to protect against acts of terrorism are in place; 
fairly allocating the costs of a terrorist event among insurance 
companies, and between policy holders and taxpayers; and generally 
prohibiting the award of punitive damages in claims arising from acts 
of terrorism.
  There has been much debate about whether the taxpayers should bear 
the cost in the short-term of another terrorist event, or whether this 
cost should be borne by policy holders. The answer, perhaps, is that 
the cost should be shared. I propose in this bill that federal 
assistance up to $50 billion be paid back by commercial property and 
casualty policy holders through a capped surcharge on their premiums. 
For Federal assistance between $50 billion and $100 billion, which 
would be required only in the case of a truly catastrophic, perhaps 
cataclysmic event, however, the bill does not require repayment.
  The following is a summary of the major provision of this bill. I 
look forward to working to improve it and to passage of needed 
legislation on terrorism insurance before the end of this session.
  The bill provides a Federal backstop for certain insured losses due 
to acts of terrorism up to $100 billion per year in 2002 and 2003. The 
Federal Government would get involved, however, only if there is an act 
of terrorism during these years that exceeded individual company 
retentions. If a commercial insurer reaches these retention levels, the 
federal government would provide assistance for 80 percent of the 
companies' losses above the retention.
  To provide uniformity, the bill preempts state definitions of 
``terrorism'' and delegates to the Secretary of Commerce the 
responsibility of determining whether or not an act of terrorism has 
occurred.
  Federal assistance is available only to companies whose annual 
terrorism-related losses in certain lines of commercial property and 
casualty insurance exceed the greater of $10 million or 5 percent of 
gross direct written premium in the previous year.
  Only companies that meet the company retention trigger can obtain 
assistance from the Federal Government. Outlays for losses up to $50 
billion are repaid by insurance policy holders through a surcharge 
imposed by the Secretary of Commerce on covered lines and collected by 
commercial insurers. These surcharges cannot exceed 6 percent of annual 
premiums, and the Secretary has the discretion to adjust the surcharge 
to reflect different risks in urban and rural areas.
  Federal outlays up to $50 billion are paid back over time by 
commercial

[[Page 23542]]

property and casualty policy holders. Federal outlays for losses over 
$50 billion are not recoverable.
  Rate regulation is left to the states.
  Except with respect to claims against terrorists and their 
conspirators, punitive damages cannot be recovered in claims arising 
out of acts of terrorism.
                                 ______
                                 
      By Mr. REID (for himself, Mrs. Clinton, Mr. Lieberman and Mr. 
        Jeffords):
  S. 1746. A bill to amend the Atomic Energy Act of 1954 and the Energy 
Reorganization Act of 1974 to strengthen security at sensitive nuclear 
facilities; to the Committee on Environment and Public Works.
  Mr. REID. Mr. President, I would like to discuss an issue of great 
importance to our Nation, the safety of our Nation's nuclear power 
plants.
  The tragedy of September 11 taught us many things: It taught us the 
importance of our first responders. It taught us the vulnerability of 
our Nation's buildings and the strength of our Nation's resolve. 
Finally, it taught us that we must be prepared for today's threats 
because they could become tomorrow's attacks.
  We must not fail to take what we have learned and apply it to the 
vulnerabilities of our Nation's energy and transportation 
infrastructure.
  Less than 1 week ago, the President signed a new law to increase the 
safety at our Nation's airports.
  That act turned the first page in a long struggle to secure our 
Nation's infrastructure.
  Today, I am introducing legislation with Senator Clinton, Senator 
Lieberman, and Senator Jeffords to write the next chapter, which covers 
commercial nuclear facilities.
  I am pleased that Congressman Markey and Congresswoman Lowey will 
introduce a companion bill in the House of Representatives.
  Nuclear facilities provide us with needed electricity, but, in light 
of the events of September 11, they also present a security risk that 
we simply must address.
  When plants are failing nearly half their security evaluations, we 
need to do more than update the curriculum. We need a whole new system.
  There are some plants that do a good job, but it is not enough to 
have peaks of success, we need a new high plateau that secures all 
plants. We can accomplish that by establishing a new nuclear security 
force.
  Our bill also requires the Nuclear Regulatory Commission to take a 
new look at the threats posed by terrorists.
  This is the foundation that will support the efforts of the nuclear 
security force and overall plant security.
  Our bill also establishes a rigorous training and evaluation program 
for the nuclear security force.
  A new office will be established within the Nuclear Regulatory 
Commission with a dedicated team of mock terrorists whose only jobs is 
to perfect their skills in challenging the security guards.
  When professional sports teams practice, the don't do it against 
amateur athletes playing in the park. They train against other 
professionals. Nuclear Security personnel should also.
  Our bill will honor the sacrifice of our Nation's emergency 
responders by ensuring that emergency response plans are in place and 
work as we expect them to.
  Finally, we will require stockpiles of medicine to help out in the 
event of a release of radioactive material from a nuclear facility.
  These potassium iodide tablets block the absorption of harmful iodine 
in the thyroid gland.
  The American people told us how they wanted their airlines and 
airports protected. The Congress and the President listened and acted.
  We will work to make sure their questions about the safety of all our 
Nation's nuclear power plants are also answered.
  This bill starts that process.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1746

