[House Report 110-318]
[From the U.S. Government Publishing Office]



110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    110-318

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



 
      TERRORISM RISK INSURANCE REVISION AND EXTENSION ACT OF 2007

                                _______
                                

 September 6, 2007.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

 Mr. Frank of Massachusetts, from the Committee on Financial Services, 
                        submitted the following

                              R E P O R T

                             together with

                    ADDITIONAL AND DISSENTING VIEWS

                        [To accompany H.R. 2761]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 2761) to extend the Terrorism Insurance Program 
of the Department of the Treasury, and for other purposes, 
having considered the same, reports favorably thereon with an 
amendment and recommends that the bill as amended do pass.
    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................    19
Background and Need for Legislation..............................    19
Hearings.........................................................    23
Committee Consideration..........................................    25
Committee Votes..................................................    25
Committee Oversight Findings.....................................    31
Performance Goals and Objectives.................................    31
New Budget Authority, Entitlement Authority, and Tax Expenditures    32
Committee Cost Estimate..........................................    32
Congressional Budget Office Estimate.............................    32
Federal Mandates Statement.......................................    42
Advisory Committee Statement.....................................    42
Constitutional Authority Statement...............................    42
Applicability to Legislative Branch..............................    42
Earmark Identification...........................................    42
Exchange of Committee Correspondence.............................    43
Section-by-Section Analysis of the Legislation...................    44
Changes in Existing Law Made by the Bill, as Reported............    49
Additional and Dissenting Views..................................    88

                               Amendment


SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Terrorism Risk Insurance Revision and 
Extension Act of 2007''.

SEC. 2. TERMINATION OF PROGRAM.

  Subsection (a) of section 108 of the Terrorism Risk Insurance Act of 
2002 (15 U.S.C. 6701 note) is amended by striking ``December 31, 2007'' 
and inserting ``December 31, 2022''.

SEC. 3. REVISION OF TERRORISM INSURANCE PROGRAM.

  (a) In General.--The Terrorism Risk Insurance Act of 2002 is 
amended--
          (1) by striking sections 101, 102, and 103 and inserting the 
        following new sections:

``SEC. 101. CONGRESSIONAL FINDINGS AND PURPOSE.

  ``(a) Findings.--The Congress finds that--
          ``(1) the ability of businesses and individuals to obtain 
        property and casualty insurance at reasonable and predictable 
        prices, in order to spread the risk of both routine and 
        catastrophic loss, is critical to economic growth, urban 
        development, and the construction and maintenance of public and 
        private housing, as well as to the promotion of United States 
        exports and foreign trade in an increasingly interconnected 
        world;
          ``(2) property and casualty insurance firms are important 
        financial institutions, the products of which allow 
        mutualization of risk and the efficient use of financial 
        resources and enhance the ability of the economy to maintain 
        stability, while responding to a variety of economic, 
        political, environmental, and other risks with a minimum of 
        disruption;
          ``(3) the ability of the insurance industry to cover the 
        unprecedented financial risks presented by potential acts of 
        terrorism in the United States can be a major factor in the 
        recovery from terrorist attacks, while maintaining the 
        stability of the economy;
          ``(4) widespread financial market uncertainties have arisen 
        following the terrorist attacks of September 11, 2001, 
        including the absence of information from which financial 
        institutions can make statistically valid estimates of the 
        probability and cost of future terrorist events, and therefore 
        the size, funding, and allocation of the risk of loss caused by 
        such acts of terrorism;
          ``(5) a decision by property and casualty insurers to deal 
        with such uncertainties, either by terminating property and 
        casualty coverage for losses arising from terrorist events, or 
        by radically escalating premium coverage to compensate for 
        risks of loss that are not readily predictable, could seriously 
        hamper ongoing and planned construction, property acquisition, 
        and other business projects, generate a dramatic increase in 
        rents, and otherwise suppress economic activity;
          ``(6) the United States Government should coordinate with 
        insurers to provide financial compensation to insured parties 
        for losses from acts of terrorism, contributing to the 
        stabilization of the United States economy in a time of 
        national crisis, and periodically assess the ability of the 
        financial services industry to develop the systems, mechanisms, 
        products, and programs necessary to create a viable financial 
        services market for private terrorism risk insurance that will 
        lessen the financial participation of the United States 
        Government;
          ``(7) in addition to a terrorist attack on the United States 
        using conventional means or weapons, there is and continues to 
        be a potential threat of a terrorist attack involving the use 
        of unconventional means or weapons, such as nuclear, 
        biological, chemical, or radiological agents;
          ``(8) as nuclear, biological, chemical, or radiological acts 
        of terrorism (known as NBCR terrorism) present a threat of loss 
        of life, injury, disease, and property damage potentially 
        unparalleled in scope and complexity by any prior event, 
        natural or man-made, the Federal Government's responsibility in 
        providing for and preserving national economic security calls 
        for a strong Federal role in ensuring financial compensation 
        and economic recovery in the event of such an attack;
          ``(9) a report issued by the Government Accountability Office 
        in September 2006 concluded that `any purely market-driven 
        expansion of coverage' for NBCR terrorism risk is `highly 
        unlikely in the foreseeable future', and the September 2006 
        report from the President's Working Group on Financial Markets 
        concluded that reinsurance for NBCR terrorist events is 
        virtually unavailable and that `[g]iven the general reluctance 
        of insurance companies to provide coverage for these types of 
        risks, there may be little potential for future market 
        development';
          ``(10) group life insurance companies are important financial 
        institutions whose products make life insurance coverage 
        affordable for millions of Americans and often serve as their 
        only life insurance benefit;
          ``(11) the group life insurance industry, in the event of a 
        severe act of terrorism, is vulnerable to insolvency because 
        high concentrations of covered employees work in the same 
        locations, because primary group life insurers do not exclude 
        conventional and NBCR terrorism risks while most catastrophic 
        reinsurance does exclude such terrorism risks, and because a 
        large-scale loss of life would fall outside of actuarial 
        expectations of death; and
          ``(12) the United States Government should provide temporary 
        financial compensation to insured parties, contributing to the 
        stabilization of the United States economy in a time of 
        national crisis, while the financial services industry develops 
        the systems, mechanisms, products, and programs necessary to 
        create a viable financial services market for private terrorism 
        risk insurance.
  ``(b) Purpose.--The purpose of this title is to establish a temporary 
Federal program that provides for a transparent system of shared public 
and private compensation for insured losses resulting from acts of 
terrorism, in order to--
          ``(1) protect consumers by addressing market disruptions and 
        ensure the continued widespread availability and affordability 
        of property and casualty insurance and group life insurance for 
        all types of terrorism risk, including conventional terrorism 
        risk and nuclear, biological, chemical, and radiological 
        terrorism risk;
          ``(2) allow for a transitional period for the private markets 
        to stabilize, resume pricing of such insurance, and build 
        capacity to absorb any future losses, while preserving State 
        insurance regulation and consumer protections (unless otherwise 
        preempted by this Act); and
          ``(3) provide finite liability limits for terrorism insurance 
        losses for insurers and the United States Government.

``SEC. 102. DEFINITIONS.

