[House Report 107-304]
[From the U.S. Government Publishing Office]



107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    107-304

======================================================================



 
PROVIDING FOR CONSIDERATION OF H.R. 3210, TERRORISM RISK PROTECTION ACT

                                _______
                                

 November 28, 2001.--Referred to the House Calendar and ordered to be 
                                printed

                                _______
                                

   Mr. Sessions, from the Committee on Rules, submitted the following

                              R E P O R T

                       [To accompany H. Res. 297]

    The Committee on Rules, having had under consideration 
House Resolution 297, by a record vote of 8 to 0, with 3 voting 
present, report the same to the House with the recommendation 
that the resolution be adopted.

                SUMMARY OF PROVISIONS OF THE RESOLUTION

    The resolution provides for consideration in the House of 
H.R. 3210, the Terrorism Risk Protection Act, under a modified 
closed rule. The rule provides one hour of debate equally 
divided and controlled by the chairman and ranking minority 
member of the Committee on Financial Services. The rule 
provides that, in lieu of the amendments recommended by the 
Committee on Financial Services and the Committee on Ways and 
Means now printed in the bill, an amendment in the nature of a 
substitute consisting of the text of H.R. 3357 shall be 
considered as adopted. The rule waives all points of order 
against consideration of the bill as amended.
    The rule provides for consideration of the amendment in the 
nature of a substitute printed in this report, if offered by 
Representative LaFalce or his designee, which shall be 
considered as read and shall be separately debatable for one 
hour equally divided and controlled by the proponent and an 
opponent. The rule waives all points of order against the 
amendment printed in this report. Finally, the rule provides 
one motion to recommit with or without instructions.
    The waiver of all points of order includes a waiver of 
section 303 of the Congressional Budget Act of 1974 
(prohibiting consideration of legislation, as reported, 
providing new budget authority, changes in revenue, or changes 
in public debt for a fiscal year until the budget resolution 
for that year has been agreed to) and section 401 of the 
Congressional Budget Act of 1974 (prohibiting consideration of 
legislation, as reported, providing new entitlement authority 
which becomes effective during the current fiscal year).
    The waiver of section 303 is necessary because section 7 of 
the bill provides new budget authority for fiscal years 2003 
and the budget resolution for that year has yet to be agreed 
to. The waiver of section 401 is necessary because section 6 of 
the bill provides new entitlement authority for the current 
fiscal year.

                            committee votes

    Pursuant to clause 3(b) of House rule XIII the results of 
each record vote on an amendment or motion to report, together 
with the names of those voting for and against, are printed 
below:

Rules Committee record vote No. 56

    Date: November 28, 2001.
    Measure: H.R. 3210.
    Motion by: Mr. Hastings (FL).
    Summary of motion: To make in order the amendment by 
Representative Crowley to include personal lines of property 
and casualty insurance in the bill, in addition to commercial 
lines of property and casualty insurance.
    Results: Defeated 3 to 8.
    Vote by Members: Goss--Nay; Linder--Nay; Pryce--Nay; Diaz-
Balart--Nay; Hastings (WA)--Nay; Sessions--Nay; Reynolds--Nay; 
Hall--Yea; Slaughter--Yea; Hastings (FL)--Yea; Dreier--Nay.

Rules Committee record vote No. 57

    Date: November 28, 2001.
    Measure: H.R. 3210.
    Motion by: Mr. Hastings (FL).
    Summary of motion: To make in order the amendment by 
Representatives Lee, Gutierrez, Frank, Meeks, Israel, and 
Sandlin to require any insurance company wishing to benefit 
from the provisions in the act to first agree to, and then 
provide, information on race, ethnicity, gender and location of 
their policyholders to the Federal Reserve, who will share the 
information with the Secretary of the Treasury. The amendment 
requires the insurance company to agree to comply with the data 
disclosure provision either one month after date of enactment 
or December 31, 2001, whichever is later, and actually provide 
the data one year after date of enactment in order to be 
eligible for future benefits. The amendment applies the 
requirements to commercial property and casualty and life 
insurance.
    Results: Defeated 3 to 8.
    Vote by Members: Goss--Nay; Linder--Nay; Pryce--Nay; Diaz-
Balart--Nay; Hastings (WA)--Nay; Sessions--Nay; Reynolds--Nay; 
Hall--Yea; Slaughter--Yea; Hastings (FL)--Yea; Dreier--Nay.

Rules Committee record vote No. 58

    Date: November 28, 2001.
    Measure: H.R. 3210.
    Motion by: Mr. Goss.
    Summary of motion: To report the resolution.
    Results: Agreed to 8 to 0, with 3 voting present.
    Vote by Members: Goss--Yea; Linder--Yea; Pryce--Yea; Diaz-
Balart--Yea; Hastings (WA)--Yea; Sessions--Yea; Reynolds--Yea; 
Hall--Present; Slaughter--Present; Hastings (FL)--Present; 
Dreier--Yea.

