[Congressional Record (Bound Edition), Volume 151 (2005), Part 21]
[Senate]
[Pages 29037-29040]
[From the U.S. Government Publishing Office, www.gpo.gov]




                  TERRORISM RISK INSURANCE ACT OF 2005

  Mr. FRIST. I ask unanimous consent the Chair now lay before the 
Senate the House message to accompany S. 467, a bill to extend the 
applicability of the Terrorism Risk Insurance Act of 2002.
  The Presiding Officer laid before the Senate the following message 
from the House of Representatives:
  Resolved that the bill from the Senate S. 467 entitled `` An Act to 
extend the applicability of the Terrorism Risk Insurance Act of 2002,'' 
do pass with an amendment.
  Mr. REID. Mr. President, make a few remarks about final passage of 
the Terrorism Risk Insurance Extension Act of 2005. Let me start by 
thanking Senators Sarbanes, Dodd, Shelby and Bennett for their tireless 
effort in the last several months to pass this critical piece of 
legislation. These Senators worked through significant differences on 
the substance of this bill and ultimately reached a compromise with the 
House that extends the basic structure of this important program for 
another 2 years, and I commend them for those efforts.
  The Terrorism Risk Insurance Act, commonly referred to as TRIA, has 
proven to be an effective program that has made terrorism risk 
insurance available to commercial propertyholders and has provided 
businesses meaningful access to coverage in a post-9/11 world. The 
program has made sure that the American economy and markets function in 
the face of a still-present threat of a terrorist attack. In my home 
State of Nevada, large construction projects and jobs were threatened 
because of uncertainty in the terrorism insurance market created by 
TRIA's imminent expiration.

[[Page 29038]]