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Nuclear Security Act of 
     2001''.

     SEC. 2. DEFINITIONS.

       Section 11 of the Atomic Energy Act of 1954 (42 U.S.C. 
     2014) is amended--
       (1) by redesignating subsection jj. as subsection ii.; and
       (2) by adding at the end the following:
       ``jj. Design Basis Threat.--The term `design basis threat' 
     means the design basis threat established by the Commission 
     under section 73.1 of title 10, Code of Federal Regulations 
     (or any successor regulation developed under section 170C).
       ``kk. Sensitive Nuclear Facility.--The term `sensitive 
     nuclear facility' means--
       ``(1) a commercial nuclear power plant and associated spent 
     fuel storage facility;
       ``(2) a decommissioned nuclear power plant and associated 
     spent fuel storage facility;
       ``(3) a category I fuel cycle facility;
       ``(4) a gaseous diffusion plant; and
       ``(5) any other facility licensed by the Commission, or 
     used in the conduct of an activity licensed by the 
     Commission, that the Commission determines should be treated 
     as a sensitive nuclear facility under section 170C.''.

     SEC. 3. NUCLEAR SECURITY.

       (a) In General.--Chapter 14 of the Atomic Energy Act of 
     1954 (42 U.S.C. 2201 et seq.) is amended by adding at the end 
     the following:

     ``SEC. 170C. PROTECTION OF SENSITIVE NUCLEAR FACILITIES 
                   AGAINST THE DESIGN BASIS THREAT.