           summary of amendment made in order under the rule

    (Summary derived from information provided by sponsors.)
    LaFalce--Democratic Substitute. Includes an industry 
deductible, to be met by individual company retention and 
industry-wide assessment, of $5 billion in Year 1, increasing 
to $10 billion in Year 2 if no event occurs in Year 1. Requires 
each company to meet its deductible before receiving federal 
assistance. Requires terrorism coverage as part of commercial 
property and casualty insurance, contains no limitation on tort 
actions or recoveries, or tax provisions. Requires the 
Secretary of the Treasury to provide financial assistance to 
commercial property and casualty insurers to cover insured 
losses resulting from terrorist acts. Also provides that: 
individual companies retain losses of up to 7% of their net 
premiums, until the immediate industry-wide deductible is met; 
federal financial assistance covers 90 percent of losses over 
the deductible (no first dollar payment); amounts over the 
industry deductible, up to $20 billion, would be repaid by 
property and casualty insurers over time; annual repayments 
would be limited to 3 percent of insurers' written premiums; 
financial assistance in amounts over $20 billion may be repaid 
by a surcharge on policyholders. Requires the Secretary, in 
determining whether to establish a surcharge on policyholders, 
to consider the cost to the taxpayer, economic conditions, 
affordability of insurance, and other factors. Includes studies 
on the impact of terrorism on the life insurance industry and 
on the advisability of establishing a terrorism reinsurance 
pool.

             text of amendment made in order under the rule

An Amendment To Be Offered by Representative LaFalce of New York, or a 
                   Designee, Debatable for 60 Minutes

  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

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

Sec. 1. Short title and table of contents.
Sec. 2. Congressional findings.
Sec. 3. Authority of Secretary of the Treasury.
Sec. 4. Submission of premium information to Secretary.
Sec. 5. Initial and subsequent triggering determinations.
Sec. 6. Federal cost-sharing for commercial insurers.
Sec. 7. Assessments.
Sec. 8. Terrorism loss repayment surcharge.
Sec. 9. Administration of assessments and surcharges.
Sec. 10. Application to self-insurance arrangements and offshore 
          insurers and reinsurers.
Sec. 11. Requirement to provide terrorism coverage.
Sec. 12. State preemption.
Sec. 13. Consistent State guidelines for coverage for acts of terrorism.
Sec. 14. Consultation with State insurance regulators and NAIC.
Sec. 15. Study of potential effects of terrorism on life insurance 
          industry.
Sec. 16. Railroad and trucking insurance study.
Sec. 17. Study of reinsurance pool system for future acts of terrorism.
Sec. 18. Definitions.
Sec. 19. Covered period and extension of program.
Sec. 20. Regulations.

SEC. 2. CONGRESSIONAL FINDINGS.

  The Congress finds that--
          (1) the terrorist attacks on the World Trade Center 
        and the Pentagon of September 11, 2001, resulted in a 
        large number of deaths and injuries, the destruction 
        and damage to buildings, and interruption of business 
        operations;
          (2) the attacks have inflicted possibly the largest 
        losses ever incurred by insurers and reinsurers in a 
        single day;
          (3) while the insurance and reinsurance industries 
        have committed to pay the losses arising from the 
        September 11 attacks, the resulting disruption has 
        created widespread market uncertainties with regard to 
        the risk of losses arising from possible future 
        terrorist attacks;
          (4) such uncertainty threatens the continued 
        availability of United States commercial property and 
        casualty insurance for terrorism risk at meaningful 
        coverage levels;
          (5) the unavailability of affordable commercial 
        property and casualty insurance for terrorist acts 
        threatens the growth and stability of the United States 
        economy, including impeding the ability of financial 
        services providers to finance commercial property 
        acquisitions and new construction;
          (6) in the past, the private insurance and 
        reinsurance markets have shown a remarkable resiliency 
        in adapting to changed circumstances;
          (7) given time, the private markets will diversify 
        and develop risk spreading mechanisms to increase 
        capacity and guard against possible future losses 
        incurred by terrorist attacks;
          (8) it is necessary to create a temporary industry 
        risk sharing program to ensure the continued 
        availability of commercial property and casualty 
        insurance and reinsurance for terrorism-related risks;
          (9) such action is necessary to limit immediate 
        market disruptions, encourage economic stabilization, 
        and facilitate a transition to a viable market for 
        private terrorism risk insurance; and
          (10) terrorism insurance plays an important role in 
        the efficient functioning of the economy and the 
        financing of commercial property acquisitions and new 
        construction and, therefore, the Congress intends to 
        continue to monitor, review, and evaluate the private 
        terrorism insurance and reinsurance marketplace to 
        determine whether additional action is necessary to 
        maintain the long-term stability of the real estate and 
        capital markets.

SEC. 3. AUTHORITY OF SECRETARY OF THE TREASURY.

  The Secretary of the Treasury shall be responsible for 
carrying out a program for financial assistance for commercial 
property and casualty insurers, as provided in this Act.

SEC. 4. SUBMISSION OF PREMIUM INFORMATION TO SECRETARY.

  To the extent such information is not otherwise available to 
the Secretary, the Secretary may require each insurer to 
submit, to the Secretary or to the NAIC, a statement specifying 
the net premium amount of coverage written by such insurer 
under each line of commercial property and casualty insurance 
sold by such insurer during such periods as the Secretary may 
provide.

SEC. 5. INITIAL AND SUBSEQUENT TRIGGERING DETERMINATIONS.

  (a) In General.--For purposes of this Act, a ``triggering 
determination'' is a determination by the Secretary that--
          (1) an act of terrorism has occurred during the 
        covered period; and
          (2) the industry-wide losses resulting from such 
        occurrence or from multiple occurrences of acts of 
        terrorism all occurring during the covered period, 
        exceed $100,000,000.
  (b) Determinations Regarding Occurrences.--The Secretary, 
after consultation with the Attorney General of the United 
States and the Secretary of State, shall have the sole 
authority which may not be delegated or designated to any other 
officer, employee, or position, for determining whether--
          (1) an occurrence was caused by an act of terrorism; 
        and
          (2) an act of terrorism occurred during the covered 
        period.