Extending TRIA will eliminate that uncertainty and provide an economic 
backstop in the event of another terrorist attack in this country.
  Our Nation's economy will be more stable now that TRIA will be 
extended, but I remind my colleagues that this legislation only extends 
the program through the end of 2007. Fortunately, the legislation 
mandates that the President's Working Group on Financial Markets 
consult with other stakeholders and come up with an analysis of the 
long-term availability and affordability of terrorism risk insurance. I 
look forward to future discussions and continued work on crafting a 
permanent solution to these problems.
  Mr. SARBANES. Mr. President, I join my colleagues in support of the 
Terrorism Risk Insurance Extension Act of 2005. This legislation 
represents a bipartisan, bi-cameral compromise to extend the Terrorism 
Risk Insurance Act of 2002 for 2 years, through December 31, 2007. I 
want to take this opportunity to congratulate my colleagues, as it is 
through the hard work of Banking Committee Chairman Shelby and Senators 
Dodd and Bennett, along with the House negotiators, led by Financial 
Services Committee Chairman Oxley and ranking member Frank, that we 
have been able to work out this compromise and ensure that TRIA 
continues.
  As I said when the Senate first considered a TRIA extension bill in 
November of this year, the original TRIA was designed to address the 
adverse impact on the terrorism insurance marketplace of the sudden 
lack of terrorism reinsurance after the September 11th attacks. 
Reinsurance is a mechanism by which insurance companies spread their 
own risks, allowing them to write more policies; without it, insurers' 
capacity to offer coverage for losses due to terrorism shrank 
considerably. By all accounts, the federal backstop provided by TRIA 
achieved its goal of making terrorism insurance coverage available and 
affordable once again. The Treasury Department reported this summer, 
``TRIA was effective in terms of the purposes it was designed to 
achieve. TRIA provided a transitional period during which insurers had 
enhanced financial capacity to write terrorism risk insurance coverage. 
. . . More generally, TRIA provided an adjustment period allowing both 
insurers and policyholders to adjust to the post-September 11th view of 
terrorism risk.''
  However, after the Treasury Department released its report, serious 
disagreements emerged as to what would be the most efficient, 
effective, and equitable way to assure the continued availability of 
terrorism insurance. This is an issue that deserves careful analysis, 
which is why this extension bill contains a requirement for a study by 
the President's Working Group on Financial Markets on the long-term 
availability and affordability of terrorism risk insurance. I hope that 
this requirement will result in a thorough examination of the issues 
and will include input from all stakeholders, which will help us answer 
the question of how to insure against terrorism over the long-term.
  To allow time for that examination to take place, this compromise 
legislation continues the TRIA program for 2 additional years, with 
certain modifications, which I will briefly summarize.
  Following the model of the extension bill passed by the Senate in 
November of this year, this legislation narrows the scope of the TRIA 
program, further targeting the program toward the types of terrorism 
insurance that are the most difficult to provide. Under the terms of 
the extension, the federal backstop will no longer be available for 
insurance policies covering commercial automobiles, professional 
liability, burglary and theft, farm owners, multiple peril, and surety.
  Just as the original TRIA did, this extension places more of the risk 
on the insurance industry, and correspondingly less on the Federal 
Government, in each year. For example, in 2005, under the current 
program, the amount of terrorism losses that an insurer must cover 
before federal assistance becomes available is 15 percent of the 
premiums collected by that insurer in lines covered by the TRIA 
program. Under this extension, this ``insurance company deductible'' 
will rise to 17.5 percent of premiums in 2006, and 20 percent of 
premiums in 2007. Moreover, the amount that insurers must pay above 
their deductible also increases, rising from 10 percent of losses in 
2006, to 15 percent of losses in 2007.
  In addition to the individual insurance companies' deductible, the 
insurance industry as a whole must cover a certain amount of losses 
before federal assistance becomes available. In 2005, the last year of 
the current TRIA program, that amount is $15 billion. Under this 
legislation, that amount will rise to $25 billion in 2006, and $27.5 
billion in 2007, an increase from the amounts included in the 
legislation originally passed by the Senate in November.
  Also, after March 31, 2006, no federal assistance will be available 
at all under the program for a terrorist attack in which total losses 
do not exceed $50 million, a level which rises to $100 million in 2007. 
The starting date for this increase in the trigger level is later than 
it was in the bill passed by the Senate in November, to allow the 
insurance industry and policyholders a grace period in which to adapt 
to the new level.
  Finally, I want to emphasize that this compromise legislation, like 
the extension bills passed by both the Senate and the House earlier 
this year, retains a critically important piece of the current TRIA 
program: the requirement that insurers make terrorism coverage 
available to policyholders in all of the lines covered by TRIA.
  These provisions follow the framework of the existing TRIA program, 
keeping the federal backstop in place so that insurers will continue 
writing terrorism policies, while placing progressively more of the 
costs onto the industry itself. As with any compromise product, no one 
would say that the legislation is perfect. But it is a serious effort 
to address the concerns we have heard raised regarding TRIA and the 
potential effects of its expiration, and I urge my colleagues to join 
me in supporting it.
  Mr. SCHUMER. Mr. President, I express my unwavering support for S. 
467, the Terrorism Risk Insurance Revision Act of 2005, introduced by 
my friend, Senator Dodd of Connecticut.
  I would like to commend Senators Dodd, Bennett, Shelby, and Sarbanes 
for getting a bill done that we can all stand here and be proud to 
support. A bill that is good for this country and good for the State of 
New York.
  At long last builders and insurers of major projects in large cities, 
particularly New York, can breathe a sigh of relief; terrorism 
insurance will be renewed. It never should have taken this long, but at 
least we know this protection will be available for another 2 years.
  We still live in America, and particularly in my city of New York, in 
the shadow of 9/11, of the terrorism that occurred. Obviously, the 
thousands of families who have had a loved one taken from their midst 
live with it every moment of their remaining lives, but the rest of us 
live with it too, not only in empathy for them but also in terms of the 
economic consequences of terrorism.
  The bottom line is very simple, and that is, because of terrorism, 
the insurance industry, in terms of insuring risk of large structures 
in America--whether it be large buildings that make us so proud of the 
Manhattan skyline, or large arenas such as the football stadiums that 
dot America, or larger facilities such as Disneyland, Disney World, and 
amusement parks--all have difficulty getting insurance.
  Insurers are worried that if, God forbid, another terrorist act 
occurs it will be so devastating that it will put them out of business.
  So 2 years ago, the Senate, House, and the President got together at 
sort of the end of the day, just like today, and passed terrorism risk 
insurance.
  It has been a large success. That no one can dispute.
  Insurance rates have come down, terrorism insurance is available, and 
insurance companies know if, God forbid, the worst happens there will 
be a backstop, and they are willing to issue policies.