  ``In this title, the following definitions shall apply:
          ``(1) Act of terrorism.--
                  ``(A) Certification.--The term `act of terrorism' 
                means any act that is certified by the Secretary, in 
                concurrence with the Secretary of State, the Secretary 
                of Homeland Security, and the Attorney General of the 
                United States--
                          ``(i) to be an act of terrorism;
                          ``(ii) to be a violent act or an act that is 
                        dangerous to--
                                  ``(I) human life;
                                  ``(II) property; or
                                  ``(III) infrastructure;
                          ``(iii) to have resulted in damage within the 
                        United States, or outside of the United States 
                        in the case of--
                                  ``(I) an air carrier or vessel 
                                described in paragraph (9)(B); or
                                  ``(II) the premises of a United 
                                States mission; and
                          ``(iv) to have been committed by an 
                        individual or individuals as part of an effort 
                        to coerce the civilian population of the United 
                        States or to influence the policy or affect the 
                        conduct of the United States Government by 
                        coercion.
                  ``(B) Limitation.--No act shall be certified by the 
                Secretary as an act of terrorism if--
                          ``(i) the act is committed as part of the 
                        course of a war declared by the Congress, 
                        except that this clause shall not apply with 
                        respect to any coverage for workers' 
                        compensation; or
                          ``(ii) property and casualty insurance and 
                        group life insurance losses resulting from the 
                        act, in the aggregate, do not exceed 
                        $5,000,000.
                  ``(C) Certification of act of nbcr terrorism.--Upon 
                certification of an act of terrorism, the Secretary, in 
                concurrence with the Secretary of State, the Secretary 
                of Homeland Security, and the Attorney General of the 
                United States, shall determine whether the act of 
                terrorism meets the definition of NBCR terrorism in 
                this section. If such determination is that the act 
                does meet such definition, the Secretary shall further 
                certify such act of terrorism as an act of NBCR 
                terrorism.
                  ``(D) Determinations final.--Any certification of, or 
                determination not to certify, an act as an act of 
                terrorism or as an act of NBCR terrorism under this 
                paragraph shall be final, and shall not be subject to 
                judicial review.
                  ``(E) Nondelegation.--The Secretary may not delegate 
                or designate to any other officer, employee, or person, 
                any determination under this paragraph of whether, 
                during the effective period of the Program, an act of 
                terrorism, including an act of NBCR terrorism, has 
                occurred.
          ``(2) Affiliate.--The term `affiliate' means, with respect to 
        an insurer, any entity that controls, is controlled by, or is 
        under common control with the insurer.
          ``(3) Amount at risk.--The term `amount at risk' means face 
        amount less statutory policy reserves for group life insurance 
        issued by any insurer for insurance against losses occurring at 
        the locations described in subparagraph (A) of paragraph (9).
          ``(4) Control.--An entity has `control' over another entity, 
        if--
                  ``(A) the entity directly or indirectly or acting 
                through 1 or more other persons owns, controls, or has 
                power to vote 25 percent or more of any class of voting 
                securities of the other entity;
                  ``(B) the entity controls in any manner the election 
                of a majority of the directors or trustees of the other 
                entity; or
                  ``(C) the Secretary determines, after notice and 
                opportunity for hearing, that the entity directly or 
                indirectly exercises a controlling influence over the 
                management or policies of the other entity; except that 
                for purposes of any proceeding under this subparagraph, 
                there shall be a presumption that any entity which 
                directly or indirectly owns, controls, or has power to 
                vote less than 5 percent of any class of voting 
                securities of another entity does not have control over 
                that entity.
          ``(5) Covered lines.--The term `covered lines' means property 
        and casualty insurance and group life insurance, as defined in 
        this section.
          ``(6) Direct earned premium.--The term `direct earned 
        premium' means a direct earned premium for property and 
        casualty insurance issued by any insurer for insurance against 
        losses occurring at the locations described in subparagraph (A) 
        of paragraph (9).
          ``(7) Excess insured loss.--The term `excess insured loss' 
        means, with respect to a Program Year, any portion of the 
        amount of insured losses during such Program Year that exceeds 
        the cap on annual liability under section 103(e)(2)(A).
          ``(8) Group life insurance.--The term `group life insurance' 
        means an insurance contract that provides life insurance 
        coverage, including term life insurance coverage, universal 
        life insurance coverage, variable universal life insurance 
        coverage, and accidental death coverage, or a combination 
        thereof, for a number of individuals under a single contract, 
        on the basis of a group selection of risks, but does not 
        include `Corporate Owned Life Insurance' or `Business Owned 
        Life Insurance,' each as defined under the Internal Revenue 
        Code of 1986, or any similar product, or group life reinsurance 
        or retrocessional reinsurance.
          ``(9) Insured loss.--
                  ``(A) In general.--Except as provided in subparagraph 
                (B), the term `insured loss' means any loss resulting 
                from an act of terrorism (including an act of war, in 
                the case of workers' compensation) that is covered by 
                primary or excess property and casualty insurance, or 
                group life insurance to the extent of the amount at 
                risk, issued by an insurer, if such loss--
                          ``(i) occurs within the United States; or
                          ``(ii) occurs to an air carrier (as defined 
                        in section 40102 of title 49, United States 
                        Code), to 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), regardless of 
                        where the loss occurs, or at the premises of 
                        any United States mission.
                  ``(B) Limitation for group life insurance.--Such term 
                shall not include any losses of an insurer resulting 
                from coverage of any single certificate holder under 
                any group life insurance coverages of the insurer to 
                the extent such losses are not compensated under the 
                Program by reason of section 103(e)(1)(D).
          ``(10) Insurer.--The term `insurer' means any entity, 
        including any affiliate thereof--
                  ``(A) that is--
                          ``(i) licensed or admitted to engage in the 
                        business of providing primary or excess 
                        insurance, or group life insurance, in any 
                        State;
                          ``(ii) not licensed or admitted as described 
                        in clause (i), if it is an eligible surplus 
                        line carrier listed on the Quarterly Listing of 
                        Alien Insurers of the NAIC, or any successor 
                        thereto;
                          ``(iii) approved for the purpose of offering 
                        property and casualty insurance by a Federal 
                        agency in connection with maritime, energy, or 
                        aviation activity;
                          ``(iv) a State residual market insurance 
                        entity or State workers' compensation fund; or
                          ``(v) any other entity described in section 
                        103(f), to the extent provided in the rules of 
                        the Secretary issued under section 103(f);
                  ``(B) that receives direct earned premiums for any 
                type of commercial property and casualty insurance 
                coverage, or, in the case of group life insurance, that 
                receives direct premiums, other than in the case of 
                entities described in sections 103(d) and 103(f); and
                  ``(C) that meets any other criteria that the 
                Secretary may reasonably prescribe.
          ``(11) Insurer deductible.--The term `insurer deductible' 
        means--
                  ``(A) for the Transition Period, the value of an 
                insurer's direct earned premiums over the calendar year 
                immediately preceding the date of enactment of this 
                Act, multiplied by 1 percent;
                  ``(B) for Program Year 1, the value of an insurer's 
                direct earned premiums over the calendar year 
                immediately preceding Program Year 1, multiplied by 7 
                percent;
                  ``(C) for Program Year 2, the value of an insurer's 
                direct earned premiums over the calendar year 
                immediately preceding Program Year 2, multiplied by 10 
                percent;
                  ``(D) for Program Year 3, the value of an insurer's 
                direct earned premiums over the calendar year 
                immediately preceding Program Year 3, multiplied by 15 
                percent;
                  ``(E) for Program Year 4, the value of an insurer's 
                direct earned premiums over the calendar year 
                immediately preceding Program Year 4, multiplied by 
                17.5 percent;
                  ``(F) for Program Year 5, the value of an insurer's 
                direct earned premiums over the calendar year 
                immediately preceding Program Year 5, multiplied by 20 
                percent;
                  ``(G) for each additional Program Year--
                          ``(i) with respect to property and casualty 
                        insurance, the value of an insurer's direct 
                        earned premiums over the calendar year 
                        immediately preceding such Program Year, 
                        multiplied by 20 percent; and
                          ``(ii) with respect to group life insurance, 
                        the value of an insurer's amount at risk over 
                        the calendar year immediately preceding such 
                        Program Year, multiplied by 0.0351 percent;
                  ``(H) notwithstanding subparagraphs (A) through (G), 
                for the Transition Period or any Program Year, if an 
                insurer has not had a full year of operations during 
                the calendar year immediately preceding such Period or 
                Program Year, such portion of the direct earned 
                premiums with respect to property and casualty 
                insurance, and such portion of the amounts at risk with 
                respect to group life insurance, of the insurer as the 
                Secretary determines appropriate, subject to 
                appropriate methodologies established by the Secretary 
                for measuring such direct earned premiums and amounts 
                at risk;
                  ``(I) notwithstanding subparagraphs (A) through (H) 
                and (J), in the case of any act of NBCR terrorism, for 
                any additional Program Year--
                          ``(i) with respect to property and casualty 
                        insurance, the value of an insurer's direct 
                        earned premiums over the calendar year 
                        immediately preceding such Program Year, 
                        multiplied by a percentage, which--
                                  ``(I) for the second additional 
                                Program Year, shall be 3.5 percent; and
                                  ``(II) for each succeeding Program 
                                Year thereafter, shall be 50 basis 
                                points greater than the percentage 
                                applicable to the preceding additional 
                                Program Year; and
                          ``(ii) with respect to group life insurance, 
                        the value of an insurer's amount at risk over 
                        the calendar year immediately preceding such 
                        Program Year, multiplied by a percentage, 
                        which--
                                  ``(I) for the first additional 
                                Program Year, shall be 0.00614 percent; 
                                and
                                  ``(II) for each succeeding Program 
                                Year thereafter, shall be 0.088 basis 
                                point greater than the percentage 
                                applicable to the preceding additional 
                                Program Year; and
                  ``(J) notwithstanding subparagraph (G)(i), if 
                aggregate industry insured losses resulting from a 
                certified act of terrorism exceed $1,000,000,000, for 
                any insurer that sustains insured losses resulting from 
                such act of terrorism, the value of such insurer's 
                direct earned premiums over the calendar year 
                immediately preceding the Program Year, multiplied by a 
                percentage, which--
                          ``(i) for the first additional Program Year 
                        shall be 5 percent;
                          ``(ii) for each additional Program Year 
                        thereafter, shall be 50 basis points greater 
                        than the percentage applicable to the preceding 
                        additional Program Year, except that if an act 
                        of terrorism occurs during any additional 
                        Program Year that results in aggregate industry 
                        insured losses exceeding $1,000,000,000, the 
                        percentage for the succeeding additional 
                        Program Year shall be 5 percent and the 
                        increase under this clause shall apply to 
                        additional Program Years thereafter;
                except that for purposes of determining under this 
                subparagraph whether aggregate industry insured losses 
                exceed $1,000,000,000, the Secretary may combine 
                insured losses resulting from two or more certified 
                acts of terrorism occurring during such Program Year in 
                the same geographic area (with such area determined by 
                the Secretary), in which case such insurer shall be 
                permitted to combine insured losses resulting from such 
                acts of terrorism for purposes of satisfying its 
                insurer deductible under this subparagraph; and except 
                that the insurer deductible under this subparagraph 
                shall apply only with respect to compensation of 
                insured losses resulting from such certified act, or 
                combined certified acts, and that for purposes of 
                compensation of any other insured losses occurring in 
                the same Program Year, the insurer deductible 
                determined under subparagraph (G)(i) or (I) shall 
                apply.
          ``(12) NAIC.--The term `NAIC' means the National Association 
        of Insurance Commissioners.
          ``(13) NBCR terrorism.--The term `NBCR terrorism' means an 
        act of terrorism that involves nuclear, biological, chemical, 
        or radiological reactions, releases, or contaminations, to the 
        extent any insured losses result from any such reactions, 
        releases, or contaminations.
          ``(14) Person.--The term `person' means any individual, 
        business or nonprofit entity (including those organized in the 
        form of a partnership, limited liability company, corporation, 
        or association), trust or estate, or a State or political 
        subdivision of a State or other governmental unit.
          ``(15) Program.--The term `Program' means the Terrorism 
        Insurance Program established by this title.
          ``(16) Program years.--
                  ``(A) Transition period.--The term `Transition 
                Period' means the period beginning on the date of 
                enactment of this Act and ending on December 31, 2002.
                  ``(B) Program year 1.--The term `Program Year 1' 
                means the period beginning on January 1, 2003 and 
                ending on December 31, 2003.
                  ``(C) Program year 2.--The term `Program Year 2' 
                means the period beginning on January 1, 2004 and 
                ending on December 31, 2004.
                  ``(D) Program year 3.--The term `Program Year 3' 
                means the period beginning on January 1, 2005 and 
                ending on December 31, 2005.
                  ``(E) Program year 4.--The term `Program Year 4' 
                means the period beginning on January 1, 2006 and 
                ending on December 31, 2006.
                  ``(F) Program year 5.--The term `Program Year 5' 
                means the period beginning on January 1, 2007 and 
                ending on December 31, 2007.
                  ``(G) Additional program year.--The term `additional 
                Program Year' means any additional one-year period 
                after Program Year 5 during which the Program is in 
                effect, which period shall begin on January 1 and end 
                on December 31 of the same calendar year.
          ``(17) Property and casualty insurance.--The term `property 
        and casualty insurance'--
                  ``(A) means commercial lines of property and casualty 
                insurance, including excess insurance, workers' 
                compensation insurance, and directors and officers 
                liability insurance; and
                  ``(B) does not include--
                          ``(i) Federal crop insurance issued or 
                        reinsured under the Federal Crop Insurance Act 
                        (7 U.S.C. 1501 et seq.), or any other type of 
                        crop or livestock insurance that is privately 
                        issued or reinsured;
                          ``(ii) private mortgage insurance (as that 
                        term is defined in section 2 of the Homeowners 
                        Protection Act of 1998 (12 U.S.C. 4901)) or 
                        title insurance;
                          ``(iii) financial guaranty insurance issued 
                        by monoline financial guaranty insurance 
                        corporations;
                          ``(iv) insurance for medical malpractice;
                          ``(v) health or life insurance, including 
                        group life insurance;
                          ``(vi) flood insurance provided under the 
                        National Flood Insurance Act of 1968 (42 U.S.C. 
                        4001 et seq.);
                          ``(vii) reinsurance or retrocessional 
                        reinsurance;
                          ``(viii) commercial automobile insurance;
                          ``(ix) burglary and theft insurance;
                          ``(x) surety insurance; or
                          ``(xi) professional liability insurance.
          ``(18) Secretary.--The term `Secretary' means the Secretary 
        of the Treasury.
          ``(19) State.--The term `State' means any State of the United 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, the Commonwealth of the Northern Mariana Islands, 
        American Samoa, Guam, each of the United States Virgin Islands, 
        and any territory or possession of the United States.
          ``(20) United states.--The term `United States' means the 
        several States, and includes the territorial sea and the 
        continental shelf of the United States, as those terms are 
        defined in the Violent Crime Control and Law Enforcement Act of 
        1994 (18 U.S.C. 2280, 2281).
          ``(21) Rule of construction for dates.--With respect to any 
        reference to a date in this title, such day shall be 
        construed--
                  ``(A) to begin at 12:01 a.m. on that date; and
                  ``(B) to end at midnight on that date.