SEC. 6. FEDERAL COST-SHARING FOR COMMERCIAL INSURERS.

  (a) In General.--Pursuant to a triggering determination, the 
Secretary shall provide financial assistance to commercial 
insurers in accordance with this section to the extent provided 
under this section to cover eligible insured losses resulting 
from acts of terrorism, which shall be repaid in accordance 
with subsection (g).
  (b) Industry Obligation Amount.--For purposes of this 
section, the industry obligation amount in connection with a 
triggering determination is the following amount:
          (1) Initial covered period.--In the case of a 
        triggering determination occurring during the covered 
        period specified in section 19(a), the difference 
        between--
                  (A) $5,000,000,000; and
                  (B) the aggregate amount of industry-wide 
                losses resulting from the triggering events 
                involved in any triggering determinations 
                preceding such triggering determination.
          (2) Extended covered period.--If the Secretary 
        exercises the authority under section 19(b) to extend 
        the covered period, in the case of a triggering 
        determination occurring during the portion of the 
        covered period consisting of such extension, the 
        difference between--
                  (A) $10,000,000,000; and
                  (B) the aggregate amount of industry-wide 
                losses resulting from the triggering events 
                involved in any triggering determinations 
                preceding such triggering determination.
  (c) Eligible Insured Losses.--For purposes of this section, 
the term ``eligible insured losses'' means, with respect to a 
triggering determination, any insured losses resulting from the 
triggering event involved that are in excess of the industry 
obligation amount for such triggering determination.
  (d) Amount of Financial Assistance.--Subject to subsection 
(e), with respect to a triggering determination, financial 
assistance shall be made available under this section to each 
commercial insurer in an amount equal to 90 percent of the 
amount of the eligible insured losses of the insurer as a 
result of the triggering event involved.
  (e) Limitations.--
          (1) Aggregate limitation.--The aggregate amount of 
        financial assistance provided pursuant to this section 
        may not exceed $100,000,000,000.
          (2) Notice to congress.--The Secretary shall notify 
        the Congress if the amount of financial assistance 
        provided pursuant to this section reaches 
        $100,000,000,000 and the Congress shall determine the 
        procedures for, and the source of, any additional 
        payments of financial assistance to cover such 
        additional insured losses.
          (3) Default on assessments and surcharges.--The 
        Secretary may establish such limitations as may be 
        necessary to ensure that payments under this section in 
        connection with a triggering determination are made 
        only to commercial insurers that are not in default of 
        any obligation under this section or section 7 to pay 
        assessments or under section 8 to collect surcharges.
  (f) Annual Limit on Individual Insurer Liability.--
          (1) Definitions.--For purposes of this subsection, 
        the following definitions shall apply:
                  (A) Annual insurer limit.--The term ``annual 
                insurer limit'' means, with respect to a 
                commercial insurer and a program year, the 
                amount equal to 7 percent of the aggregate 
                premium amount of all commercial property and 
                casualty insurance coverage, written by such 
                insurer during the calendar year preceding such 
                program year, under all lines of commercial 
                property and casualty insurance.
                  (B) Limitable losses.--The term ``limitable 
                losses'' means, for any program year, the 
                industry-wide losses in such program year that 
                do not exceed the dollar amount specified in 
                subsection (b)(1)(A) or (b)(2)(A), as 
                applicable to the program year.
                  (C) Program year.--The term ``program year'' 
                means the period beginning on the date of the 
                enactment of this Act and ending on January 1, 
                2003. If the Secretary extends the covered 
                period pursuant to section 20(b), each calendar 
                year (or portion thereof) covered by such 
                extension shall be a program year for purposes 
                of this subsection.
          (2) Triggering of industry assessments.--If, for any 
        program year, the amount of the limitable losses for 
        such program year that are incurred by any single 
        commercial insurer exceed the annual insurer limit for 
        the commercial insurer for such program year, the 
        Secretary shall apportion the amount of such excess 
        limitable losses pursuant to assessments under 
        paragraph (3).
          (3) Industry assessments to cover losses exceeding 
        loss limit.--For each program year, the Secretary 
        shall, as soon as practicable, determine the aggregate 
        amount of excess limitable losses described in 
        paragraph (2), for all commercial insurers. Subject to 
        paragraph (4), the Secretary shall assess, to each 
        commercial insurer not described in paragraph (2), a 
        portion of such aggregate limitable losses based on the 
        proportion, written by each such commercial insurer, of 
        the aggregate written premium for the calendar year 
        preceding such program year.
          (4) Operation of annual insurer limit to 
        assessments.--The sum of the amount of limitable losses 
        incurred by a commercial insurer in a program year and 
        the aggregate amount of an assessment under this 
        subsection to such insurer may not in any case exceed 
        the annual insurer limit for the insurer.
          (5) Notice.--Upon determining the amount of the 
        assessments under this subsection for a program year, 
        the Secretary shall, as soon as practicable, provide 
        written notice to each commercial insurer that is 
        subject to an assessment of the amount of the 
        assessment and the deadline pursuant to paragraph (6) 
        for payment of the assessment.
          (6) Payment.--Each commercial insurer that is subject 
        to an assessment under this subsection shall pay to the 
        Secretary the amount of the assessment not later than 
        60 days after the Secretary provides notice of the 
        assessment under paragraph (5).
          (7) Distribution of assessment amounts.--Upon 
        receiving payment of assessments under this subsection, 
        the Secretary shall promptly distribute all such 
        amounts among commercial insurers described in 
        paragraph (2), based on limitable losses incurred in 
        excess of the annual insurer limits for such insurers. 
        The Secretary may take such actions, including making 
        such adjustments and reimbursements, as may be 
        necessary to carry out the purposes of this subsection.
  (g) Repayment.--Financial assistance made available under 
this section shall be repaid through assessments under section 
7 collected by the Secretary and surcharges remitted to the 
Secretary under section 8. Any such amounts collected or 
remitted shall be deposited into the general fund of the 
Treasury.
  (h) Final Netting.--The Secretary shall have sole discretion 
to determine the time at which claims relating to any insured 
loss or act of terrorism shall become final.
  (i) Finality of Determinations.--Any determination of the 
Secretary under this section shall be final, and shall not be 
subject to judicial review.
  (j) Emergency Designation.--Congress designates the amount of 
new budget authority and outlays in all fiscal years resulting 
from this section as an emergency requirement pursuant to 
section 252(e) of the Balanced Budget and Emergency Deficit 
Control Act of 1985 (2 U.S.C. 901(e)). Such amount shall be 
available only to the extent that a request, that includes 
designation of such amount as an emergency requirement as 
defined in such Act, is transmitted by the President to 
Congress.

