[Senate Report 105-140]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 274
105th Congress                                                   Report
                                 SENATE

 1st Session                                                    105-140
_______________________________________________________________________


 
             AVIATION INSURANCE REAUTHORIZATION ACT OF 1997

                               __________

                              R E P O R T

                                 OF THE

           COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                                   on

                                S. 1193





                November 6, 1997.--Ordered to be printed


       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       one hundred fifth congress

                             first session

                     JOHN McCAIN, Arizona, Chairman

TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
SLADE GORTON, Washington             WENDELL H. FORD, Kentucky
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas            Virginia
OLYMPIA SNOWE, Maine                 JOHN F. KERRY, Massachusetts
JOHN ASHCROFT, Missouri              JOHN B. BREAUX, Louisiana
BILL FRIST, Tennessee                RICHARD H. BRYAN, Nevada
SPENCER ABRAHAM, Michigan            BYRON L. DORGAN, North Dakota
SAM BROWNBACK, Kansas                RON WYDEN, Oregon

                       John Raidt, Staff Director

     Ivan A. Schlager, Democratic Chief Counsel and Staff Director



                                                       Calendar No. 274
105th Congress                                                   Report
                                 SENATE

 1st Session                                                    105-140
_______________________________________________________________________


             AVIATION INSURANCE REAUTHORIZATION ACT OF 1997

                                _______
                                

                November 6, 1997.--Ordered to be printed

_______________________________________________________________________


       Mr. McCain, from the Committee on Commerce, Science, and 
                Transportation, submitted the following

                              R E P O R T

                         [To accompany S. 1193]

    The Committee on Commerce, Science, and Transportation, to 
which was referred the bill (S. 1193) ``A Bill to amend chapter 
443 of title 49, United States Code, to extend the 
authorization of the aviation insurance program, and for other 
purposes'', having considered the same, reports favorably 
thereon with an amendment (in the nature of a substitute) and 
recommends that the bill (as amended) do pass.

                          Purpose of the Bill

  The reported bill extends, through December 1998, the 
authority under the aviation insurance program to provide 
insurance to air carriers under certain circumstances.

                          Background and Needs

  The Aviation Insurance Program insures air carriers against 
losses resulting from war, terrorism, or other hostile acts, 
when commercial insurance to cover such circumstances is 
canceled, or is not available at reasonable rates. For an air 
carrier to qualify for the program, the President must 
determine that a flight is essential to the foreign policy 
interests of the United States, and the Administrator of the 
Federal Aviation Administration (FAA) must determine that 
commercial insurance is not available on reasonable terms.
  Under the program, the FAA can issue nonpremium and premium 
insurance. Nonpremium insurance is issued to air carriers 
flying missions for federal agencies that have an 
indemnification agreement with the Department of Transportation 
(DOT). Only the Department of Defense and the Department of 
State currently have indemnification agreements with the DOT. 
Under an indemnification agreement, the agency contracts with 
an air carrier for aircraft, and reimburses the FAA for any 
insurance claims paid by the FAA. Premium insurance is issued 
to air carriers flying commercial operations in foreign air 
commerce, or between two or more points outside the United 
States. The FAA assumes the financial liability for claims. Air 
carriers pay premiums commensurate with the risks involved for 
this insurance.
  The program does not have sufficient funds available to pay 
many potential claims in a timely manner. The program is self-
financed from premiums, registration fees, and investments in 
U.S. securities, and has a current balance of about $70 
million. The Congress partially addressed this issue by 
allowing the Department of Defense to pay claims for the 
nonpremium insurance that it issues from its Operations 
account. The funding issue was not resolved, however, for 
nonpremium insurance issued by the Department of State, and for 
premium insurance. The Congress could appropriate the amount 
needed above the available program funding, but may not be able 
to do so within 30 days, which is the standard time for 
commercial insurance to pay a claim for a hull loss. Delays 
beyond 30 days in paying claims could result in a financial 
hardship, and possibly bankruptcy, for air carriers.
  The Committee considered addressing the problem of limited 
program funding for other than Department of Defense-related 
nonpremium insurance by authorizing the FAA to borrow money 
from the federal treasury to pay a claim. The Congressional 
Budget Office determined that this borrowing authority would 
have no significant impact on the federal budget. The Office of 
Management and Budget, however, indicated that the provision of 
borrowing authority to the program should be scored as an 
outlay affecting the federal deficit. The Committee, therefore, 
did not include a borrowing authority provision in the bill as 
reported.
  The Committee continues to be concerned that adequate funding 
is not available to pay a claim in a timely manner, and would 
encourage the FAA and the air carriers to continue working 
together to find a solution to this problem. The bill, 
therefore, authorizes the program through 1998 with the 
expectation that the FAA, working with the air carriers and the 
OMB, will develop a reasonable proposal for the Committee's 
consideration when the program authorization is under review 
next year.
  Finally, the bill as reported amends the statutory definition 
of public aircraft to exclude aircraft that are owned by the 
United States government and leased to an aircraft 
manufacturer. The bill clarifies that aircraft owned by the 
United States government and leased to the manufacturer are not 
``civil'' aircraft, and do not require FAA certification and 
registration.