``SEC. 103. TERRORISM INSURANCE PROGRAM.

  ``(a) Establishment of Program.--
          ``(1) In general.--There is established in the Department of 
        the Treasury the Terrorism Insurance Program.
          ``(2) Authority of the secretary.--Notwithstanding any other 
        provision of State or Federal law, the Secretary shall 
        administer the Program, and shall pay the Federal share of 
        compensation for insured losses in accordance with subsection 
        (e).
          ``(3) Mandatory participation.--Each entity that meets the 
        definition of an insurer under this title shall participate in 
        the Program.
          ``(4) NBCR exemption for certain insurers.--Notwithstanding 
        the requirements of paragraph (3):
                  ``(A) Eligibility.--Upon request, the Secretary may 
                provide an exemption from the requirements of 
                subparagraph (B) of subsection (c)(1) in the Program to 
                an entity that otherwise meets the definition of an 
                insurer under this title if--
                          ``(i) such insurer's direct earned premium is 
                        less than $50,000,000 in the calendar year 
                        immediately preceding the current additional 
                        Program Year; and
                          ``(ii) the Secretary makes the determination 
                        set forth in subparagraph (D).
                  ``(B) Insurer group.--For purposes of subparagraph 
                (A)(i), the direct earned premium of any insurer shall 
                include the direct earned premiums of every affiliate 
                of that insurer.
                  ``(C) Information and consultation.--Any insurer 
                requesting an exemption pursuant to this paragraph 
                shall provide any information the Secretary may require 
                to establish its eligibility for the exemption. In 
                developing standards for evaluating eligibility for the 
                exemption under this paragraph, the Secretary shall 
                consult with the NAIC.
                  ``(D) Determination.--In making any determination 
                regarding eligibility for exemption under this 
                paragraph, the Secretary shall consult with the 
                insurance commissioner of the State or other 
                appropriate State regulatory authority where the 
                insurer is domiciled and determine whether the insurer 
                has demonstrated that it would become insolvent if it 
                were required, in the event of an act of NBCR 
                terrorism, to satisfy--
                          ``(i) its deductible and maximum applicable 
                        share above the deductible pursuant to sections 
                        102(11)(I) and 103(e)(1)(B), respectively, for 
                        such act of NBCR terrorism resulting in 
                        aggregate industry insured losses above the 
                        trigger established in section 103(e)(1)(C); or
                          ``(ii) its maximum payment obligations for 
                        insured losses for such act of NBCR terrorism 
                        resulting in aggregate industry insured losses 
                        below the trigger established in section 
                        103(e)(1)(C).
                  ``(E) Workers' compensation and other compulsory 
                insurance law.--In granting an exemption under this 
                paragraph, the Secretary shall not approve any request 
                for exemption with regard to State workers' 
                compensation insurance or other compulsory insurance 
                law requiring coverage of the risks described in 
                subparagraph (B) of subsection (c)(1).
                  ``(F) Exemption period.--
                          ``(i) In general.--Any exemption granted to 
                        an insurer by the Secretary under this 
                        paragraph shall have a duration of not longer 
                        than 2 years.
                          ``(ii) Extension.--Notwithstanding clause 
                        (i), the Secretary may, upon application by an 
                        insurer granted an exemption under this 
                        paragraph, extend such exemption for additional 
                        periods of not longer than 2 years.
  ``(b) Conditions for Federal Payments.--No payment may be made by the 
Secretary under this section with respect to an insured loss that is 
covered by an insurer, unless--
          ``(1) the person that suffers the insured loss, or a person 
        acting on behalf of that person, files a claim with the 
        insurer;
          ``(2) the insurer provides clear and conspicuous disclosure 
        to the policyholder of the premium charged for insured losses 
        covered by the Program (including the additional premium, if 
        any, charged for the coverage for insured losses resulting from 
        acts of NBCR terrorism as made available pursuant to subsection 
        (c)(1)(B)) and the Federal share of compensation for insured 
        losses under the Program--
                  ``(A) in the case of any policy that is issued before 
                the date of enactment of this Act, not later than 90 
                days after that date of enactment;
                  ``(B) in the case of any policy that is issued within 
                90 days of the date of enactment of this Act, at the 
                time of offer, purchase, and renewal of the policy; and
                  ``(C) in the case of any policy that is issued more 
                than 90 days after the date of enactment of this Act, 
                on a separate line item in the policy, at the time of 
                offer, purchase, and renewal of the policy;
          ``(3) the insurer processes the claim for the insured loss in 
        accordance with appropriate business practices, and any 
        reasonable procedures that the Secretary may prescribe; and
          ``(4) the insurer submits to the Secretary, in accordance 
        with such reasonable procedures as the Secretary may 
        establish--
                  ``(A) a claim for payment of the Federal share of 
                compensation for insured losses under the Program;
                  ``(B) written certification--
                          ``(i) of the underlying claim; and
                          ``(ii) of all payments made for insured 
                        losses; and
                  ``(C) certification of its compliance with the 
                provisions of this subsection.
  ``(c) Mandatory Availability.--
          ``(1) Availability of coverage for insured losses.--Subject 
        to paragraph (3), during each Program Year, each entity that 
        meets the definition of an insurer under section 102 shall make 
        available--
                  ``(A) in all of its insurance policies for covered 
                lines, coverage for insured losses that does not differ 
                materially from the terms, amounts, and other coverage 
                limitations applicable to losses arising from events 
                other than acts of terrorism; and
                  ``(B) in insurance policies for covered lines for 
                which the coverage described in subparagraph (A) is 
                provided, exceptions to the pollution and nuclear 
                hazard exclusions of such policies that render such 
                exclusions inapplicable only as to insured losses 
                arising from acts of NBCR terrorism.
          ``(2) Allowable exclusions in other coverage.--Subject to 
        paragraph (3) and notwithstanding any other provision of 
        Federal or State law, including any State workers' compensation 
        and other compulsory insurance law, if a person elects not to 
        purchase an insurance policy with the coverage described in 
        paragraph (1)--
                  ``(A) an insurer may exclude coverage for all losses 
                from acts of terrorism including acts of NBCR 
                terrorism, except for State workers' compensation and 
                other compulsory insurance law requiring coverage of 
                the risks described in subsection (c)(1) (unless 
                permitted by State law); or
                  ``(B) an insurer may offer other options for coverage 
                that differ materially from the terms, amounts, and 
                other coverage limitations applicable to losses arising 
                from events other than acts of terrorism;
        except that nothing in this paragraph shall affect paragraph 
        (4).
          ``(3) Applicability for nbcr terrorism.--Notwithstanding any 
        other provision of this Act, paragraphs (1)(B) and (2) shall 
        apply, beginning upon January 1, 2009, with respect to coverage 
        for acts of NBCR terrorism, that is purchased or renewed on or 
        after such date.
          ``(4) Availability of life insurance without regard to lawful 
        foreign travel.--During each Program Year, each entity that 
        meets the definition of an insurer under section 102 shall make 
        available, in all of its life insurance policies issued after 
        the date of the enactment of the Terrorism Risk Insurance 
        Revision and Extension Act of 2007 under which the insured 
        person is a citizen of the United States or an alien lawfully 
        admitted for permanent residence in the United States, coverage 
        that neither considers past, nor precludes future, lawful 
        foreign travel by the person insured, and shall not decline 
        such coverage based on past or future, lawful foreign travel by 
        the person insured or charge a premium for such coverage that 
        is excessive and not based on a good faith actuarial analysis, 
        except that an insurer may decline or, upon inception or 
        renewal of a policy, limit the amount of coverage provided 
        under any life insurance policy based on plans to engage in 
        future lawful foreign travel to occur within 12 months of such 
        inception or renewal of the policy but only if, at time of 
        application--
                  ``(A) such declination is based on, or such 
                limitation applies only with respect to, travel to a 
                foreign destination--
                          ``(i) for which the Director of the Centers 
                        for Disease Control and Prevention of the 
                        Department of Health and Human Services has 
                        issued a highest level alert or warning, 
                        including a recommendation against non-
                        essential travel, due to a serious health-
                        related condition;
                          ``(ii) in which there is an ongoing military 
                        conflict involving the armed forces of a 
                        sovereign nation other than the nation to which 
                        the insured person is traveling; or
                          ``(iii)(I) that the insurer has specifically 
                        designated in the terms of the life insurance 
                        policy at the inception of the policy or at 
                        renewal, as applicable; and
                          ``(II) with respect to which the insurer has 
                        made a good-faith determination that--
                                  ``(aa) a serious unlawful situation 
                                exists which is ongoing; and
                                  ``(bb) the credibility of information 
                                by which the insurer can verify the 
                                death of the insured person is 
                                compromised; and
                  ``(B) in the case of any limitation of coverage, such 
                limitation is specifically stated in the terms of the 
                life insurance policy at the inception of the policy or 
                at renewal, as applicable.
  ``(d) State Residual Market Insurance Entities.--
          ``(1) In general.--The Secretary shall issue regulations, as 
        soon as practicable after the date of enactment of this Act, 
        that apply the provisions of this title to State residual 
        market insurance entities and State workers' compensation 
        funds.
          ``(2) Treatment of certain entities.--For purposes of the 
        regulations issued pursuant to paragraph (1)--
                  ``(A) a State residual market insurance entity that 
                does not share its profits and losses with private 
                sector insurers shall be treated as a separate insurer; 
                and
                  ``(B) a State residual market insurance entity that 
                shares its profits and losses with private sector 
                insurers shall not be treated as a separate insurer, 
                and shall report to each private sector insurance 
                participant its share of the insured losses of the 