SEC. 7. ASSESSMENTS.

  (a) In General.--In the case of a triggering determination, 
each commercial insurer shall be subject to assessments under 
this section for the purpose of repaying a portion of the 
financial assistance made available under section 6 in 
connection with such determination.
  (b) Aggregate Assessment.--Pursuant to a triggering 
determination, the Secretary shall determine the aggregate 
amount (if any) to be assesseed under this section among all 
commercial insurers, which shall be equal to the lesser of--
          (1) the difference between--
                  (A) $20,000,000,000; and
                  (B) the dollar amount specified in paragraph 
                (1)(A) or (2)(A) of section 6(b), as applicable 
                for such triggering determination; and
          (2) the amount of financial assistance paid under 
        section 6 in connection with the triggering 
        determination.
  (c) Method and Timing.--
          (1) In general.--The aggregate assessment amount in 
        connection with a triggering determination shall be 
        assessed through one or more, as may be necessary 
        pursuant to paragraph (3), assessments under this 
        section.
          (2) Timing.--An assessment under this section in 
        connection with a triggering determination shall be 
        imposed only upon the expiration of any 12-month period 
        beginning after such determination during which no 
        other assessments under this section have been imposed.
          (3) Limitation.--The aggregate amount of any 
        assessments imposed under this section on any single 
        commercial insurer during any 12-month period shall not 
        exceed the amount that is equal to 3 percent of the net 
        premium for such insurer for such period.
  (d) Allocation.--The portion of the aggregate amount of any 
assessment under this section that is allocated to each 
commercial insurer shall be based on the ratio that the net 
premium written by such commercial insurer during the year 
during which the assessment is imposed bears to the aggregate 
written premium for such year, subject to section 9 and the 
limitation under subsection (c)(3) of this section.
  (e) Notice and Obligation to Pay.--
          (1) Notice.--As soon as practicable after any 
        triggering determination, the Secretary shall notify 
        each commercial insurer in writing of an assessment 
        under this section, which notice shall include the 
        amount of the assessment allocated to such insurer.
          (2) Effect of notice.--Upon notice to a commercial 
        insurer, the commercial insurer shall be obligated to 
        pay to the Secretary, not later than 60 days after 
        receipt of such notice, the amount of the assessment on 
        such commercial insurer.
          (3) Failure to make timely payment.--If any 
        commercial insurer fails to pay an assessment under 
        this section before the deadline established under 
        paragraph (2) for the assessment, the Secretary may 
        take either or both of the following actions:
                  (A) Civil monetary penalty.--Assess a civil 
                monetary penalty pursuant to section 9(d) upon 
                such insurer.
                  (B) Interest.--Require such insurer to pay 
                interest, at such rate as the Secretary 
                considers appropriate, on the amount of the 
                assessment that was not paid before the 
                deadline established under paragraph (2).
  (f) Administrative Flexibility.--
          (1) Adjustment of assessments.--The Secretary may 
        provide for or require estimations of amounts under 
        this section and may provide for subsequent refunds or 
        require additional payments to correct such 
        estimations, as appropriate.
          (2) Deferral of contributions.--The Secretary may 
        defer the payment of part or all of an assessment 
        required under this section to be paid by a commercial 
        insurer, but only to the extent that the Secretary 
        determines that such deferral is necessary to avoid the 
        likely insolvency of the commercial insurer.
          (3) Timing of assessments.--The Secretary shall make 
        adjustments regarding the timing and imposition of 
        assessments (including the calculation of net premiums 
        and aggregate written premium) as appropriate for 
        commercial insurers that provide commercial property 
        and casualty insurance on a non-calendar year basis.

SEC. 8. TERRORISM LOSS REPAYMENT SURCHARGE.