                          Legislative History

  Senator Gorton, Chairman of the Aviation Subcommittee, 
introduced S. 1193 on September 18, 1997. Senators McCain, 
Hollings, and Ford are cosponsors of the bill.
  The conference report on the Department of Defense 
authorization bill includes a provision to reauthorize the 
aviation insurance program for five years (H.R. 1119, Sec. 
1088). S. 1193 is intended to supersede this provision, should 
it be enacted. The House of Representatives agreed to the 
conference report on H.R. 1119 on October 28, 1997.
  The companion bill to S. 1193 was reported in the House of 
Representatives on September 4, 1997 (H.R. 2036, H. Rept. 105-
284). On September 23, 1997, the Committee, without objection, 
ordered S. 1193 reported with an amendment in the nature of a 
substitute.

                            Estimated Costs

  In accordance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 403 of the 
Congressional Budget Act of 1974, the Committee provides the 
following cost estimate, prepared by the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, October 1, 1997.
Hon. John McCain,
Chairman, Committee on Commerce, Science, and Transportation, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1193, the Aviation 
Insurance Reauthorization Act of 1997.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Rachel 
Forward and Clare Doherty.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

               congressional budget office cost estimate

S. 1193--Aviation Insurance Reauthorization Act of 1997

    S. 1193 would amend Title 49 of the U.S. Code to extend 
from September 30, 1997, to December 31, 1998, the 
authorization of the aviation insurance program administered by 
the Federal Aviation Administration (FAA). CBO estimates that 
enacting the bill would probably not have any significant 
impact on the federal budget over the 1998-2002 period. Because 
the bill could affect direct spending, pay-as-you-go procedures 
would apply. S. 1193 contains no intergovernmental or private-
sector mandates as defined in the Unfunded Mandates Reform Act 
of 1995 and would not affect the budgets of state, local, or 
tribal governments.
    The aviation insurance program provides insurance coverage 
for aircraft operations that are deemed essential to the 
foreign policy interests of the United States when commercial 
insurance is unavailable on reasonable terms. The program is 
financed through the Aviation Insurance Revolving Fund, which 
is supported by premiums paid for coverage (for ``premium 
insurance''), one-time binder fees paid by the airlines (for 
``nonpremium insurance''), appropriated funds, and interest on 
investments in U.S. Treasury securities. From 1959 though March 
1997, the fund accumulated $65 million in revenues and paid out 
a total of $151,000 in claims.
    Nonpremium insurance, which accounts for about 99 percent 
of all aviation insurance, is for U.S. airlines that are 
providing contract services for federal agencies that have 
indemnification agreements with the Department of 
Transportation (DOT). Currently only the Department of Defense 
(DoD) and the State Department have such agreements with DOT. 
In the event of a loss, DoD or the State Department would 
reimburse the FAA for the insurance claims it would have to pay 
to the airlines. Since 1975, there have been approximately 
5,400 flights covered by the program.
    Premium insurance is provided to U.S. or foreign airlines 
for regularly scheduled commercial or charter service. Airlines 
pay a premium to the FAA for the coverage, similar to a normal 
insurance policy. Both types of insurance policies cover both 
hull loss and liability.
    Based on information from DOT, CBO estimates that it is 
unlikely that enacting H.R. 2036 would have a significant 
impact on the federal budget over the next five years. The bill 
could affect federal spending if new claims occur from 
extending the insurance program. While the amount of new 
spending could be large, historical experience suggests that 
events that would necessitate such spending are very rare.
    The CBO staff contacts for this estimate are Rachel Forward 
and Clare Doherty. The estimate was approved by Robert A. 
Sunshine, Deputy Assistant Director for Budget Analysis.