                entity, which shall be included in each private sector 
                insurer's insured losses.
          ``(3) Treatment of participation in certain entities.--Any 
        insurer that participates in sharing profits and losses of a 
        State residual market insurance entity shall include in its 
        calculations of premiums any premiums distributed to the 
        insurer by the State residual market insurance entity.
  ``(e) Insured Loss Shared Compensation.--
          ``(1) Federal share.--
                  ``(A) Conventional terrorism.--Except as provided in 
                subparagraph (B), the Federal share of compensation 
                under the Program to be paid by the Secretary for 
                insured losses of an insurer during any additional 
                Program Year shall be equal to the sum of--
                          ``(i) 85 percent of that portion of the 
                        amount of such insured losses that--
                                  ``(I) exceeds the applicable insurer 
                                deductible required to be paid during 
                                such Program Year; and
                                  ``(II) based upon pro rata 
                                determinations pursuant to paragraph 
                                (2)(B), does not result in aggregate 
                                industry insured losses during such 
                                Program Year exceeding 
                                $100,000,000,000; and
                          ``(ii) 100 percent of the insured losses of 
                        the insurer that, based upon pro rata 
                        determinations pursuant to paragraph (2)(B), 
                        result in aggregate industry insured losses 
                        during such Program Year exceeding 
                        $100,000,000,000, up to the limit under 
                        paragraph (2)(A).
                  ``(B) NBCR terrorism.--
                          ``(i) Amount of compensation.--The Federal 
                        share of compensation under the Program to be 
                        paid by the Secretary for insured losses of an 
                        insurer resulting from NBCR terrorism during 
                        any additional Program Year shall be equal to 
                        the sum of--
                                  ``(I) the amount of qualified NBCR 
                                losses (as such term is defined in 
                                clause (ii)) of the insurer, multiplied 
                                by a percentage based on the aggregate 
                                industry qualified NBCR losses for the 
                                Program Year, which percentage shall 
                                be--
                                          ``(aa) 85 percent of such 
                                        aggregate industry qualified 
                                        NBCR losses of less than 
                                        $10,000,000,000;
                                          ``(bb) 87.5 percent of such 
                                        aggregate industry qualified 
                                        NBCR losses between 
                                        $10,000,000,000 and 
                                        $20,000,000,000;
                                          ``(cc) 90 percent of such 
                                        aggregate industry qualified 
                                        NBCR losses between 
                                        $20,000,000,000 and 
                                        $40,000,000,000;
                                          ``(dd) 92.5 percent of such 
                                        aggregate industry qualified 
                                        NBCR losses of between 
                                        $40,000,000,000 and 
                                        $60,000,000,000; and
                                          ``(ee) 95 percent of such 
                                        aggregate industry qualified 
                                        NBCR losses of more than 
                                        $60,000,000,000;
                                and shall be prorated per insurer based 
                                on each insurer's percentage of the 
                                aggregate industry qualified NBCR 
                                losses for such additional Program 
                                Year; and
                                  ``(II) 100 percent of the insured 
                                losses of the insurer resulting from 
                                NBCR terrorism that, based upon pro 
                                rata determinations pursuant to 
                                paragraph (2)(B), result in aggregate 
                                industry insured losses during such 
                                Program Year exceeding 
                                $100,000,000,000, up to the limit under 
                                paragraph (2)(A).
                          ``(ii) Qualified nbcr losses.--For purposes 
                        of this subparagraph, the term `qualified NBCR 
                        losses' means, with respect to insured losses 
                        of an insurer resulting from NBCR terrorism 
                        during an additional Program Year, that portion 
                        of the amount of such insured losses that--
                                  ``(I) exceeds the applicable insurer 
                                deductible required to be paid during 
                                such Program Year; and
                                  ``(II) based upon pro rata 
                                determinations pursuant to paragraph 
                                (2)(B), does not result in aggregate 
                                industry insured losses during such 
                                Program Year exceeding 
                                $100,000,000,000.
                  ``(C) Program trigger.--In the case of a certified 
                act of terrorism occurring after March 31, 2006, no 
                compensation shall be paid by the Secretary under 
                subsection (a), unless the aggregate industry insured 
                losses resulting from such certified act of terrorism 
                exceed $50,000,000, except that if a certified act of 
                terrorism occurs for which resulting aggregate industry 
                insured losses exceed $1,000,000,000, the applicable 
                amount for any subsequent certified act of terrorism 
                shall be the amount specified in section 102(1)(B)(ii).
                  ``(D) Limitation on compensation for group life 
                insurance.--Notwithstanding any other provision of this 
                Act, the Federal share of compensation under the 
                Program paid by the Secretary for insured losses of an 
                insurer resulting from coverage of any single 
                certificate holder under any group life insurance 
                coverages of the insurer may not during any additional 
                Program Year exceed $1,000,000.
                  ``(E) Prohibition on duplicative compensation.--The 
                Federal share of compensation for insured losses under 
                the Program shall be reduced by the amount of 
                compensation provided by the Federal Government to any 
                person under any other Federal program for those 
                insured losses.
          ``(2) Cap on annual liability.--
                  ``(A) In general.--Notwithstanding paragraph (1) or 
                any other provision of Federal or State law, including 
                any State workers' compensation or other compulsory 
                insurance law, if the aggregate amount of the Federal 
                share of compensation to be paid to all insurers 
                pursuant to paragraph (1) exceeds $100,000,000,000, 
                during any additional Program Year (until such time as 
                the Congress may act otherwise with respect to such 
                losses)--
                          ``(i) the Secretary shall not make any 
                        payment under this title for any portion of the 
                        amount of the aggregate insured losses during 
                        such Program Year for which the Federal share 
                        exceeds $100,000,000,000; and
                          ``(ii) no insurer that has met its insurer 
                        deductible shall be liable for the payment of 
                        any portion of the aggregate insured losses 
                        during such Program Year that exceeds 
                        $100,000,000,000.
                  ``(B) Insurer share.--For purposes of subparagraph 
                (A), the Secretary shall determine the pro rata share 
                of insured losses to be paid by each insurer that 
                incurs insured losses under the Program.
                  ``(C) Claims allocations.--The Secretary shall, by 
                regulation, provide for insurers to allocate claims 
                payments for insured losses under applicable insurance 
                policies in any case described in subparagraph (A). 
                Such regulations shall include provisions for payment, 
                for the purpose of addressing emergency needs of 
                applicable individuals affected by an act of terrorism, 
                of a portion of claims for insured losses promptly upon 
                filing of such claims.
          ``(3) Limitation on insurer financial responsibility.--
                  ``(A) Limitation.--Notwithstanding any other 
                provision of Federal or State law, including any State 
                workers' compensation or other compulsory insurance 
                law, an insurer's financial responsibility for insured 
                losses from acts of terrorism shall be limited to its 
                applicable insurer deductible and its applicable share 
                of insured losses that exceed its applicable insurer 
                deductible, subject to the requirements of paragraph 
                (2).
                  ``(B) Federal reimbursement.--Notwithstanding any 
                other provision of Federal or State law, the Secretary 
                shall--
                          ``(i) reimburse insurers for any payment of 
                        excess insured losses made prior to publication 
                        of any notification pursuant to paragraph 
                        (4)(A);
                          ``(ii) reimburse insurers for any payment of 
                        excess insured losses occurring on or after the 
                        date of any notification pursuant to paragraph 
                        (4)(A), but only to the extent that--
                                  ``(I) such payment is ordered by a 
                                court pursuant to subparagraph (C) of 
                                this paragraph or is directed by State 
                                law, notwithstanding this paragraph, or 
                                by Federal law;
                                  ``(II) such payment is limited to 
                                compensating insurers for their payment 
                                of excess insured losses and does not 
                                include punitive damages, or litigation 
                                or other costs; and
                                  ``(III) the insurer has made a good-
                                faith effort to defend against any 
                                claims for such payment; and
                          ``(iii) have the right to intervene in any 
                        legal proceedings relating to such claims 
                        specified in clause (ii)(III).
                  ``(C) Federal court jurisdiction.--
                          ``(i) Conditions.--All claims relating to or 
                        arising out of an insurer's financial 
                        responsibility for insured losses from acts of 
                        terrorism under this paragraph shall be within 
                        the original and exclusive jurisdiction of the 
                        district courts of the United States, in 
                        accordance with the procedures established in 
                        subparagraph (D), if the Secretary certifies 
                        that the following conditions have been met, or 
                        that there is a reasonable likelihood that the 
                        following conditions may be met:
                                  ``(I) The aggregate amount of the 
                                Federal share of compensation to be 
                                paid to all insurers pursuant to 
                                paragraph (1) exceeds $100,000,000,000, 
                                pursuant to paragraph (2); and