  (a) Determination of Imposition and Collection.--
          (1) In general.--If, pursuant to a triggering 
        determination, the Secretary determines that the 
        aggregate amount of financial assistance provided 
        pursuant to section 6 exceeds the amount determined 
        pursuant to section 7(b)(1), the Secretary shall 
        consider and weigh the factors under paragraph (2) to 
        determine the extent to which a surcharge under this 
        section should be established.
          (2) Factors.--The factors under this paragraph are--
                  (A) the ultimate costs to taxpayers if a 
                surcharge under this section is not 
                established;
                  (B) the economic conditions in the commercial 
                marketplace;
                  (C) the affordability of commercial insurance 
                for small- and medium-sized business; and
                  (D) such other factors as the Secretary 
                considers appropriate.
          (3) Policyholder premium.--Any amount established by 
        the Secretary as a surcharge under this section shall 
        be established and imposed as a policyholder premium 
        surcharge on commercial property and casualty insurance 
        written after such determination, for the purpose of 
        repaying financial assistance made available under 
        section 6 in connection with such triggering 
        determination.
          (4) Collection.--The Secretary shall provide for 
        commercial insurers to collect surcharge amounts 
        established under this section and remit such amounts 
        collected to the Secretary.
  (b) Amount and Duration.--Subject to subsection (c), the 
surcharge under this section shall be established in such 
amount, and shall apply to commercial property and casualty 
insurance written during such period, as the Secretary 
determines is necessary to recover the aggregate amount of 
financial assistance provided under section 6 in connection 
with the triggering determination that exceeds the amount 
determined pursuant to section 7(b)(1).
  (c) Percentage Limitation.--The surcharge under this section 
applicable to commercial property and casualty insurance 
coverage may not exceed, on an annual basis, the amount equal 
to 3 percent of the premium charged for such coverage.
  (d) Other Terms.--The surcharge under this section shall--
          (1) be based on a percentage of the premium amount 
        charged for commercial property and casualty insurance 
        coverage that a policy provides; and
          (2) be imposed with respect to all commercial 
        property and casualty insurance coverage written during 
        the period referred to in subsection (b).
  (e) Exclusions.--For purposes of this section, commercial 
property and casualty insurance does not include any 
reinsurance provided to primary insurance companies.

SEC. 9. ADMINISTRATION OF ASSESSMENTS AND SURCHARGES.

  (a) Manner and Method.--
          (1) In general.--Except to the extent specified in 
        such sections, the Secretary shall provide for the 
        manner and method of carrying out assessments under 
        section 7 and surcharges under section 8, including the 
        timing and procedures of making assessments and 
        surcharges, notifying commercial insurers of 
        assessments and surcharge requirements, collecting 
        payments from and surcharges through commercial 
        insurers, and refunding of any excess amounts paid or 
        crediting such amounts against future assessments.
          (2) Effect of assessments and surcharges on urban and 
        smaller commercial and rural areas and different lines 
        of insurance.--In determining the method and manner of 
        imposing assessments under section 7 and surcharges 
        under section 8, including the amount of such 
        assessments and surcharges, the Secretary shall take 
        into consideration--
                  (A) the economic impact of any such 
                assessments and surcharges on commercial 
                centers of urban areas, including the effect on 
                commercial rents and commercial insurance 
                premiums, particularly rents and premiums 
                charged to small businesses, and the 
                availability of lease space and commercial 
                insurance within urban areas;
                  (B) the risk factors related to rural areas 
                and smaller commercial centers, including the 
                potential exposure to loss and the likely 
                magnitude of such loss, as well as any 
                resulting cross-subsidization that might 
                result; and
                  (C) the various exposures to terrorism risk 
                for different lines of commercial property and 
                casualty insurance.
  (b) Timing of Coverages and Assessments.--The Secretary may 
adjust the timing of coverages and assessments provided under 
this Act to provide for equivalent application of the 
provisions of this Act to commercial insurers and policies that 
are not based on a calendar year.
  (c) Adjustment.--The Secretary may adjust the assessments 
charged under section 7 or the percentage imposed under the 
surcharge under section 8 at any time, as the Secretary 
considers appropriate to protect the national interest, which 
may include avoiding unreasonable economic disruption or 
excessive market instability and avoiding undue burdens on 
small businesses.
  (d) Civil Monetary Penalty.--
          (1) In general.--The Secretary may assess a civil 
        monetary penalty in an amount not exceeding the amount 
        under paragraph (2) against any commercial insurer that 
        the Secretary determines, on the record after 
        opportunity for a hearing--
                  (A) has failed to pay an assessment under 
                section 7 in accordance with the requirements 
                of, or regulations issued, under this Act;
                  (B) has failed to charge, collect, or remit 
                surcharges under section 8 in accordance with 
                the requirements of, or regulations issued 
                under, this Act;
                  (C) has intentionally provided to the 
                Secretary erroneous information regarding 
                premium or loss amounts; or
                  (D) has otherwise failed to comply with the 
                provisions of, or the regulations issued under, 
                this Act.
          (2) Amount.--The amount under this paragraph is the 
        greater of $1,000,000 and, in the case of any failure 
        to pay, charge, collect, or remit amounts in accordance 
        with this Act or the regulations issued under this Act, 
        such amount in dispute.

SEC. 10. APPLICATION TO SELF-INSURANCE ARRANGEMENTS AND OFFSHORE 
                    INSURERS AND REINSURERS.

  (a) Self-Insurance Arrangements.--The Secretary may, in 
consultation with the NAIC, apply the provisions of this Act, 
as appropriate, to self-insurance arrangements by 
municipalities and other entities, but only if such application 
is determined before the occurrence of a triggering event and 
all of the provisions of this Act are applied uniformly to such 
entities.
  (b) Offshore Insurers and Reinsurers.--The Secretary shall 
ensure that the provisions of this Act are applied as 
appropriate to any offshore or non-admitted entities that 
provide commercial property and casualty insurance.

SEC. 11. REQUIREMENT TO PROVIDE TERRORISM COVERAGE.