                      Regulatory Impact Statement

  In accordance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee provides the 
following evaluation of the regulatory impact of the 
legislation, as reported.

                       number of persons covered

  The legislation provides the authorization for a 14-month 
extension of the aviation insurance program. As this 
legislation is simply reauthorizing existing programs, the 
number of persons covered should be consistent with current 
levels.

                            economic impact

  As reported, the bill reinstates an existing program. 
Historically, claims paid under the program have been modest. 
Program activities are not expected to have an inflationary 
impact on the nation's economy.

                                privacy

  The legislation will not have any adverse impact on the 
personal privacy of the individuals affected.

                               paperwork

  This legislation reinstates the existing DOT aviation 
insurance program. Therefore, there should be no change in 
paperwork requirements associated with these DOT programs.

                      Section-by-Section Analysis

Section 1. Short title

  This section states the short title of the bill, the 
``Aviation Insurance Reauthorization Act of 1997''.

Section 2. Valuation of aircraft

  This section directs the Secretary of Transportation to be 
guided by reasonable business practices in the commercial 
aviation insurance industry when determining the amount for 
which an aircraft may be insured. This change is intended to 
recognize that there may be instances in which an aircraft's 
market value is not the appropriate basis for determining the 
amount of insurance. This occurs, for example, in the case of 
leased or mortgaged aircraft when the lessor or mortgagor 
requires a specified amount of insurance in the lease or 
mortgage agreement. As the market values of aircraft fluctuate, 
the stipulated amount may sometimes be more than the market 
value of the aircraft.

Section 3. Effect of indemnity agreements

  This section states that the President's signature, or the 
signature of the President's designee, of the indemnification 
agreement between the Secretary of Transportation and the head 
of another U.S. government agency will constitute the required 
finding under section 44302(b) that the flight is necessary to 
carry out the foreign policy interests of the United States.

Section 4. Arbitration authority

  This section permits an aviation insurance program policy to 
provide for binding arbitration of a dispute between the FAA 
and the commercial insurer over what part of a loss each is 
responsible for.

Section 5. Extension of program

  This section extends the authority of the Secretary of 
Transportation to issue insurance, under 49 U.S.C. Sections 
44301-44310, until December 31, 1998.

Section 6. Use of aircraft for demonstration

  This section clarifies that aircraft owned by the United 
States government do not have to be certified and registered by 
the FAA when leased to a private entity and operated by any 
person for purposes related to crew training, equipment 
development, or demonstration.

                        Changes in Existing Law

  In compliance with paragraph 12 of rule XXVI of the Standing 
Rules of the Senate, changes in existing law made by the bill, 
as reported, are shown as follows (existing law proposed to be 
omitted is enclosed in black brackets, new material is printed 
in italic, existing law in which no change is proposed is shown 
in roman):