[[Page 29039]]

  In turn, that meant developers, builders who wanted to build new 
large structures in America, did so, employing thousands and thousands 
of people, creating profits and new businesses as well.
  Well today we are all here to do the right thing. Yesterday, the 
Banking Committee, of which I am member, passed unanimously a bill to 
extend the TRIA. In this bill we have kept the trigger levels 
manageable for the policyholder community. We kept the retention levels 
at a responsible level for the private market, retaining the public/
private nature of the program.
  The bottom line is that we have made some necessary modifications to 
the program without losing the major protections. We did not all agree 
what should have been in the bill. Many of us felt strongly about 
including Group Life and protections against nuclear, biological, 
chemical and radiological attacks. But the beauty of the process is 
that it is a negotiation where we all give and take.
  This bill is a good compromise.
  The continuation of this program is vital to our Nation's economic 
stability. By passing this bill on the floor today, we will be sending 
a message to the world that our financial markets will be protected. 
That our country will be able to bounce back in the event of any 
disruptions or financial dislocation caused by another possible 
terrorist attack.
  It is still my strong belief that there needs to be a long-term 
solution--a permanent program. The President has continued to say that 
we are fighting a war on terrorism.
  The bombing in Jordan last week, the London bombings this past July, 
and the recent threat to the New York subway system are a few examples 
of why we must continue fighting this war on terrorism.
  It would have been my preference to get a bill that extended beyond 2 
years. But I am at least pleased to know that there was a serious 
effort to address this concern by including a provision to create a 
commission that would begin to analyze the long-term availability and 
affordability of insurance for terrorism risk.
  I would particularly like to thank Senators Dodd and Shelby for 
specifically including the language I requested which directs the 
President's Working Group to analyze the long-term affordability and 
availability of coverage for chemical, nuclear, biological and 
radiological events.
  This is an issue of great importance to many New Yorkers. Many 
retailers and business owners in Lower Manhattan are afraid of a 
possible dirty bombs attack and the availability of insurance for such 
an event. This must be addressed and right away.
  The bottom line is that financial dislocation caused by another 
possible terrorist attack--God forbid--is too much for our country to 
risk. I urge the entire Senate to pass this legislation today. It is 
only right that we let the markets, let the insurance world, and, most 
of all, let jobs and construction go forth.
  (At the request of Mr. Reid, the following statement was ordered to 
be printed in the Record.)
 Mr. DODD. Mr President, I rise to lend my strong support for 
S. 467, the Terrorism Risk Insurance Extension Act of 2005, which I 
originally introduced with Senator Bennett and 34 cosponsors earlier 
this year. The product before the Senate today was amended in committee 
with the hard work and leadership of Banking Committee Chairman Shelby 
and Ranking Member Sarbanes. Additionally, S. 467 addresses many of the 
ideas and concerns raised by the House in its version of the 
legislation. I would like to thank House Financial Services Committee 
Chairman Oxley and Ranking Member Frank for their hard work in finding 
consensus on this measure.
  I would like to commend the members on the Banking Committee: 
Senators Johnson, Reed, Schumer, Bayh, Carper, Stabenow, Corzine, 
Hagel, Bunning and Dole as well as the other cosponsors of the 
legislation for recognizing-- very early on--how important extending 
the Terrorism Risk Insurance Act, TRIA, was to our Nation's economy and 
for their efforts on this legislation.
  I would also like to thank the staff who worked on this legislation, 
particularly Sarah Kline and Steve Harris from Senator Sarbane's staff, 
Mike Nielsen from Senator Bennett's staff, Alex Sternhell from my staff 
and Jim Johnson, Andrew Olmem, Mark Oesterle and Kathy Casey from 
Senator Shelby's staff.
  Like many bills, this legislation is a document of compromise. We 
have carefully taken into consideration the recommendations of 
policyholders, insurers, consumers, academics, think-
tanks, the Treasury Department and others to craft this important 
extension legislation.
  Let me take a few brief moments to provide my colleagues with a 
little background on TRIA and why it needs to be extended today.
  As a result of the tragic terrorist acts events of 9/11, we 
repeatedly heard from businesses, large and small, from labor unions 
and manufacturers, from hospitals to hotels, from professional sports 
teams to utility companies, from insurers and the insured about the 
need for the Federal Governmment to act to help them receive financial 
protection from future terrorist attacks.
  Congress listened, and we acted--creating the Terrorism Risk 
Insurance Act, TRIA.
  In November 2002, TRIA was passed by both the House and Senate by 
significant margins and was signed into law. It created a 3-year 
program establishing a Federal backstop against catastrophic losses in 
the property and casualty insurance marketplace.
  And we heard an ovehelming response trom policyholders across the 
country--TRIA has worked. It has achieved its primary goal--continued 
availability and affordability of insurance against future terrorist 
attacks.
  Industries as diverse as commercial real estate, shipping, 
construction, manufacturing, and even ``mom and pop'' retailers require 
insurance to obtain credit, loans, and investments necessary for their 
normal business operations. TRIA was designed to do just that--restore 
``business as usual'' in every State across our Nation.
  I believe that the greatest indicator of the success of TRIA is what 
we have heard over the past 3 years since the enactment of TRIA--public 
outcry from businesses and workers whose livelihoods are threatened by 
their inability to purchase coverage against acts of terror.
  Construction projects are no longer stalled, mortgages are no longer 
in doubt, jobs are no longer in jeopardy as a result of the inability 
to receive terrorism insurance.
  Not only has TRIA been effective in ensuring that terrorism is 
available and affordable, and that our economy remains vibrant, it is 
also an incredibly important taxpayer protection law. With relatively 
little money necessary to fund the administration of the TRIA program, 
we have ensured that insurers and policyholders take the first $30 to 
$40 billion of losses of a potential terrorist attack.
  Additionally, there is one provision in this legislation that I 
believe is an important component--the mandate for the President's 
Working Group--our Nation's Federal financial regulators--to do an 
analysis of the long-term availability and affordability of terrorism 
risk insurance.
  This legislation provides for a 2-year extension of TRIA--and in 
these next 2 years we need to find a long-term solution to this issue. 
It may be determined that this is an unwritable risk for the private 
sector and that a continued Federal role is needed or we may find that 
insurers are able to return to underwriting this risk without a Federal 
backstop. But we need to start work on developing this information and 
potential solutions as soon as possible.
  The enactment of this legislation will extend the TRIA program and 
will ensure that our Nation and its economy are best prepared to deal 
with a future terrorist attack. I urge my colleagues to support this 
important legislation.
  Mr. FRIST. Mr. President, I ask unanimous consent the Senate concur 
in the House amendment with a further