                                  ``(II) the insurer has paid its 
                                applicable insurer deductible and its 
                                pro rata share of insured losses 
                                determined pursuant to paragraph 
                                (2)(B).
                          ``(ii) Removal of state court actions.--If 
                        the Secretary certifies that conditions set 
                        forth in subclauses (I) and (II) of clause (i) 
                        have been met, all pending State court actions 
                        that relate to or arise out of an insurer's 
                        financial responsibility for insured losses 
                        from acts of terrorism under this paragraph 
                        shall be removed to a district court of the 
                        United States in accordance with subparagraph 
                        (D).
                  ``(D) Venue.--For each certification made by the 
                Secretary pursuant to subparagraph (C)(i), not later 
                than 90 days after the Secretary's determination the 
                Judicial Panel on Multidistrict Litigation shall 
                designate one district court or, if necessary, multiple 
                district courts of the United States that shall have 
                original and exclusive jurisdiction over all actions 
                for any claim relating to or arising out of an 
                insurer's financial responsibility for insured losses 
                from acts of terrorism under this paragraph.
          ``(4) Notices regarding losses and annual liability cap.--
                  ``(A) Approaching cap.--If the Secretary determines 
                estimated or actual aggregate Federal compensation to 
                be paid pursuant to paragraph (1) equals or exceeds 
                $80,000,000,000 during any Program Year, the Secretary 
                shall promptly provide notification in accordance with 
                subparagraph (D)--
                          ``(i) of such estimated or actual aggregate 
                        Federal compensation to be paid;
                          ``(ii) of the likelihood that such aggregate 
                        Federal compensation to be paid for such 
                        Program Year will equal or exceed 
                        $100,000,000,000; and
                          ``(iii) that, pursuant to paragraph 
                        (2)(A)(ii), insurers are not required to make 
                        payments of excess insured losses.
                  ``(B) Event likely to cause losses to exceed cap.--If 
                any act of terrorism occurs that the Secretary 
                determines is likely to cause estimated or actual 
                aggregate Federal compensation to be paid pursuant to 
                paragraph (1) to exceed $100,000,000,000 during any 
                Program Year, the Secretary shall, not later than 10 
                days after such act, provide notification in accordance 
                with subparagraph (D)--
                          ``(i) of such estimated or actual aggregate 
                        Federal compensation to be paid; and
                          ``(ii) that, pursuant to paragraph 
                        (2)(A)(ii), insurers are not required to make 
                        payments for excess insured losses.
                  ``(C) Exceeding cap.--If the Secretary determines 
                estimated or actual aggregate Federal compensation to 
                be paid pursuant to paragraph (1) equals or exceeds 
                $100,000,000,000 during any Program Year--
                          ``(i) the Secretary shall promptly provide 
                        notification in accordance with subparagraph 
                        (D)--
                                  ``(I) of such estimated or actual 
                                aggregate Federal compensation to be 
                                paid; and
                                  ``(II) that, pursuant to paragraph 
                                (2)(A)(ii), insurers are not required 
                                to make payments for excess insured 
                                losses unless the Congress provides for 
                                payments for excess insured losses 
                                pursuant to clause (ii) of this 
                                subparagraph; and
                          ``(ii) the Congress shall determine the 
                        procedures for and the source of any payments 
                        for such excess insured losses.
                  ``(D) Parties notified.--Notification is provided in 
                accordance with this subparagraph only if notification 
                is provided--
                          ``(i) to the Congress, in writing; and
                          ``(ii) to insurers, by causing such notice to 
                        be published in the Federal Register.
                  ``(E) Determinations.--The Secretary shall make 
                determinations regarding estimated and actual aggregate 
                Federal compensation to be paid promptly after any act 
                of terrorism as may be necessary to comply with this 
                paragraph.
                  ``(F) Mandatory disclosure for insurance contracts.--
                All policies for property and casualty insurance and 
                group life insurance shall be deemed to contain a 
                provision to the effect that no insurer that has met 
                its applicable insurer deductible and its applicable 
                share of insured losses that exceed its applicable 
                insurer deductible but are not compensated pursuant to 
                paragraph (1), shall be obligated to pay for any 
                portion of excess insured loss. Notwithstanding the 
                preceding sentence, insurers shall include a disclosure 
                in their policies detailing the maximum level of 
                Government assistance and the applicable insurer share.
          ``(5) 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.
          ``(6) Determinations final.--Any determination of the 
        Secretary under this subsection shall be final, unless 
        expressly provided, and shall not be subject to judicial 
        review.
          ``(7) Insurance marketplace aggregate retention amount.--For 
        purposes of paragraph (8), the insurance marketplace aggregate 
        retention amount shall be--
                  ``(A) for the period beginning on the first day of 
                the Transition Period and ending on the last day of 
                Program Year 1, the lesser of--
                          ``(i) $10,000,000,000; and
                          ``(ii) the aggregate amount, for all 
                        insurers, of insured losses during such period;
                  ``(B) for Program Year 2, the lesser of--
                          ``(i) $12,500,000,000; and
                          ``(ii) the aggregate amount, for all 
                        insurers, of insured losses during such Program 
                        Year;
                  ``(C) for Program Year 3, the lesser of--
                          ``(i) $15,000,000,000; and
                          ``(ii) the aggregate amount, for all 
                        insurers, of insured losses during such Program 
                        Year;
                  ``(D) for Program Year 4, the lesser of--
                          ``(i) $25,000,000,000; and
                          ``(ii) the aggregate amount, for all 
                        insurers, of insured losses during such Program 
                        Year;
                  ``(E) for Program Year 5, the lesser of--
                          ``(i) $27,500,000,000; and
                          ``(ii) the aggregate amount, for all 
                        insurers, of insured losses during such Program 
                        Year; and
                  ``(F) for each additional Program Year--
                          ``(i) for property and casualty insurance, 
                        the lesser of--
                                  ``(I) $27,500,000,000; and
                                  ``(II) the aggregate amount, for all 
                                such insurance, of insured losses 
                                during such Program Year; and
                          ``(ii) for group life insurance, the lesser 
                        of--
                                  ``(I) $5,000,000,000; and
                                  ``(II) the aggregate amount, for all 
                                such insurance, of insured losses 
                                during such Program Year.
          ``(8) Recoupment of federal share.--
                  ``(A) Mandatory recoupment amount.--For purposes of 
                this paragraph, the mandatory recoupment amount for 
                each of the Program Years referred to in subparagraphs 
                (A) through (F) of paragraph (7) shall be the 
                difference between--
                          ``(i) the applicable insurance marketplace 
                        aggregate retention amount under paragraph (7) 
                        for such Program Year; and
                          ``(ii) the aggregate amount, for all 
                        applicable insurers (pursuant to subparagraph 
                        (E)), of insured losses during such Program 
                        Year that are not compensated by the Federal 
                        Government because such losses--
                                  ``(I) are within the insurer 
                                deductible for the insurer subject to 
                                the losses; or
                                  ``(II) are within the portion of 
                                losses of the insurer that exceed the 
                                insurer deductible, but are not 
                                compensated pursuant to paragraph (1).
                  ``(B) No mandatory recoupment if uncompensated losses 
                exceed applicable insurance marketplace retention.--
                Notwithstanding subparagraph (A), if the aggregate 
                amount of uncompensated insured losses referred to in 
                clause (ii) of such subparagraph for any Program Year 
                referred to in any of subparagraphs (A) through (F) of 
                paragraph (7) is greater than the applicable insurance 
                marketplace aggregate retention amount under paragraph 
                (7) for such Program Year, the mandatory recoupment 
                amount shall be $0.
                  ``(C) Mandatory establishment of surcharges to recoup 
                mandatory recoupment amount.--The Secretary shall 
                collect, for repayment of the Federal financial 
                assistance provided in connection with all acts of 
                terrorism (or acts of war, in the case of workers' 
                compensation) occurring during any of the Program Years 
                referred to in any of subparagraphs (A) through (F) of 
                paragraph (7), terrorism loss risk-spreading premiums 
                in an amount equal to any mandatory recoupment amount 
                for such Program Year.
                  ``(D) Discretionary recoupment of remainder of 
                financial assistance.--To the extent that the amount of 
                Federal financial assistance provided exceeds any 
                mandatory recoupment amount, the Secretary may--
                          ``(i) recoup, through terrorism loss risk-
                        spreading premiums, such additional amounts; or
                          ``(ii) submit a report to the Congress 
                        identifying such amounts that the Secretary 
                        believes cannot be recouped, based on--
                                  ``(I) the ultimate costs to taxpayers 
                                of no additional recoupment;
                                  ``(II) the economic conditions in the 
                                commercial marketplace, including the 
                                capitalization, profitability, and 
                                investment returns of the insurance 
                                industry and the current cycle of the 
                                insurance markets;
                                  ``(III) the affordability of 
                                commercial insurance for small- and 
                                medium-sized businesses; and
                                  ``(IV) such other factors as the 
                                Secretary considers appropriate.
                  ``(E) Separate recoupment.--``The Secretary shall 
                provide that--
                          ``(i) any recoupment under this paragraph of 
                        amounts paid for Federal financial assistance 
                        for insured losses for property and casualty 