                        TITLE 49. TRANSPORTATION

                    SUBTITLE VII. AVIATION PROGRAMS

                    PART A. AIR COMMERCE AND SAFETY

                           SUBPART I. GENERAL

                    CHAPTER 401. GENERAL PROVISIONS

Sec. 40102. Definitions

  (a) General Definitions.--In this part--
          (1) ``aeronautics'' means the science and art of 
        flight.
          (2) ``air carrier'' means a citizen of the United 
        States undertaking by any means, directly or 
        indirectly, to provide air transportation.
          (3) ``air commerce'' means foreign air commerce, 
        interstate air commerce, the transportation of mail by 
        aircraft, the operation of aircraft within the limits 
        of a Federal airway, or the operation of aircraft that 
        directly affects, or may endanger safety in, foreign or 
        interstate air commerce.
          (4) ``air navigation facility'' means a facility 
        used, available for use, or designed for use, in aid of 
        air navigation, including--
                  (A) a landing area;
                  (B) a light;
                  (C) apparatus or equipment for distributing 
                weather information, signaling, radio-
                directional finding, or radio or other 
                electromagnetic communication; and
                  (D) another structure or mechanism for 
                guiding or controlling flight in the air or the 
                landing and takeoff of aircraft.
          (5) ``air transportation'' means foreign air 
        transportation, interstate air transportation, or the 
        transportation of mail by aircraft.
          (6) ``aircraft'' means any contrivance invented, 
        used, or designed to navigate, or fly in, the air.
          (7) ``aircraft engine'' means an engine used, or 
        intended to be used, to propel an aircraft, including a 
        part, appurtenance, and accessory of the engine, except 
        a propeller.
          (8) ``airman'' means an individual--
                  (A) in command, or as pilot, mechanic, or 
                member of the crew, who navigates aircraft when 
                under way;
                  (B) except to the extent the Administrator of 
                the Federal Aviation Administration may provide 
                otherwise for individuals employed outside the 
                United States, who is directly in charge of 
                inspecting, maintaining, overhauling, or 
                repairing aircraft, aircraft engines, 
                propellers, or appliances; or
                  (C) who serves as an aircraft dispatcher or 
                air traffic control-tower operator.
          (9) ``airport'' means a landing area used regularly 
        by aircraft for receiving or discharging passengers or 
        cargo.
          (10) ``all-cargo air transportation'' means the 
        transportation by aircraft in interstate air 
        transportation of only property or only mail, or both.
          (11) ``appliance'' means an instrument, equipment, 
        apparatus, a part, an appurtenance, or an accessory 
        used, capable of being used, or intended to be used, in 
        operating or controlling aircraft in flight, including 
        a parachute, communication equipment, and another 
        mechanism installed in or attached to aircraft during 
        flight, and not a part of an aircraft, aircraft engine, 
        or propeller.
          (12) ``cargo'' means property, mail, or both.
          (13) ``charter air carrier'' means an air carrier 
        holding a certificate of public convenience and 
        necessity that authorizes it to provide charter air 
        transportation.
          (14) ``charter air transportation'' means charter 
        trips in air transportation authorized under this part.
          (15) ``citizen of the United States'' means--
                  (A) an individual who is a citizen of the 
                United States;
                  (B) a partnership each of whose partners is 
                an individual who is a citizen of the United 
                States; or
                  (C) a corporation or association organized 
                under the laws of the United States or a State, 
                the District of Columbia, or a territory or 
                possession of the United States, of which the 
                president and at least two-thirds of the board 
                of directors and other managing officers are 
                citizens of the United States, and in which at 
                least 75 percent of the voting interest is 
                owned or controlled by persons that are 
                citizens of the United States.
          (16) ``civil aircraft'' means an aircraft except a 
        public aircraft.
          (17) ``civil aircraft of the United States'' means an 
        aircraft registered under chapter 441 of this title.
          (18) ``conditional sales contract'' means a 
        contract--
                  (A) for the sale of an aircraft, aircraft 
                engine, propeller, appliance, or spare part, 
                under which the buyer takes possession of the 
                property but title to the property vests in the 
                buyer at a later time on--
                          (i) paying any part of the purchase 
                        price;
                          (ii) performing another condition; or
                          (iii) the happening of a contingency; 
                        or
                  (B) to bail or lease an aircraft, aircraft 
                engine, propeller, appliance, or spare part, 
                under which the bailee or lessee--
                          (i) agrees to pay an amount 
                        substantially equal to the value of the 
                        property; and
                          (ii) is to become, or has the option 
                        of becoming, the owner of the property 
                        on complying with the contract.
          (19) ``conveyance'' means an instrument, including a 
        conditional sales contract, affecting title to, or an 
        interest in, property.
          (20) ``Federal airway'' means a part of the navigable 
        airspace that the Administrator designates as a Federal 
        airway.
          (21) ``foreign air carrier'' means a person, not a 
        citizen of the United States, undertaking by any means, 
        directly or indirectly, to provide foreign air 
        transportation.
          (22) ``foreign air commerce'' means the 
        transportation of passengers or property by aircraft 
        for compensation, the transportation of mail by 
        aircraft, or the operation of aircraft in furthering a 
        business or vocation, between a place in the United 
        States and a place outside the United States when any 
        part of the transportation or operation is by aircraft.
          (23) ``foreign air transportation'' means the 
        transportation of passengers or property by aircraft as 
        a common carrier for compensation, or the 
        transportation of mail by aircraft, between a place in 
        the United States and a place outside the United States 
        when any part of the transportation is by aircraft.
          (24) ``interstate air commerce'' means the 
        transportation of passengers or property by aircraft 
        for compensation, the transportation of mail by 
        aircraft, or the operation of aircraft in furthering a 
        business or vocation--
                  (A) between a place in--
                          (i) a State, territory, or possession 
                        of the United States and a place in the 
                        District of Columbia or another State, 
                        territory, or possession of the United 
                        States;
                          (ii) a State and another place in the 
                        same State through the airspace over a 
                        place outside the State;
                          (iii) the District of Columbia and 
                        another place in the District of 
                        Columbia; or
                          (iv) a territory or possession of the 
                        United States and another place in the 
                        same territory or possession; and
                  (B) when any part of the transportation or 
                operation is by aircraft.