[[Page 29040]]

amendment which is at the desk, the amendment be agreed to, the motion 
to reconsider be laid upon the table, and any statements be printed in 
the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment (No. 2689) was agreed to, as follows:

            (Purpose: To provide for a complete substitute)

       In lieu of the matter proposed to be inserted, insert the 
     following:

     SECTION 1. SHORT TITLE.

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

     SEC. 2. EXTENSION OF TERRORISM RISK INSURANCE PROGRAM.

       (a) Program Extension.--Section 108(a) of the Terrorism 
     Risk Insurance Act of 2002 (15 U.S.C. 6701 note; 116 Stat. 
     2336) is amended by striking ``2005'' and inserting ``2007''.
       (b) Mandatory Availability.--Section 103(c) of the 
     Terrorism Risk Insurance Act of 2002 (15 U.S.C. 6701 note; 
     116 Stat. 2327) is amended--
       (1) by striking paragraph (2);
       (2) by striking ``AVAILABILITY.--'' and all that follows 
     through ``each entity'' and inserting ``AVAILABILITY.--During 
     each Program Year, each entity''; and
       (3) by redesignating subparagraphs (A) and (B) as 
     paragraphs (1) and (2), respectively, and moving the margins 
     2 ems to the left.

     SEC. 3. AMENDMENTS TO DEFINED TERMS.