       ``(a) Definitions.--In this section:
       ``(1) Nuclear security force.--The term `nuclear security 
     force' means the nuclear security force established under 
     subsection (b)(1).
       ``(2) Fund.--The term `Fund' means the Nuclear Security 
     Fund established under subsection (f).
       ``(3) Qualification standard.--The term `qualification 
     standard' means a qualification standard established under 
     subsection (e)(2)(A).
       ``(4) Security plan.--The term `security plan' means a 
     security plan developed under subsection (b)(2).
       ``(b) Nuclear Security.--The Commission shall--
       ``(1) establish a nuclear security force, the members of 
     which shall be employees of the Commission, to provide for 
     the security of all sensitive nuclear facilities against the 
     design basis threat; and
       ``(2) develop and implement a security plan for each 
     sensitive nuclear facility to ensure the security of all 
     sensitive nuclear facilities against the design basis threat.
       ``(c) Design Basis Threat.--
       ``(1) In general.--Not later than 90 days after the date of 
     enactment of this section, and at least once every 3 years 
     thereafter, the Commission, in consultation with the 
     Assistant to the President for Homeland Security, the 
     Attorney General, the Secretary of Defense, and other 
     Federal, State, and local agencies, as appropriate, shall 
     revise the design basis threat to include--
       ``(A) threats equivalent to--
       ``(i) the events of September 11, 2001;
       ``(ii) a physical, cyber, biochemical, or other terrorist 
     threat;
       ``(iii) an attack on a facility by multiple coordinated 
     teams of a large number of individuals;
       ``(iv) assistance in an attack from several persons 
     employed at the facility;
       ``(v) a suicide attack;
       ``(vi) a water-based or air-based threat;
       ``(vii) the use of explosive devices of considerable size 
     and other modern weaponry;
       ``(viii) an attack by persons with a sophisticated 
     knowledge of the operations of a sensitive nuclear facility; 
     and
       ``(ix) fire, especially a fire of long duration; and
       ``(B) any other threat that the Commission determines 
     should be included as an element of the design basis threat.
       ``(2) Reports.--The Commission shall submit to Congress a 
     report on each revision made under paragraph (1).
       ``(d) Security Plans.--
       ``(1) In general.--Not later than 180 days after the date 
     of enactment of this section, the Commission shall develop a 
     security plan for each sensitive nuclear facility to ensure 
     the protection of each sensitive nuclear facility against the 
     design basis threat.
       ``(2) Elements of the plan.--A security plan shall 
     prescribe--
       ``(A) the deployment of the nuclear security force, 
     including--
       ``(i) numbers of the members of the nuclear security force 
     at each sensitive nuclear facility;
       ``(ii) tactics of the members of the nuclear security force 
     at each sensitive nuclear facility; and
       ``(iii) capabilities of the members of the nuclear security 
     force at each sensitive nuclear facility;
       ``(B) other protective measures, including--
       ``(i) designs of critical control systems at each sensitive 
     nuclear facility;
       ``(ii) restricted personnel access to each sensitive 
     nuclear facility;
       ``(iii) perimeter site security, internal site security, 
     and fire protection barriers;

[[Page 23543]]