                        insurance shall be applied to property and 
                        casualty insurance policies; and
                          ``(ii) any recoupment under this paragraph of 
                        amounts paid for Federal financial assistance 
                        for insured losses for group life insurance 
                        shall be applied to group life insurance 
                        policies.
          ``(9) Policy surcharge for terrorism loss risk-spreading 
        premiums.--
                  ``(A) Policyholder premium.--Subject to paragraph 
                (8)(E), any amount established by the Secretary as a 
                terrorism loss risk-spreading premium shall--
                          ``(i) be imposed as a policyholder premium 
                        surcharge on property and casualty insurance 
                        policies and group life insurance policies in 
                        force after the date of such establishment;
                          ``(ii) begin with such period of coverage 
                        during the year as the Secretary determines 
                        appropriate; and
                          ``(iii) be based on--
                                  ``(I) a percentage of the premium 
                                amount charged for property and 
                                casualty insurance coverage under the 
                                policy; and
                                  ``(II) a percentage of the amount at 
                                risk for group life insurance coverage 
                                under the policy.
                  ``(B) Collection.--The Secretary shall provide for 
                insurers to collect terrorism loss risk-spreading 
                premiums and remit such amounts collected to the 
                Secretary.
                  ``(C) Percentage limitation.--A terrorism loss risk-
                spreading premium may not exceed, on an annual basis--
                          ``(i) with respect to property and casualty 
                        insurance, the amount equal to 3 percent of the 
                        premium charged under the policy; and
                          ``(ii) with respect to group life insurance, 
                        the amount equal to 0.0053 percent of the 
                        amount at risk under the policy.
                  ``(D) Adjustment for urban and smaller commercial and 
                rural areas and different lines of insurance.--
                          ``(i) Adjustments.--In determining the method 
                        and manner of imposing terrorism loss risk-
                        spreading premiums, including the amount of 
                        such premiums, the Secretary shall take into 
                        consideration--
                                  ``(I) the economic impact 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;
                                  ``(II) 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
                                  ``(III) the various exposures to 
                                terrorism risk for different lines of 
                                insurance.
                          ``(ii) Recoupment of adjustments.--Any 
                        mandatory recoupment amounts not collected by 
                        the Secretary because of adjustments under this 
                        subparagraph shall be recouped through 
                        additional terrorism loss risk-spreading 
                        premiums.
                  ``(E) Timing of premiums.--The Secretary may adjust 
                the timing of terrorism loss risk-spreading premiums to 
                provide for equivalent application of the provisions of 
                this title to policies that are not based on a calendar 
                year, or to apply such provisions on a daily, monthly, 
                or quarterly basis, as appropriate.
  ``(f) Captive Insurers and Other Self-Insurance Arrangements.--The 
Secretary may, in consultation with the NAIC or the appropriate State 
regulatory authority, apply the provisions of this title, as 
appropriate, to other classes or types of captive insurers and other 
self-insurance arrangements by municipalities and other entities (such 
as workers' compensation self-insurance programs and State workers' 
compensation reinsurance pools), but only if such application is 
determined before the occurrence of an act of terrorism in which such 
an entity incurs an insured loss and all of the provisions of this 
title are applied comparably to such entities.
  ``(g) Reinsurance to Cover Exposure.--
          ``(1) Obtaining coverage.--This title may not be construed to 
        limit or prevent insurers from obtaining reinsurance coverage 
        for insurer deductibles or insured losses retained by insurers 
        pursuant to this section, nor shall the obtaining of such 
        coverage affect the calculation of such deductibles or 
        retentions.
          ``(2) Limitation on financial assistance.--The amount of 
        financial assistance provided pursuant to this section shall 
        not be reduced by reinsurance paid or payable to an insurer 
        from other sources, except that recoveries from such other 
        sources, taken together with financial assistance for the 
        Transition Period or a Program Year provided pursuant to this 
        section, may not exceed the aggregate amount of the insurer's 
        insured losses for such period. If such recoveries and 
        financial assistance for the Transition Period or a Program 
        Year exceed such aggregate amount of insured losses for that 
        period and there is no agreement between the insurer and any 
        reinsurer to the contrary, an amount in excess of such 
        aggregate insured losses shall be returned to the Secretary.'';
          (2) in section 104(a)--
                  (A) in paragraph (1), by striking ``and'' at the end;
                  (B) in paragraph (2), by striking the period and 
                inserting ``; and''; and
                  (C) by adding at the end the following new paragraph:
          ``(3) during the 90-day period beginning upon the 
        certification of any act of terrorism, to issue such 
        regulations as the Secretary considers necessary to carry out 
        this Act without regard to the notice and comment provisions of 
        section 553 of title 5, United States Code.'';
          (3) in section 104, by adding at the end the following new 
        subsection:
  ``(h) Annual Adjustment.--
          ``(1) In general.--Notwithstanding any other provision of 
        this title, the Secretary shall adjust, for the second 
        additional Program Year and for each additional Program Year 
        thereafter, based upon the percentage change in an appropriate 
        index during the 12-month period preceding such Program Year, 
        each of the following amounts (as such amount may have been 
        previously adjusted):
                  ``(A) The dollar amount in section 102(1)(B)(ii) 
                (relating to act of terrorism).
                  ``(B) The dollar amount in section 102(11)(J) 
                (relating to aggregate industry insured losses in a 
                previously impacted area).
                  ``(C) The dollar amounts in subparagraphs (A) and (B) 
                of section 103(e)(1) (relating to limitation on Federal 
                share).
                  ``(D) The dollar amounts in section 103(e)(1)(C) 
                (relating to Program trigger).
                  ``(E) The dollar amount in section 103(e)(1)(D) 
                (relating to limitation on group life insurance 
                compensation).
                  ``(F) The dollar amounts in section 103(e)(2) 
                (relating to cap on annual liability).
                  ``(G) The dollar amounts in section 103(e)(3)(C) 
                (relating to limitation on insurer financial 
                liability).
                  ``(H) The dollar amounts in section 103(e)(4) 
                (relating to notices regarding losses and annual 
                liability cap).
                  ``(I) The dollar amounts in section 103(e)(7) 
                (relating to insurance marketplace aggregate retention 
                amount).
                  ``(J) The dollar amounts in section 109(b)(1)(C) 
                (relating to membership of Commission on Terrorism 
                Insurance Risk).
          ``(2) Publication.--The Secretary shall make the dollar 
        amounts for each additional Program Year, as adjusted pursuant 
        to this subsection, publicly available in a timely manner.'';
          (4) in section 106(a)(2)--
                  (A) in subparagraph (B), by striking ``and'' at the 
                end;
                  (B) by redesignating subparagraph (C) as subparagraph 
                (F); and
                  (C) by inserting after subparagraph (B) the following 
                new subparagraphs:
                  ``(C) during the period beginning on the date of the 
                enactment of the Terrorism Risk Insurance Revision and 
                Extension Act of 2007 and ending on December 31, 2008, 
                rates and forms for property and casualty insurance, 
                and group life insurance, required by this title and 
                providing coverage except for NBCR terrorism that are 
                filed with any State shall not be subject to prior 
                approval or a waiting period under any law of a State 
                that would otherwise be applicable, except that nothing 
                in this title affects the ability of any State to 
                invalidate a rate as excessive, inadequate, or unfairly 
                discriminatory, and, with respect to forms, where a 
                State has prior approval authority, it shall apply to 
                allow subsequent review of such forms;
                  ``(D) during the period beginning on the date of the 
                enactment of the Terrorism Risk Insurance Revision and 
                Extension Act of 2007, and ending on December 31, 2009, 
                forms for property and casualty insurance, and group 
                life insurance, covered by this title and providing 
                coverage for NBCR terrorism that are filed with any 
                State, to the extent of the addition of such coverage 
                for NBCR terrorism and where such coverage was not 
                previously required, shall not be subject to prior 
                approval or waiting period under any law of a State 
                that would otherwise be applicable;
                  ``(E) during the period beginning on the date of the 
                enactment of the Terrorism Risk Insurance Revision and 
                Extension Act of 2007, and ending on December 31, 2010, 
                rates for property and casualty insurance, and group 
                life insurance, covered by this title and providing 
                coverage for NBCR terrorism that are filed with any 
                State, to the extent of the addition of such coverage 
                for NBCR terrorism and where such coverage was not 
                previously required, shall not be subject to prior 
                approval or waiting period under any law of a State 
                that would otherwise be applicable, except that nothing 
                in this title affects the ability of any State to 
                invalidate a rate as inadequate or unfairly 
                discriminatory; and'';
          (5) in section 106, by adding at the end the following new 
        subsection:
  ``(c) Rule of Construction Regarding Insurer Coordination.--Nothing 
in this Act shall be construed to prohibit, restrict, or otherwise 
limit an insurer from entering into an arrangement with another insurer 
to make available coverage for any portion of insured losses to fulfill 
the requirements of section 103(c). The Secretary shall develop, in 
consultation with the NAIC, minimum financial solvency standards and 
other standards the Secretary determines appropriate with respect to 
such arrangements. Nothing in this subsection shall be construed to 
establish any legal partnership.''; and
          (6) in section 108(c)(1), by striking ``paragraph (4), (5), 
        (6), (7), or (8)'' and inserting ``paragraph (5), (6), (7), 
        (8), or (9)''.
  (b) Regulations on Claims Allocations.--The Secretary of the Treasury 
shall issue the regulations referred to in subparagraph (C) of section 
103(e)(2) of the Terrorism Risk Insurance Act of 2002, as amended by 
subsection (a)(1) of this section, and to carry out subparagraph (B) of 
such section 103(e)(2), not later than the expiration of the 120-day 
period beginning upon the date of the enactment of this Act.
  (c) Regulations on NBCR Exemptions.--The Secretary of the Treasury 
shall issue the regulations to carry out paragraph (4) of section 
103(a) of the Terrorism Risk Insurance Act of 2002, as amended by 
subsection (a)(1) of this section, not later than the expiration of the 
180-day period beginning upon the date of the enactment of this Act.