          (25) ``interstate air transportation'' means the 
        transportation of passengers or property by aircraft as 
        a common carrier for compensation, or the 
        transportation of mail by aircraft--
                  (A) between a place in--
                          (i) a State, territory, or possession 
                        of the United States and a place in the 
                        District of Columbia or another State, 
                        territory, or possession of the United 
                        States;
                          (ii) Hawaii and another place in 
                        Hawaii through the airspace over a 
                        place outside Hawaii;
                          (iii) the District of Columbia and 
                        another place in the District of 
                        Columbia; or
                          (iv) a territory or possession of the 
                        United States and another place in the 
                        same territory or possession; and
                  (B) when any part of the transportation is by 
                aircraft.
          (26) ``intrastate air carrier'' means a citizen of 
        the United States undertaking by any means to provide 
        only intrastate air transportation.
          (27) ``intrastate air transportation'' means the 
        transportation by a common carrier of passengers or 
        property for compensation, entirely in the same State, 
        by turbojet-powered aircraft capable of carrying at 
        least 30 passengers.
          (28) ``landing area'' means a place on land or water, 
        including an airport or intermediate landing field, 
        used, or intended to be used, for the takeoff and 
        landing of aircraft, even when facilities are not 
        provided for sheltering, servicing, or repairing 
        aircraft, or for receiving or discharging passengers or 
        cargo.
          (29) ``mail'' means United States mail and foreign 
        transit mail.
          (30) ``navigable airspace'' means airspace above the 
        minimum altitudes of flight prescribed by regulations 
        under this subpart and subpart III of this part, 
        including airspace needed to ensure safety in the 
        takeoff and landing of aircraft.
          (31) ``navigate aircraft'' and ``navigation of 
        aircraft'' include piloting aircraft.
          (32) ``operate aircraft'' and ``operation of 
        aircraft'' mean using aircraft for the purposes of air 
        navigation, including--
                  (A) the navigation of aircraft; and
                  (B) causing or authorizing the operation of 
                aircraft with or without the right of legal 
                control of the aircraft.
          (33) ``person'', in addition to its meaning under 
        section 1 of title 1, includes a governmental authority 
        and a trustee, receiver, assignee, and other similar 
        representative.
          (34) ``predatory'' means a practice that violates the 
        antitrust laws as defined in the first section of the 
        Clayton Act (15 U.S.C. 12).
          (35) ``price'' means a rate, fare, or charge.
          (36) ``propeller'' includes a part, appurtenance, and 
        accessory of a propeller.
          (37) ``public aircraft''
                  (A) means an aircraft--
                          (i) used only for the United States 
                        Government; [or]
                          (ii) owned by the United States 
                        Government and operated by any person 
                        for purposes related to crew training, 
                        equipment development, or 
                        demonstration; or
                          [(ii)] (iii) owned and operated 
                        (except for commercial purposes), or 
                        exclusively leased for at least 90 
                        continuous days, by a government 
                        (except the United States Government), 
                        including a State, the District of 
                        Columbia, or a territory or possession 
                        of the United States, or political 
                        subdivision of that government; but
                  (B) does not include a government-owned 
                aircraft--
                          (i) transporting property for 
                        commercial purposes; or
                          (ii) transporting passengers other 
                        than--
                                  (I) transporting (for other 
                                than commercial purposes) 
                                crewmembers or other persons 
                                aboard the aircraft whose 
                                presence is required to 
                                perform, or is associated with 
                                the performance of, a 
                                governmental function such as 
                                firefighting, search and 
                                rescue, law enforcement, 
                                aeronautical research, or 
                                biological or geological 
                                resource management; or
                                  (II) transporting (for other 
                                than commercial purposes) 
                                persons aboard the aircraft if 
                                the aircraft is operated by the 
                                Armed Forces or an intelligence 
                                agency of the United States.
                        An aircraft described in the preceding 
                        sentence shall, notwithstanding any 
                        limitation relating to use of the 
                        aircraft for commercial purposes, be 
                        considered to be a public aircraft for 
                        the purposes of this part without 
                        regard to whether the aircraft is 
                        operated by a unit of government on 
                        behalf of another unit of government, 
                        pursuant to a cost reimbursement 
                        agreement between such units of 
                        government, if the unit of government 
                        on whose behalf the operation is 
                        conducted certifies to the 
                        Administrator of the Federal Aviation 
                        Administration that the operation was 
                        necessary to respond to a significant 
                        and imminent threat to life or property 
                        (including natural resources) and that 
                        no service by a private operator was 
                        reasonably available to meet the 
                        threat.
          (38) ``spare part'' means an accessory, appurtenance, 
        or part of an aircraft (except an aircraft engine or 
        propeller), aircraft engine (except a propeller), 
        propeller, or appliance, that is tobe installed at a 
later time in an aircraft, aircraft engine, propeller, or appliance.
          (39) ``State authority'' means an authority of a 
        State designated under State law--
                  (A) to receive notice required to be given a 
                State authority under subpart II of this part; 
                or
                  (B) as the representative of the State before 
                the Secretary of Transportation in any matter 
                about which the Secretary is required to 
                consult with or consider the views of a State 
                authority under subpart II of this part.
          (40) ``ticket agent'' means a person (except an air 
        carrier, a foreign air carrier, or an employee of an 
        air carrier or foreign air carrier) that as a principal 
        or agent sells, offers for sale, negotiates for, or 
        holds itself out as selling, providing, or arranging 
        for, air transportation.
          (41) ``United States'' means the States of the United 
        States, the District of Columbia, and the territories 
        and possessions of the United States, including the 
        territorial sea and the overlying airspace.
  (b) Limited Definition.--In subpart II of this part, 
``control'' means control by any means.