       (a) Program Years.--Section 102(11) of the Terrorism Risk 
     Insurance Act of 2002 (15 U.S.C. 6701 note; 116 Stat. 2326) 
     is amended by adding at the end the following:
       ``(E) Program year 4.--The term `Program Year 4' means the 
     period beginning on January 1, 2006 and ending on December 
     31, 2006.
       ``(F) Program year 5.--The term `Program Year 5' means the 
     period beginning on January 1, 2007 and ending on December 
     31, 2007.''.
       (b) Exclusions From Covered Lines.--
       (1) In general.--Section 102(12)(B) of the Terrorism Risk 
     Insurance Act of 2002 (15 U.S.C. 6701 note; 116 Stat. 2326) 
     is amended--
       (A) in clause (vi), by striking ``or'' at the end;
       (B) in clause (vii), by striking the period at the end and 
     inserting a semicolon; and
       (C) by adding at the end the following:
       ``(viii) commercial automobile insurance;
       ``(ix) burglary and theft insurance;
       ``(x) surety insurance;
       ``(xi) professional liability insurance; or
       ``(xii) farm owners multiple peril insurance.''.
       (2) Conforming amendment.--Section 102(12)(A) of the 
     Terrorism Risk Insurance Act of 2002 (15 U.S.C. 6701 note; 
     116 Stat. 2326) is amended by striking ``surety insurance'' 
     and inserting ``directors and officers liability insurance''.
       (c) Insurer Deductibles.--Section 102(7) of the Terrorism 
     Risk Insurance Act of 2002 (15 U.S.C. 6701 note; 116 Stat. 
     2325) is amended--
       (1) in subparagraph (D), by striking ``and'' at the end;
       (2) by redesignating subparagraph (E) as subparagraph (G);
       (3) by inserting after subparagraph (D), the following:
       ``(E) for Program Year 4, the value of an insurer's direct 
     earned premiums over the calendar year immediately preceding 
     Program Year 4, multiplied by 17.5 percent;
       ``(F) for Program Year 5, the value of an insurer's direct 
     earned premiums over the calendar year immediately preceding 
     Program Year 5, multiplied by 20 percent; and''; and
       (4) in subparagraph (G), as so redesignated, by striking 
     ``through (D)'' and all that follows through ``Year 3''and 
     inserting the following: ``through (F), for the Transition 
     Period or any Program Year''.

     SEC. 4. INSURED LOSS SHARED COMPENSATION.

       Section 103(e) of the Terrorism Risk Insurance Act of 2002 
     (15 U.S.C. 6701 note; 116 Stat. 2328) is amended--
       (1) in paragraph (1)--
       (A) by inserting ``through Program Year 4'' before ``shall 
     be equal''; and
       (B) by inserting ``, and during Program Year 5 shall be 
     equal to 85 percent,'' after ``90 percent''; and
       (2) in each of paragraphs (2) and (3), by striking 
     ``Program Year 2 or Program Year 3'' each place that term 
     appears and inserting ``any of Program Years 2 through 5''.

     SEC. 5. AGGREGATE RETENTION AMOUNTS AND RECOUPMENT OF FEDERAL 
                   SHARE.

       (a) Aggregate Retention Amounts.--Section 103(e)(6) of the 
     Terrorism Risk Insurance Act of 2002 (15 U.S.C. 6701 note; 
     116 Stat. 2329) is amended--
       (1) in subparagraph (B), by striking ``and'' at the end;
       (2) in subparagraph (C), by striking the period at the end 
     and inserting a semicolon; and
       (3) by adding at the end the following:
       ``(D) for Program Year 4, the lesser of--
       ``(i) $25,000,000,000; and
       ``(ii) the aggregate amount, for all insurers, of insured 
     losses during such Program Year; and
       ``(E) for Program Year 5, the lesser of--
       ``(i) $27,500,000,000; and
       ``(ii) the aggregate amount, for all insurers, of insured 
     losses during such Program Year.''.
       (b) Recoupment of Federal Share.--Section 103(e)(7) of the 
     Terrorism Risk Insurance Act of 2002 (15 U.S.C. 6701 note; 
     116 Stat. 2329) is amended--
       (1) in subparagraph (A), by striking ``, (B), and (C)'' and 
     inserting ``through (E)''; and
       (2) in each of subparagraphs (B) and (C), by striking 
     ``subparagraph (A), (B), or (C)'' each place that term 
     appears and inserting ``any of subparagraphs (A) through 
     (E)''.

