[House Report 106-2]
[From the U.S. Government Publishing Office]





106th Congress                                                   Report
  1st Session           HOUSE OF REPRESENTATIVES                  106-2

_______________________________________________________________________


 
             AVIATION WAR RISK INSURANCE PROGRAM EXTENSION

                                _______
                                

February 2, 1999.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______


 Mr. Shuster, from the Committee on Transportation and Infrastructure, 
                        submitted the following

                              R E P O R T

                         [To accompany H.R. 98]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Transportation and Infrastructure, to whom 
was referred the bill (H.R. 98) to amend chapter 443 and title 
49, United States Code, to extend the aviation war risk 
insurance program, having considered the same, report favorably 
thereon without amendment and recommend that the bill do pass.
    Commercial insurance companies will usually not insure 
commercial airline flights to high-risk areas such as countries 
at war or on the verge of war. In many cases, these flights are 
required to further the foreign policy or national security of 
the United States. For example, in Operation Desert Shield and 
Desert Storm, commercial airlines were needed to ferry troops 
and equipment to the Middle East.
    To ensure that flights to high-risk areas can operate when 
needed, Chapter 443 of Title 49 of the U.S. Code authorizes the 
Secretary of Transportation to provide insurance and 
reinsurance to commercial airlines against any risk.
    The war risk insurance program was first authorized in 
1951. Insurance was provided under this program in the early 
1970s in the aftermath of attacks by Palestinian terrorists, 
during the final days of the Vietnam war, the Gulf War, and 
Bosnia. Since 1975, war risk insurance has been activated over 
5,000 times.
    The program has been reauthorized 12 times and is now 
schedule to expire on March 31 of this year. In the past, 
reauthorization of the war risk program has been relatively 
routine and was often accomplished without any changes or even 
the need for holding a hearing.
    Last year, the Committee approved legislation (H.R. 4058, 
H. Rept. 105-632 and H.R. 4057, H. Rept. 105-639 at page 45) 
modifying the program to ensure prompt payment to the airlines 
in the event of a claim and reauthorizing the program through 
December 31, 2003. These bills passed the House on July 20, 
1998 and August 4, 1998 respectively. However, neither was 
enacted. Instead, for reasons unrelated to the merits of the 
war risk program, the Omnibus Consolidated and Emergency 
Supplemental Appropriations Act for Fiscal Year 1999 (P.L. 105-
277, See H. Rept. 105-825, at 608) reauthorized the program 
until only March 31, 1999. This Act did include the provision 
in the House passed bills ensuring prompt payment.
    Expiration of the war risk insurance program at the end of 
March could prove harmful to national security. Airlines will 
be reluctant to provide their aircraft in the event of war or 
other military action without the backing of the war risk 
insurance program. Therefore, the reported bill 
wouldreauthorize the program until December 31, 2003. This was the 
period specified in the original House-passed bills.

                       Section-by-Section Summary

Section 1. Extension of Insurance Program

    This language simply reauthorizes the war risk insurance 
program through December 31, 2003.

                    Hearings and Legislative History

    H.R. 98 was introduced on January 6, 1999. The Committee 
has not held hearings on the reported legislation.

                        Committee Consideration

    On January 7, 1999, the Committee met in open session, 
discharged the Subcommittee on Aviation, and ordered the bill 
reported, without an amendment, by voice vote with a quorum 
present. There were no recorded votes taken during Committee 
consideration of H.R. 98.

                              Record Votes

    Clause 3(b) of Rule XIII of the House of Representatives 
requires each committee report to include the total number of 
votes cast for and against on each record vote on a motion to 
report and on any amendment offered to the measure or matter, 
and the names of those members voting for and against. There 
were no recorded votes taken in connection with ordering H.R. 
98 reported. A motion by Mr. Duncan to order H.R. 98 favorably 
reported to the House, without amendment, was agreed to by 
voice vote, a quorum being present.

                      Committee Oversight Findings

    With respect to the requirements of clause 3(c)(i) of Rule 
XIII of the Rules of the House of Representatives, the 
Committee's oversight findings and recommendations are 
reflected in this report.