                        TITLE 49. TRANSPORTATION

                    SUBTITLE VII. AVIATION PROGRAMS

                    PART A. AIR COMMERCE AND SAFETY

                          SUBPART III. SAFETY

                         CHAPTER 443. INSURANCE

Sec. 44302. General authority

  (a) Insurance and Reinsurance.--
          (1) Subject to subsection (b) of this section and 
        section 44305(a) of this title, the Secretary of 
        Transportation may provide insurance and reinsurance 
        against loss or damage arising out of any risk from the 
        operation of an American aircraft or foreign-flag 
        aircraft--
                  (A) in foreign air commerce; or
                  (B) between at least 2 places, all of which 
                are outside the United States.
          (2) An aircraft may be insured or reinsured for not 
        more than its reasonable value [as determined by the 
        Secretary.] as determined by the Secretary in 
        accordance with reasonable business practices in the 
        commercial aviation insurance industry. Insurance or 
        reinsurance may be provided only when the Secretary 
        decides that the insurance cannot be obtained on 
        reasonable terms from an insurance carrier.
  (b) Presidential Approval.--The Secretary may provide 
insurance or reinsurance under subsection (a) of this section 
only with the approval of the President. The President may 
approve the insurance or reinsurance only after deciding that 
the continued operation of the American aircraft or foreign-
flag aircraft to be insured or reinsured is necessary to carry 
out the foreign policy of the United States Government.
  (c) Consultation.--The President may require the Secretary to 
consult with interested departments, agencies, and 
instrumentalities of the Government before providing insurance 
or reinsurance under this chapter.
  (d) Additional Insurance.--With the approval of the 
Secretary, a person having an insurable interest in an aircraft 
may insure with other underwriters in an amount that is more 
than the amount insured with the Secretary. However, the 
Secretary may not benefit from the additional insurance. This 
subsection does not prevent the Secretary from making contracts 
of coinsurance.