     SEC. 6. PROGRAM TRIGGER.

       Section 103(e)(1) of the Terrorism Risk Insurance Act of 
     2002 (15 U.S.C. note, 116 Stat. 2328) is amended--
       (1) by redesignating subparagraph (B) as subparagraph (C); 
     and
       (2) by inserting after subparagraph (A) the following:
       ``(B) Program trigger.--In the case of a certified act of 
     terrorism occurring after March 31, 2006, no compensation 
     shall be paid by the Secretary under subsection (a), unless 
     the aggregate industry insured losses resulting from such 
     certified act of terrorism exceed--
       ``(i) $50,000,000, with respect to such insured losses 
     occurring in Program Year 4; or
       ``(ii) $100,000,000, with respect to such insured losses 
     occurring in Program Year 5.''.

     SEC. 7. LITIGATION MANAGEMENT.

       Section 107(a) of the Terrorism Risk Insurance Act of 2002 
     (15 U.S.C. 6701 note; 116 Stat. 2335) is amended by adding at 
     the end the following:
       ``(6) Authority of the secretary.--Procedures and 
     requirements established by the Secretary under section 50.82 
     of part 50 of title 31 of the Code of Federal Regulations (as 
     in effect on the date of issuance of that section in final 
     form) shall apply to any cause of action described in 
     paragraph (1) of this subsection.''.

     SEC. 8. ANALYSIS AND REPORT ON TERRORISM RISK COVERAGE 
                   CONDITIONS AND SOLUTIONS.

       Section 108 of the Terrorism Risk Insurance Act of 2002 (15 
     U.S.C. 6701 note; 116 Stat. 2336) is amended by adding at the 
     end the following:
       ``(e) Analysis of Market Conditions for Terrorism Risk 
     Insurance.--
       ``(1) In general.--The President's Working Group on 
     Financial Markets, in consultation with the National 
     Association of Insurance Commissioners, representatives of 
     the insurance industry, representatives of the securities 
     industry, and representatives of policy holders, shall 
     perform an analysis regarding the long-term availability and 
     affordability of insurance for terrorism risk, including--
       ``(A) group life coverage; and
       ``(B) coverage for chemical, nuclear, biological, and 
     radiological events.
       ``(2) Report.--Not later than September 30, 2006, the 
     President's Working Group on Financial Markets shall submit a 
     report to the Committee on Banking, Housing, and Urban 
     Affairs of the Senate and the Committee on Financial Services 
     of the House of Representatives on its findings pursuant to 
     the analysis conducted under subsection (a).''.

  The bill (S. 467), as amended, was passed.
  Mr. FRIST. This bill, the Terrorism Risk Extension Act, was enacted 3 
years ago in the aftermath of the September 11 attacks and was intended 
at the time to provide temporary mechanisms to allow the marketplace to 
adapt after the economic dislocations that resulted from those attacks 
on September 11.
  This summer, Treasury Secretary Snow issued a report highlighting the 
importance of allowing private insurance companies to regain their hold 
in the marketplace. As the report showed, TRIA successfully bridged 
that gap created by the September 11 terrorist attacks and very 
effectively enabled the insurance marks to stabilize.
  The continued presence of the federally backed subsidy risked 
crowding out private market initiatives and slowing down, impeding the 
development of private market solutions. That is why I called for an 
extension of TRIA that was narrow, that was targeted and minimized 
interference with our markets.
  The bill we just passed achieves that goal. The taxpayers' exposure 
is lessened by reducing the lines of coverage subject to the Federal 
backstop, and the insurance industry's exposure is increased.
  I am gratified we passed the bill. Over the long term the Federal 
Government cannot be a substitute for market-based solutions.
  I thank Chairman Shelby and Senator Dodd for their hard work on this 
very important bill. It hasn't been easy, but it has now been 
accomplished.

                          ____________________