  The Secretary shall require each commercial insurer to 
include, in each policy for commercial property and casualty 
insurance coverage made available, sold, or otherwise provided 
by such insurer, coverage for insured losses resulting from the 
occurrence of an act of terrorism that--
          (1) does not differ materially from the terms, 
        amounts, and other coverage limitations applicable to 
        losses arising from events other than acts of 
        terrorism;
          (2) may not be eliminated, waived, or excluded, by 
        mutual agreement, request or consent of the 
        policyholder, or otherwise; and
          (3) that meets any other criteria that the Secretary 
        may reasonably prescribe.

SEC. 12. STATE PREEMPTION.

  (a) Covered Perils.--A commercial insurer shall be considered 
to have complied with any State law that requires or regulates 
the provision of insurance coverage for acts of terrorism if 
the insurer provides coverage in accordance with the 
definitions regarding acts of terrorism under this Act or under 
any regulations issued by the Secretary.
  (b) Rate Laws.--If any provision of any State law prevents an 
insurer from increasing its premium rates in an amount 
necessary to recover any assessments pursuant to section 7, 
such provision is preempted only to the extent necessary to 
provide for such insurer to recover such losses.
  (c) File and Use.--
          (1) In general.--With respect only to commercial 
        property and casualty insurance covering acts of 
        terrorism, any provision of State law that requires, as 
        a condition precedent to the effectiveness of rates or 
        policies for such insurance that is made available by 
        an insurer licensed to transact such business in the 
        State, any action (including prior approval by the 
        State insurance regulator for such State) other than 
        filing of such rates and policies and related 
        information with such State insurance regulator is 
        preempted to the extent such law requires such 
        additional actions for such insurance coverage.
          (2) Subsequent review authority.--Paragraph (1) shall 
        not be considered to preempt a provision of State law 
        solely because the law provides that rates and policies 
        for such insurance coverage are, upon such filing, 
        subject to subsequent review and action, which may 
        include actions to disapprove or discontinue use of 
        such rates or policies, by the State insurance 
        regulator.
          (3) Treatment of prior review provisions.--Any 
        authority for prior review and action by a State 
        regulator preempted under paragraph (1) shall be deemed 
        to be authority to conduct a subsequent review and 
        action on such filings.

SEC. 13. CONSISTENT STATE GUIDELINES FOR COVERAGE FOR ACTS OF 
                    TERRORISM.

  (a) Sense of Congress Regarding Covered Perils.--It is the 
sense of the Congress that--
          (1) the NAIC, in consultation with the Secretary, 
        should develop appropriate definitions for acts of 
        terrorism that are consistent with this Act and 
        appropriate standards for making determinations 
        regarding occurrences of acts of terrorism;
          (2) each State should adopt the definitions and 
        standards developed by the NAIC for purposes of 
        regulating insurance coverage made available in that 
        State;
          (3) in consulting with the NAIC, the Secretary should 
        advocate and promote the development of definitions and 
        standards that are appropriate for purposes of this 
        Act; and
          (4) after consultation with the NAIC, the Secretary 
        should adopt further definitions for acts of terrorism 
        and standards for determinations that are appropriate 
        for this Act.
  (b) Insurance Reserve Guidelines.--
          (1) Sense of congress regarding adoption by states.--
        It is the sense of the Congress that--
                  (A) the NAIC should develop appropriate 
                guidelines for commercial insurers and pools 
                regarding maintenance of reserves against the 
                risks of acts of terrorism; and
                  (B) each State should adopt such guidelines 
                for purposes of regulating commercial insurers 
                doing business in that State.
          (2) Consideration of adoption of national 
        guidelines.--Upon the expiration of the 6-month period 
        beginning on the date of the enactment of this Act, the 
        Secretary shall make a determination of whether the 
        guidelines referred to in paragraph (1) have, by such 
        time, been developed and adopted by nearly all States 
        in a uniform manner. If the Secretary determines that 
        such guidelines have not been so developed and adopted, 
        the Secretary shall consider adopting, and may adopt, 
        such guidelines on a national basis in a manner that 
        supercedes any State law regarding maintenance of 
        reserves against such risks.
  (c) Guidelines Regarding Disclosure of Pricing and Terms of 
Coverage.--
          (1) Sense of congress.--It is the sense of the 
        Congress that the States should require, by laws or 
        regulations governing the provision of commercial 
        property and casualty insurance that includes coverage 
        for acts of terrorism, that the price of any such 
        terrorism coverage, including the costs of any 
        terrorism related assessments or surcharges under this 
        Act, be separately disclosed.
          (2) Adoption of national guidelines.--If the 
        Secretary determines that the States have not enacted 
        laws or adopted regulations adequately providing for 
        the disclosures described in paragraph (1) within a 
        reasonable period of time after the date of the 
        enactment of this Act, the Secretary shall, after 
        consultation with the NAIC, adopt guidelines on a 
        national basis requiring such disclosure in a manner 
        that supercedes any State law regarding such 
        disclosure.

SEC. 14. CONSULTATION WITH STATE INSURANCE REGULATORS AND NAIC.

  (a) In General.--The Secretary shall consult with the State 
insurance regulators and the NAIC in carrying out this Act.
  (b) Financial Assistance, Assessments, and Surcharges.--The 
Secretary may take such actions, including entering into such 
agreements and providing such technical and organizational 
assistance to insurers and State insurance regulators, as may 
be necessary to provide for the distribution of financial 
assistance under section 6 and the collection of assessments 
under section 7 and surcharges under section 8.
  (c) Investigating and Auditing Claims.--The Secretary may, in 
consultation with the State insurance regulators and the NAIC, 
investigate and audit claims of insured losses by commercial 
insurers and otherwise require verification of amounts of 
premiums or losses, as appropriate.