       ``(iv) increases in protection for spent fuel storage 
     areas;
       ``(v) placement of spent fuel in dry cask storage; and
       ``(vi) background security checks for employees and 
     prospective employees; and
       ``(C) a schedule for completing the requirements of the 
     security plan not later than 18 months after the date of 
     enactment of this section.
       ``(3) Additional requirements.--A holder of a license for a 
     sensitive nuclear facility under section 103 or 104 or the 
     State or local government in which a sensitive nuclear 
     facility is located may petition the Commission for 
     additional requirements in the security plan for the 
     sensitive nuclear facility.
       ``(4) Implementation of security plan.--Not later than 270 
     days after the date of enactment of this section, the 
     Commission, in consultation with a holder of a license for a 
     sensitive nuclear facility under section 103 or 104, shall, 
     by direct action of the Commission or by order requiring 
     action by the licensee, implement the security plan for the 
     sensitive nuclear facility in accordance with the schedule 
     under paragraph (2)(C).
       ``(5) Sufficiency of security plan.--If at any time the 
     Commission determines that the implementation of the 
     requirements of the security plan for a sensitive nuclear 
     facility is insufficient to ensure the security of the 
     sensitive nuclear facility against the design basis threat, 
     the Commission shall immediately submit to Congress and the 
     President a classified report that--
       ``(A) identifies the vulnerability of the sensitive nuclear 
     facility; and
       ``(B) recommends actions by Federal, State, or local 
     agencies to eliminate the vulnerability.
       ``(e) Nuclear Security Force.--
       ``(1) In general.--Not later than 90 days after the date of 
     enactment of this section, the Commission, in consultation 
     with other Federal agencies, as appropriate, shall establish 
     a program for the hiring and training of the nuclear security 
     force.
       ``(2) Hiring.--
       ``(A) Qualification standards.--Not later than 30 days 
     after the date of enactment of this section, the Commission 
     shall establish qualification standards that individuals 
     shall be required to meet to be hired by the Commission as 
     members of the nuclear security force.
       ``(B) Examination.--The Commission shall develop and 
     administer a nuclear security force personnel examination for 
     use in determining the qualification of individuals seeking 
     employment as members of the nuclear security force.
       ``(C) Criminal and security background checks.--The 
     Commission shall require that an individual to be hired as a 
     member of the nuclear security force undergo a criminal and 
     security background check.
       ``(D) Disqualification of individuals who present national 
     security risks.--The Commission, in consultation with the 
     heads of other Federal agencies, as appropriate, shall 
     establish procedures, in addition to any background check 
     conducted under subparagraph (B), to ensure that no 
     individual who presents a threat to national security is 
     employed as a member of the nuclear security force.
       ``(3) Annual proficiency review.--
       ``(A) In general.--The Commission shall provide that an 
     annual evaluation of each member of the nuclear security 
     force is conducted and documented.
       ``(B) Requirements for continuation.--An individual 
     employed as a member of the nuclear security force may not 
     continue to be employed in that capacity unless the 
     evaluation under subparagraph (A) demonstrates that the 
     individual--
       ``(i) continues to meet all qualification standards;
       ``(ii) has a satisfactory record of performance and 
     attention to duty; and
       ``(iii) has the knowledge and skills necessary to 
     vigilantly and effectively provide for the security of a 
     sensitive nuclear facility against the design basis threat.
       ``(4) Training.--
       ``(A) In general.--The Commission shall provide for the 
     training of each member of the nuclear security force to 
     ensure each member has the knowledge and skills necessary to 
     provide for the security of a sensitive nuclear facility 
     against the design basis threat.
       ``(B) Training plan.--Not later than 60 days after the date 
     of enactment of this section, the Commission shall develop a 
     plan for the training of members of the nuclear security 
     force.
       ``(C) Use of other agencies.--The Commission may enter into 
     a memorandum of understanding or other arrangement with any 
     other Federal agency with appropriate law enforcement 
     responsibilities, to provide personnel, resources, or other 
     forms of assistance in the training of members of the nuclear 
     security force.
       ``(f) Nuclear Security Fund.--
       ``(1) Establishment.--There is established in the Treasury 
     of the United States a fund to be known as the `Nuclear 
     Security Fund', which shall be used by the Commission to 
     administer programs under this section to provide for the 
     security of sensitive nuclear facilities.
       ``(2) Deposits in the fund.--The Commission shall deposit 
     in the Fund--
       ``(A) the amount of fees collected under paragraph (5); and
       ``(B) amounts appropriated under subsection (g).
       ``(3) Investment of amounts.--
       ``(A) In general.--The Secretary of the Treasury shall 
     invest such portion of the Fund as is not, in the judgment of 
     the Secretary of the Treasury, required to meet current 
     withdrawals. Investments may be made only in interest-bearing 
     obligations of the United States.
       ``(B) Acquisition of obligations.--For the purpose of 
     investments under subparagraph (A), obligations may be 
     acquired--
       ``(i) on original issue at the issue price; or
       ``(ii) by purchase of outstanding obligations at the market 
     price.
       ``(C) Sale of obligations.--Any obligation acquired by the 
     Fund may be sold by the Secretary of the Treasury at the 
     market price.
       ``(D) Credits to fund.--The interest on, and the proceeds 
     from the sale or redemption of, any obligations held in the 
     Fund shall be credited to and form a part of the Fund.
       ``(4) Use of amounts in the fund.--The Commission shall use 
     amounts in the Fund to pay the costs of--
       ``(A) salaries, training, and other expenses of the nuclear 
     security force; and
       ``(B) developing and implementing security plans.
       ``(5) Fee.--To ensure that adequate amounts are available 
     to provide assistance under paragraph (4), the Commission 
     shall assess licensees a fee in an amount determined by the 
     Commission, not to exceed 1 mill per kilowatt-hour of 
     electricity generated by a sensitive nuclear facility.
       ``(g) Authorization of Appropriations.--There are 
     authorized to be appropriated such sums as are necessary to 
     carry out this section.''.
       (b) Implementation.--The Commission shall complete the full 
     implementation of the amendment made by subsection (a) as 
     soon as practicable after the date of enactment of this Act, 
     but in no event later than 270 days after the date of 
     enactment of this Act.
       (c) Technical and Conforming Amendment.--The table of 
     contents for chapter 14 of the Atomic Energy Act of 1954 (42 
     U.S.C. prec. 2011) is amended by adding at the end the 
     following:

``Sec. 170B. Uranium supply.
``Sec. 170C. Protection of sensitive nuclear facilities against the 
              design basis threat.''.

     SEC. 4. OPERATION SAFEGUARDS AND RESPONSE UNIT.

       Section 204 of the Energy Reorganization Act of 1974 (42 
     U.S.C. 5844) is amended by adding at the end the following:
       ``(d) Operation Safeguards and Response Unit.--
       ``(1) Definitions.--In this subsection:
       ``(A) Assistant director.--The term `Assistant Director' 
     means the Assistant Director for Operation Safeguards and 
     Response.
       ``(B) Design basis threat.--The term `design basis threat' 
     has the meaning given the term in section 11 of the Atomic 
     Energy Act of 1954 (42 U.S.C. 2014).
       ``(C) Sensitive nuclear facility.--The term `sensitive 
     nuclear facility' has the meaning given the term in section 
     11 of the Atomic Energy Act of 1954 (42 U.S.C. 2014).
       ``(D) Unit.--The term `Unit' means the Operation Safeguards 
     and Response Unit established under paragraph (2)(A).
       ``(2) Establishment of unit.--
       ``(A) In general.--There is established within the Office 
     of Nuclear Material Safety and Safeguards the Operation 
     Safeguards and Response Unit.
       ``(B) Head of unit.--The Unit shall be headed by the 
     Assistant Director for Operation Safeguards and Response.
       ``(C) Duties.--The Assistant Director shall--
       ``(i) establish a program for the conduct of operation 
     safeguards and response evaluations under paragraph (3); and
       ``(ii) establish a program for the conduct of emergency 
     response exercises under paragraph (4).
       ``(D) Mock terrorist team.--The personnel of the Unit shall 
     include a Mock Terrorist Team comprised of--
       ``(i) not fewer than 20 individuals with advanced knowledge 
     of special weapons and tactics comparable to special 
     operations forces of the Armed Forces;
       ``(ii) at least 1 nuclear engineer;
       ``(iii) for each evaluation at a sensitive nuclear facility 
     under paragraph (3), at least 1 individual with knowledge of 
     the operations of the sensitive nuclear facility who is 
     capable of actively disrupting the normal operations of the 
     sensitive nuclear facility; and
       ``(iv) any other individual that the Assistant Director 
     determines should be a member of the Mock Terrorist Team.
       ``(3) Operation safeguards and response evaluations.--
       ``(A) In general.--Not later than 1 year after the date of 
     enactment of this subsection, the Assistant Director shall 
     establish an operation safeguards and response evaluation 
     program to assess the ability of each sensitive nuclear 
     facility to defend against the design basis threat.
       ``(B) Frequency of evaluations.--Not less often than once 
     every 2 years, the Assistant

[[Page 23544]]