                        Cost of the Legislation

    Clause 3(d)(2) of Rule XIII of the Rules of the House of 
Representatives does not apply where a cost estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974 has been timely submitted prior to the filing of the 
report and is included in the report. Such a cost estimate is 
included in this report.

                    Compliance With House Rule XIII

    1. With respect to the requirement of clause 3(c)(2) of 
Rule XIII of the Rules of the House of Representatives, and 
section 308(a) of the Congressional Budget Act of 1974, the 
Committee references the report of the Congressional Budget 
Office below.
    2. With respect to the requirement of clause 3(c)(4) of 
Rule XIII of the Rules of the House of Representatives, the 
Committee has received no report of oversight findings and 
recommendations from the Committee on Government Reform and 
Oversight on the subject of H.R. 98.
    3. With respect to the requirement of clause 3(c)(3) of 
Rule XIII of the Rules of the House of Representatives and 
section 402 of the Congressional Budget Act of 1974, the 
Committee has received the following cost estimate for H.R. 98 
from the Director of the Congressional Budget Office.

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, January 21, 1999.
Hon. Bud Shuster,
Chairman, Committee on Transportation and Infrastructure, House of 
        Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 98, a bill to 
amend chapter 443 of Title 49, United States Code, to extend 
the aviation war risk insurance program.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Victoria V. 
Heid.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

               congressional budget office cost estimate

H.R. 98--A bill to amend chapter 443 of Title 49, United States Code, 
        to extend the aviation war risk insurance program

    H.R. 98 would extend the authorization for the Federal 
Aviation Administration's (FAA's) aviation insurance program 
through December 31, 2003. Under current law, the program will 
end on March 31, 1999. Enacting H.R. 98 could increase federal 
spending, but because claims under the aviation insurance 
program are very rare, CBO estimates that extending the program 
would probably have no significant impact on the federal budget 
over the next five years. Because the bill could affect direct 
spending, pay-as-you-go procedures would apply. H.R. 98 
contains no intergovernmental or private-sector mandates as 
defined in the Unfunded Mandates Reform Act and would have no 
impact on the budgets of state, local, or tribal governments.
    The aviation insurance program insures 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''), and 
interest on investments from the revolving fund in U.S. 
Treasury securities. According to the FAA, from 1959 through 
September 1998, the balance in the fund has grown to $71 
million and the fund has paid out a total of only $151,000 in 
claims. New receipts from airlines total less than $100,000 a 
year.
    Nonpremium insurance, which has accounted for about 99 
percent of all aviation insurance in the recent past, 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 and the State 
Department would reimburse the FAA for the insurance claims it 
would have to pay the airlines. Since 1975, approximately 5,400 
flights have been 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 FAA for the coverage, similar to a commercial 
insurance policy. Both types of insurance policies cover hull 
loss and liability.
    Enacting H.R. 98 could cause an increase in federal 
spending if new claims would result. Moreover, such new 
spending could be very large, particularly if a claim exceeded 
the balance of the trust fund and the FAA had to seek a 
supplemental appropriation. But historical experience suggests 
that claims under this program are very rare; therefore, 
extending the aviation insurance program would probably have no 
significant impact on the federal budget over the next five 
years.
    The CBO staff contact for this estimate is Victoria V. 
Heid. The estimate was approved by Robert A. Sunshine, Deputy 
Assistant Director for Budget Analysis.

                Applicability to the Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act (Public Law 
104-1).

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of the Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act (Public Law 104-4).

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(i) of rule XIII of the Rules of the 
House of Representatives, committee reports on a bill or joint 
resolution of a public character shall include a statement 
citing the specific powers granted to the Congress in the 
Constitution to enact the measure. The Committee on 
Transportation and Infrastructure finds that Congress has the 
authority to enact this measure pursuant to its powers granted 
under article I, section 8 of the Constitution.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3 of rule XIII of the Rules of 
the House of Representatives, 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 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

             SECTION 44130 OF TITLE 49, UNITED STATES CODE

Sec. 44310. Ending effective date

    The authority of the Secretary of Transportation to provide 
insurance and reinsurance under this chapter is not effective 
after [March 31, 1999] December 31, 2003.

                                
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