Sec. 44305. Insuring United States Government property

  (a) General.--With the approval of the President, a 
department, agency, or instrumentality of the United States 
Government may obtain--
          (1) insurance under this chapter, including insurance 
        for risks from operating an aircraft in intrastate or 
        interstate air commerce, but not including insurance on 
        valuables subject to sections 1 and 2 of the Government 
        Losses in Shipment Act (40 U.S.C. 721, 722); and
          (2) insurance for risks arising from providing goods 
        or services directly related to and necessary for 
        operating an aircraft covered by insurance obtained 
        under clause (1) of this subsection if the aircraft is 
        operated--
                  (A) in carrying out a contract of the 
                department, agency, or instrumentality; or
                  (B) to transport military forces or materiel 
                on behalf of the United States under an 
                agreement between the Government and the 
                government of a foreign country.
  (b) Premium Waivers and Indemnification.--With the approval 
required under subsection (a) of this section, the Secretary of 
Transportation may provide the insurance without premium at the 
request of the Secretary of Defense or the head of a 
department, agency, or instrumentality designated by the 
President when the Secretary of Defense or the designated head 
agrees to indemnify the Secretary of Transportation against all 
losses covered by the insurance. The Secretary of Defense and 
any designated head may make indemnity agreements with the 
Secretary of Transportation under this section. If such an 
agreement is countersigned by the President or the President's 
designee, the agreement shall constitute, for purposes of 
section 44302(b), a determination that continuation of the 
aircraft operations to which the agreement applies is necessary 
to carry out the foreign policy of the United States.

Sec. 44306. Premiums and limitations on coverage and claims.

  (a) Premiums Based on Risk.--To the extent practical, the 
premium charged for insurance or reinsurance under this chapter 
shall be based on consideration of the risk involved.
  (b) Time Limits.--The Secretary of Transportation may provide 
insurance and reinsurance under this chapter for a period of 
not more than 60 days. The period may be extended for 
additional periods of not more than 60 days each only if the 
President decides, before each additional period, that the 
continued operation of the aircraft to be insured or reinsured 
is necessary to carry out the foreign policy of the United 
States Government.
  (c) Maximum Insured Amount.--The insurance policy on an 
aircraft insured or reinsured under this chapter shall specify 
a stated amount that is not more than the value of the 
aircraft, [as determined by the Secretary.] as determined by 
the Secretary in accordance with reasonable business practices 
in the commercial aviation insurance industry. A claim under 
the policy may not be paid for more than that stated amount.

Sec. 44308. Administrative

  (a) Commercial Practices.--The Secretary of Transportation 
may carry out this chapter consistent with commercial practices 
of the aviation insurance business.
  (b) Issuance of Policies and Disposition of Claims.--
          (1) The Secretary may issue insurance policies to 
        carry out this chapter. The Secretary may prescribe the 
        forms, amounts insured under the policies, and premiums 
        charged. Any such policy may authorize the binding 
        arbitration of claims made thereunder in such manner as 
        may be agreed to by the Secretary and any commercial 
        insurer that may be responsible for any part of a loss 
        to which such policy relates. The Secretary may change 
        an amount of insurance or a premium for an existing 
        policy only with the consent of the insured.
          (2) For a claim under insurance authorized by this 
        chapter, the Secretary may--
                  (A) settle and pay the claim made for or 
                against the United States Government; [and]
                  (B) pay the amount of a binding arbitration 
                award made under paragraph (1); and
                  [(B)] (C) pay the amount of a judgment 
                entered against the Government.
  (c) Underwriting Agent.--
          (1) The Secretary may, and when practical shall, 
        employ an insurance carrier or group of insurance 
        carriers to act as an underwriting agent. The Secretary 
        may use the agent to adjust claims under this chapter, 
        but claims may be paid only when approved by the 
        Secretary.
          (2) The Secretary may pay reasonable compensation to 
        an underwriting agent for servicing insurance the agent 
        writes for the Secretary. Compensation may include 
        payment for reasonable expenses incurred by the agent 
        but may not include a payment by the agent for 
        stimulation or solicitation of insurance business.
          (3) Except as provided by this subsection, the 
        Secretary may not pay an insurance broker or other 
        person acting in a similar capacity any consideration 
        for arranging insurance when the Secretary directly 
        insures any part of the risk.
  (d) Budget.--The Secretary shall submit annually a budget 
program for carrying out this chapter as provided for wholly 
owned Government corporations under chapter 91 of title 31.
  (e) Accounts.--The Secretary shall maintain a set of accounts 
for audit under chapter 35 of title 31. Notwithstanding chapter 
35, the Comptroller General shall allow credit for expenditures 
under this chapter made consistent with commercial practices in 
the aviation insurance business when shown to be necessary 
because of the business activities authorized by this chapter.

Sec. 44310. Ending effective date

  The authority of the Secretary of Transportation to provide 
insurance and reinsurance under this chapter is not effective 
after [September 30, 2002.] December 31, 1998.

                                
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