     Director shall conduct and document operation safeguards and 
     response evaluations at each sensitive nuclear facility to 
     assess the ability of the members of the nuclear security 
     force at the sensitive nuclear facility to defend against the 
     design basis threat.
       ``(C) Activities.--The evaluation shall include 2 or more 
     force-on-force exercises by the Mock Terrorist Team against 
     the sensitive nuclear facility that simulate air, water, and 
     land assaults (as appropriate).
       ``(D) Criteria.--The Assistant Director shall establish 
     criteria for judging the success of the evaluations.
       ``(E) Corrective action.--If a sensitive nuclear facility 
     fails to complete successfully an operation safeguards and 
     response evaluation, the Commission shall require additional 
     operation safeguards and response evaluations not less often 
     than once every 6 months until the sensitive nuclear facility 
     successfully completes an operation safeguards and response 
     evaluation.
       ``(F) Reports.--Not less often than once every year, the 
     Commission shall submit to Congress and the President a 
     report that describes the results of each operation 
     safeguards and response evaluation under this paragraph for 
     the previous year.
       ``(4) Emergency response exercises.--
       ``(A) In general.--Not later than 1 year after the date of 
     enactment of this subsection, the Assistant Director, in 
     consultation with the Assistant to the President for Homeland 
     Security, the Director of the Federal Emergency Management 
     Agency, the Attorney General, and other Federal, State, and 
     local agencies, as appropriate, shall establish an emergency 
     response program to evaluate the ability of Federal, State, 
     and local emergency response personnel within a 50-mile 
     radius of a sensitive nuclear facility to respond to a 
     radiological emergency at the sensitive nuclear facility.
       ``(B) Frequency.--Not less often than once every 3 years, 
     the Assistant Director shall conduct emergency response 
     exercises to evaluate the ability of Federal, State, and 
     local emergency response personnel within a 50-mile radius of 
     a sensitive nuclear facility to respond to a radiological 
     emergency at the sensitive nuclear facility.
       ``(C) Activities.--The response exercises shall evaluate--
       ``(i) the response capabilities, response times, and 
     coordination and communication capabilities of the response 
     personnel;
       ``(ii) the effectiveness and adequacy of emergency response 
     plans, including evacuation plans; and
       ``(iii) the ability of response personnel to distribute 
     potassium iodide or other prophylactic medicines in an 
     expeditious manner.
       ``(D) Revision of emergency response plans.--The Commission 
     shall revise the emergency response plan for a sensitive 
     nuclear facility to correct for any deficiencies identified 
     by an evaluation under this paragraph.
       ``(E) Reports.--Not less often than once every year, the 
     Commission shall submit to Congress and the President a 
     report that describes--
       ``(i) the results of each emergency response exercise under 
     this paragraph conducted in the previous year; and
       ``(ii) each revision of an emergency response plan made 
     under subparagraph (D) for the previous year.''.

     SEC. 5. POTASSIUM IODIDE STOCKPILES.

       Section 170 of the Atomic Energy Act of 1954 (42 U.S.C. 
     2210) is amended by adding at the end the following:
       ``u. Not later than 180 days after the date of enactment of 
     this subsection, the Commission, in consultation with the 
     Director of the Federal Emergency Management Agency, the 
     Secretary of Health and Human Services, and other Federal, 
     State, and local agencies, as appropriate, shall--
       ``(1) ensure that sufficient stockpiles of potassium iodide 
     tablets have been established at public facilities (such as 
     schools and hospitals) within at least a 50-mile radius of 
     all sensitive nuclear facilities;
       ``(2) develop plans for the prompt distribution of the 
     stockpiles described in paragraph (1) to all individuals 
     located within at least a 50-mile radius of a sensitive 
     nuclear facility in the event of a release of radionuclides; 
     and
       ``(3) submit to Congress a report--
       ``(A) certifying that stockpiles have been established as 
     described in paragraph (1); and
       ``(B) including the plans described in paragraph (2).''.

     SEC. 6. DEFENSE OF FACILITIES.

       (a) In General.--In a case in which a state of war or 
     national emergency exists, the Commission shall--
       (1) request the Governor of each State in which a sensitive 
     nuclear facility is located to deploy the National Guard to 
     each sensitive nuclear facility in that State; and
       (2) request the President to--
       (A) deploy the Coast Guard to sensitive nuclear facilities 
     on the coastline of the United States; and
       (B) restrict air space in the vicinity of sensitive nuclear 
     facilities in the United States.
       (b) Authorization of Appropriations.--There are authorized 
     to be appropriated such sums as are necessary to carry out 
     this section.

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