SEC. 15. STUDY OF POTENTIAL EFFECTS OF TERRORISM ON LIFE INSURANCE 
                    INDUSTRY.

  (a) Establishment.--Not later than 30 days after the date of 
enactment of this Act, the President shall establish a 
commission (in this section referred to as the ``Commission'') 
to study and report on the potential effects of an act or acts 
of terrorism on the life insurance industry in the United 
States and the markets served by such industry.
  (b) Membership and Operations.--
          (1) Appointment.--The Commission shall consist of 7 
        members, as follows:
                  (A) The Secretary of the Treasury or the 
                designee of the Secretary.
                  (B) The Chairman of the Board of Governors of 
                the Federal Reserve System or the designee of 
                the Chairman.
                  (C) The Assistant to the President for 
                Homeland Security.
                  (D) 4 members appointed by the President, who 
                shall be--
                          (i) a representative of direct 
                        underwriters of life insurance within 
                        the United States;
                          (ii) a representative of reinsurers 
                        of life insurance within the United 
                        States;
                          (iii) an officer of the NAIC; and
                          (iv) a representative of insurance 
                        agents for life underwriters.
          (2) Operations.--The chairperson of the Commission 
        shall determine the manner in which the Commission 
        shall operate, including funding, staffing, and 
        coordination with other governmental entities.
  (c) Study.--The Commission shall conduct a study of the life 
insurance industry in the United States, which shall identify 
and make recommendations regarding--
          (1) possible actions to encourage, facilitate, and 
        sustain the provision, by the life insurance industry 
        in the United States, of coverage for losses due to 
        death or disability resulting from an act or acts of 
        terrorism, including in the face of threats of such 
        acts; and
          (2) possible actions or mechanisms to sustain or 
        supplement the ability of the life insurance industry 
        in the United States to cover losses due to death or 
        disability resulting from an act or acts of terrorism 
        in the event that--
                  (A) such acts significantly affect mortality 
                experience of the population of the United 
                States over any period of time;
                  (B) such losses jeopardize the capital and 
                surplus of the life insurance industry in the 
                United States as a whole; or
                  (C) other consequences from such acts occur, 
                as determined by the Commission, that may 
                significantly affect the ability of the life 
                insurance industry in the United States to 
                independently cover such losses.
  (d) Recommendations.--The Commission may make a 
recommendation pursuant to subsection (c) only upon the 
concurrence of a majority of the members of the Commission.
  (e) Report.--Not later than 120 days after the date of 
enactment of this Act, the Commission shall submit to the House 
of Representatives and the Senate a report describing the 
results of the study and any recommendations developed under 
subsection (c).
  (f) Termination.--The Commission shall terminate 60 days 
after submission of the report pursuant to subsection (e).

SEC. 16. RAILROAD AND TRUCKING INSURANCE STUDY.

  The Secretary of the Treasury shall conduct a study to 
determine how the Federal Government can address a possible 
crisis in the availability and affordability of railroad and 
trucking insurance by making such insurance for acts of 
terrorism available on commercially reasonable terms. Not later 
than 120 days after the date of the enactment of this Act the 
Secretary shall submit to the Congress a report regarding the 
results and conclusions of the study.

SEC. 17. STUDY OF REINSURANCE POOL SYSTEM FOR FUTURE ACTS OF TERRORISM.

  (a) Study.--The Secretary, the Board of Governors of the 
Federal Reserve System, and the Comptroller General of the 
United States shall jointly conduct a study on the advisability 
and effectiveness of establishing a reinsurance pool system 
relating to future acts of terrorism to replace the program 
provided for under this Act.
  (b) Consultation.--In conducting the study under subsection 
(a), the Secretary, the Board of Governors of the Federal 
Reserve System, and the Comptroller General shall consult with 
(1) academic experts, (2) the United Nations Secretariat for 
Trade and Development, (3) representatives from the property 
and casualty insurance industry, (4) representatives from the 
reinsurance industry, (5) the NAIC, and (6) such consumer 
organizations as the Secretary considers appropriate.
  (c) Report.--Not later than 6 months after the date of the 
enactment of this Act, the Secretary, the Board of Governors of 
the Federal Reserve System, and the Comptroller General shall 
jointly submit a report to the Congress on the results of the 
study under subsection (a).

SEC. 18. DEFINITIONS.

  For purposes of this Act, the following definitions shall 
apply:
          (1) Act of terrorism.--
                  (A) In general.--The term ``act of 
                terrorism'' means any act that the Secretary 
                determines meets the requirements under 
                subparagraph (B), as such requirements are 
                further defined and specified by the Secretary 
                in consultation with the NAIC.
                  (B) Requirements.--An act meets the 
                requirements of this subparagraph if the act--
                          (i) is unlawful;
                          (ii) causes harm to a person, 
                        property, or entity, in the United 
                        States, or in the case of a domestic 
                        United States air carrier or a United 
                        States flag vessel (or a vessel based 
                        principally in the United States on 
                        which United States income tax is paid 
                        and whose insurance coverage is subject 
                        to regulation in the United States), in 
                        or outside the United States;
                          (iii) is committed by a person or 
                        group of persons or associations who 
                        are recognized, either before or after 
                        such act, by the Department of State or 
                        the Secretary as an international 
                        terrorist group or have conspired with 
                        such a group or the group's agents or 
                        surrogates;
                          (iv) has as its purpose to overthrow 
                        or destabilize the government of any 
                        country, or to influence the policy or 
                        affect the conduct of the government of 
                        the United States or any segment of the 
                        economy of United States, by coercion; 
                        and
                          (v) is not considered an act of war, 
                        except that this clause shall not apply 
                        with respect to any coverage for 
                        workers compensation.
          (2) Affiliate.--The term ``affiliate'' means, with 
        respect to an insurer, any company that controls, is 
        controlled by, or is under common control with the 
        insurer.
          (3) Aggregate written premium.--The term ``aggregate 
        written premium'' means, with respect to a year, the 
        aggregate premium amount of all commercial property and 
        casualty insurance coverage written during such year 
        under all lines of commercial property and casualty 
        insurance.
          (4) Commercial insurer.--The term ``commercial 
        insurer'' means any corporation, association, society, 
        order, firm, company, mutual, partnership, individual, 
        aggregation of individuals, or any other legal entity 
        that provides commercial property and casualty 
        insurance. Such term includes any affiliates of a 
        commercial insurer.
          (5) Commercial property and casualty insurance.--
                  (A) In general.--The term ``commercial 
                property and casualty insurance'' means 
                insurance or reinsurance, or retrocessional 
                reinsurance, for persons or properties in the 
                United States against--
                          (i) loss of or damage to property;
                          (ii) loss of income or extra expense 
                        incurred because of loss of or damage 
                        to property;
                          (iii) third party liability claims 
                        caused by negligence or imposed by 
                        statute or contract, including workers 
                        compensation; or
                          (iv) loss resulting from debt or 
                        default of another.
                  (B) Exclusions.--Such term does not include--
                          (i) insurance for homeowners, 
                        tenants, private passenger nonfleet 
                        automobiles, mobile homes, or other 
                        insurance for personal, family, or 
                        household needs;
                          (ii) insurance for professional 
                        liability, including medical 
                        malpractice, errors and omissions, or 
                        directors' and officers' liability; or
                          (iii) health or life insurance.
          (6) Control.--A company has control over another 
        company if--
                  (A) the company directly or indirectly or 
                acting through one or more other persons owns, 
                controls, or has power to vote 25 percent or 
                more of any class of voting securities of the 
                other company;
                  (B) the company controls in any manner the 
                election of a majority of the directors or 
                trustees of the other company; or
                  (C) the Secretary determines, after notice 
                and opportunity for hearing, that the company 
                directly or indirectly exercises a controlling 
                influence over the management or policies of 
                the other company.
          (7) Covered period.--The term ``covered period'' has 
        the meaning given such term in section 19.
          (8) Industry-wide losses.--The term ``industry-wide 
        losses'' means the aggregate insured losses sustained 
        by all insurers from coverage written under all lines 
        of commercial property and casualty insurance.
          (9) Insured loss.--The term ``insured loss'' means 
        any loss, net of reinsurance and retrocessional 
        reinsurance, covered by commercial property and 
        casualty insurance.
          (10) NAIC.--The term ``NAIC'' means the National 
        Association of Insurance Commissioners.
          (11) Net premium.--The term ``net premium'' means, 
        with respect a commercial insurer and a year, the 
        aggregate premium amount collected by such commercial 
        insurer for all commercial property and casualty 
        insurance coverage written during such year under all 
        lines of commercial property and casualty insurance by 
        such commercial insurer, less any premium paid by such 
        commercial insurer to other commercial insurers to 
        insure or reinsure those risks.
          (12) Secretary.--The term ``Secretary'' means the 
        Secretary of the Treasury.
          (13) State.--The term ``State'' means the States of 
        the United States, the District of Columbia, the 
        Commonwealth of Puerto Rico, the Commonwealth of the 
        Northern Mariana Islands, Guam, the Virgin Islands, 
        American Samoa, and any other territory or possession 
        of the United States.
          (14) State insurance regulator.--The term ``State 
        insurance regulator'' means, with respect to a State, 
        the principal insurance regulatory authority of the 
        State.
          (15) Triggering determination.--The term ``triggering 
        determination'' has the meaning given such term in 
        section 5(a).
          (16) Triggering event.--The term ``triggering event'' 
        means, with respect to a triggering determination, the 
        occurrence of an act of terrorism, or the occurrence of 
        such acts, that caused the insured losses resulting in 
        such triggering determination.
          (17) United states.--The term ``United States'' 
        means, collectively, the States (as such term is 
        defined in this section).

SEC. 19. COVERED PERIOD AND EXTENSION OF PROGRAM.

  (a) Covered Period.--Except to the extent provided otherwise 
under subsection (b), for purposes of this Act, the term 
``covered period'' means the period beginning on the date of 
the enactment of this Act and ending on January 1, 2003.
  (b) Extension of Program.--If the Secretary determines that 
extending the covered period is necessary to ensure the 
adequate availability in the United States of commercial 
property and casualty insurance coverage for acts of terrorism, 
the Secretary may, subject to subsection (c), extend the 
covered period by not more than two years.
  (c) Report.--The Secretary may exercise the authority under 
subsection (b) to extend the covered period only if the 
Secretary submits a report to the Congress providing notice of 
and setting forth the reasons for such extension.

SEC. 20. REGULATIONS.

  The Secretary shall issue any regulations necessary to carry 
out this Act.

                                  
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