SEC. 4. TERRORISM BUY-DOWN FUND.

  The Terrorism Risk Insurance Act of 2002 (15 U.S.C. 6701 note) is 
amended--
          (1) by inserting after section 106 the following new section:

``SEC. 106A. TERRORISM BUY-DOWN FUND.

  ``(a) Establishment.--The Secretary shall establish a Terrorism Buy-
Down Fund (in this section referred to as the `Fund') that shall make 
available additional terrorism coverage for the insured losses of 
insurers, which shall be available for purchase by insurers on a 
voluntary basis.
  ``(b) Purchase of Deductible, Co-Share, and Trigger Buy-Down 
Coverage.--
          ``(1) In general.--An insurer may purchase deductible, co-
        share, and pre-trigger buy-down coverage (in this section 
        referred to as `buy-down coverage') through the Fund by making 
        an election, in advance, to treat some or all of the premiums 
        it has disclosed pursuant to section 103(b)(2) as fee charges 
        for the Program imposed by the Secretary and remitting such 
        amounts to the Fund.
          ``(2) Limits.--An insurer may not purchase buy-down coverage 
        in an amount greater than the lesser of--
                  ``(A) the highest amount specified in section 
                103(e)(1)(C); and
                  ``(B) the insurer's one-in-one-hundred-year risk 
                exposure to acts of terrorism.
  ``(c) Buy-Down Coverage.--The Fund shall provide the buy-down 
coverage to an insurer for losses for acts of terrorism, without 
application of the insurer deductible and in addition to any otherwise 
payable Federal share of compensation pursuant to section 103(e).
  ``(d) Build-up.--The buy-down coverage that shall be payable to an 
insurer for qualifying losses shall be the aggregate of the insurer's 
buy-down coverage premiums plus interest accrued on such amounts.
  ``(e) Use by Insurers.--
          ``(1) Qualifying losses.--For the purpose of this section, 
        qualifying losses are insured losses by an insurer that are not 
        excess losses and that do not include amounts for which Federal 
        financial assistance pursuant to section 103(e) is received, 
        notwithstanding any limits otherwise applicable regarding 
        section 103(e)(1)(C) (regarding program triggers) or section 
        102(11) (regarding insurer deductibles).
          ``(2) Use of buy-down coverage.--An insurer may use any buy-
        down coverage payments received under subsection (f) to 
        satisfy--
                  ``(A) the applicable insurer deductibles for the 
                insurer;
                  ``(B) the portion of the insurer's losses that exceed 
                the insurer deductible but are not compensated by the 
                Federal share; and
                  ``(C) the insurer's obligations to pay for insured 
                losses if the Program trigger under section 
                103(e)(1)(C) is not satisfied.
          ``(3) Buy-down coverage does not reduce federal co-share.--
        The receipt by an insurer of buy-down coverage under this 
        section for insured losses shall not be considered with respect 
        to calculating the insurer's insured losses with respect to the 
        insurer's deductible and eligibility for Federal financial 
        assistance pursuant to section 103(e).
          ``(4) Insolvency.--An insurer may sell its rights to buy-down 
        coverage from the Fund to another insurer as part of or to 
        avoid an insolvency or as part of a merger, sale, or major 
        reorganization.
  ``(f) Payment of Buy-Down Coverage.--The Fund shall pay the 
qualifying losses of an insurer purchasing buy-down coverage up to the 
amount described in subsection (d).
  ``(g) Government Borrowing.--The Secretary may borrow the funds from 
the Fund to offset, in whole or in part, the Federal share of 
compensation provided to all insurers under the Program, except that--
          ``(1) the Fund shall always immediately provide any buy-down 
        coverage payments required under subsection (f); and
          ``(2) any such amounts borrowed must be replenished with 
        appropriate interest.
  ``(h) Risk-Sharing Mechanisms.--The Secretary shall establish 
voluntary risk-sharing mechanisms for insurers purchasing buy-down 
coverage from the Fund to pool their reinsurance purchases and 
otherwise share terrorism risk.
  ``(i) Termination.--Upon termination of the Program under section 
108, and subject to the Secretary's continuing authority under section 
108(b) to adjust claims in satisfaction under the Program, the 
Secretary shall provide that the Fund shall become a privately-operated 
mutual terrorism reinsurance company owned by the insurers that have 
submitted buy-down coverage premiums in proportion to such premiums 
minus any buy-down coverage payments received.''; and
          (2) in the table of contents in section 1(b), by inserting 
        after the item relating to section 106 the following new item:

``Sec. 106A. Terrorism Buy-Down Fund.''.

SEC. 5. ANALYSIS AND STUDY.

  (a) Analysis of Market Conditions.--Section 108 of the Terrorism Risk 
Insurance Act of 2002 (15 U.S.C. 6701 note) is amended by striking 
subsection (e) and inserting the following:
  ``(e) Analysis of Market Conditions for Terrorism Risk Insurance.--
          ``(1) In general.--The Secretary, in consultation with the 
        NAIC, representatives of the insurance industry, 
        representatives of the securities industry, and representatives 
        of policyholders, shall perform an analysis regarding the long-
        term availability and affordability of insurance for terrorism 
        risk in the private marketplace, including coverage for--
                  ``(A) property and casualty insurance;
                  ``(B) group life insurance;
                  ``(C) workers' compensation;
                  ``(D) nuclear, biological, chemical, and radiological 
                events; and
                  ``(E) commercial real estate.
          ``(2) Biennial reports.--The Secretary shall submit biennial 
        reports to the Committee on Financial Services of the House of 
        Representatives and the Committee on Banking, Housing, and 
        Urban Affairs of the Senate, on its findings pursuant to the 
        analysis conducted under paragraph (1). The first such report 
        shall be submitted not later than the expiration of the 24-
        month period beginning on the date of the enactment of the 
        Terrorism Risk Insurance Revision and Extension Act of 2007.
          ``(3) Testimony.--Upon submission of each biennial report 
        under paragraph (2), the Secretary shall provide oral testimony 
        to the Committee on Financial Services of the House of 
        Representatives and Committee on Banking, Housing, and Urban 
        Affairs of the United States Senate regarding the report and 
        the analysis under this subsection for which the report is 
        submitted.''.
  (b) Commission on Terrorism Risk Insurance.--Title I of the Terrorism 
Risk Insurance Act of 2002 (15 U.S.C. 6701 note) is amended--
          (1) by adding at the end the following new section:

``SEC. 109. COMMISSION ON TERRORISM RISK INSURANCE.

  ``(a) Establishment.--There is hereby established the Commission on 
Terrorism Risk Insurance (in this section referred to as the 
`Commission').
  ``(b) Membership.--
          ``(1) The Commission shall consist of 21 members, as follows:
                  ``(A) The Secretary of the Treasury or the designee 
                of the Secretary.
                  ``(B) One member who is a State insurance 
                commissioner, designated by the NAIC.
                  ``(C) 15 members, who shall be appointed by the 
                President, who shall include--
                          ``(i) a representative of group life 
                        insurers;
                          ``(ii) a representative of property and 
                        casualty insurers with direct earned premium of 
                        $1,000,000,000 or less;
                          ``(iii) a representative of property and 
                        casualty insurers with direct earned premium of 
                        more than $1,000,000,000;
                          ``(iv) a representative of multiline 
                        insurers;
                          ``(v) a representative of independent 
                        insurance agents;
                          ``(vi) a representative of insurance brokers;
                          ``(vii) a policyholder representative;
                          ``(viii) a representative of the survivors of 
                        the victims of the attacks of September 11, 
                        2001;
                          ``(ix) a representative of the reinsurance 
                        industry;
                          ``(x) a representative of workers' 
                        compensation insurers;
                          ``(xi) a representative from the commercial 
                        mortgage-backed securities industry;
                          ``(xii) a representative from a nationally 
                        recognized statistical rating organization;
                          ``(xiii) a real estate developer;
                          ``(xiv) a representative of workers' 
                        compensation insurers created by State 
                        legislatures, selected in consultation with the 
                        American Association of State Compensation 
                        Insurance Funds from among its members; and
                          ``(xv) a representative from the commercial 
                        real estate brokerage industry or the 
                        commercial property management industry.
                  ``(D) Four members, who shall serve as liaisons to 
                the Congress, who shall include two members jointly 
                selected by the Chairman and Ranking Member of the 
                Committee on Financial Services of the House of 
                Representatives and two members jointly selected by the 
                Chairman and Ranking Member of the Committee on 
                Banking, Housing, and Urban Affairs of the Senate.
          ``(2) Secretary.--The Program Director of the Terrorism Risk 
        Insurance Act of the Department of the Treasury shall serve as 
        Secretary of the Commission. The Secretary of the Commission 
        shall determine the manner in which the Commission shall 
        operate, including funding and staffing.
  ``(c) Duties.--
          ``(1) In general.--The Commission shall identify and make 
        recommendations regarding--
                  ``(A) possible actions to encourage, facilitate, and 
                sustain provision by the private insurance industry in 
                the United States of affordable coverage for losses due 
                to an act or acts of terrorism;
                  ``(B) possible actions or mechanisms to sustain or 
                supplement the ability of the insurance industry in the 
                United States to cover losses resulting from acts of 
                terrorism in the event that--
                          ``(i) such losses jeopardize the capital and 
                        surplus of the insurance industry in the United 
                        States as a whole; or
                          ``(ii) other consequences from such acts 
                        occur, as determined by the Commission, that 
                        may significantly affect the ability of the 
                        insurance industry in the United States to 
                        cover such losses independently; and
                  ``(C) possible actions to significantly reduce the 
                Federal role in covering losses resulting from acts of 
                terrorism.
          ``(2) Evaluations.--In identifying and making the 
        recommendations required under paragraph (1), the Commission 
        shall specifically evaluate the utility and viability of 
        proposals aimed at improving the availability of insurance 
        against terrorism risk in the private marketplace.
          ``(3) Initial meeting.--The Commission shall hold its first 
        meeting during the 3-month period that begins 15 months after 
        the date of the enactment of the Terrorism Risk Insurance 
        Revision and Extension Act of 2007.
          ``(4) Reports.--
                  ``(A) Contents.--The Commission shall submit two 
                reports to the Congress that--
                          ``(i) evaluate and make recommendations 
                        regarding whether there is a need for a Federal 
                        terrorism risk insurance program;
                          ``(ii) if so, include a specific, detailed 
                        recommendation for the replacement of the 
                        Program under this title; and
                          ``(iii) include the identifications, 
                        evaluations, and recommendations required under 
                        paragraphs (1) and (2).
                  ``(B) Timing.--The first report required under 
                subparagraph (A) shall be submitted before the 
                expiration of the 60-month period beginning on the date 
                of the enactment of the Terrorism Risk Insurance 
                Revision and Extension Act of 2007. The second such 
                report shall be submitted before the expiration of the 
                96-month period beginning upon such date of 
                enactment.''; and
          (2) in the table of contents in section 1(b), by inserting 
        after the item relating to section 108 the following new item:

``Sec. 109. Commission on Terrorism Risk Insurance.''.

SEC. 6. APPLICABILITY.

  The amendments made by this Act shall apply beginning on January 1, 
2008. The provisions of the Terrorism Risk Insurance Act of 2002, as in 
effect on the day before the date of the enactment of this Act, shall 
apply through the end of December 31, 2007.

                          Purpose and Summary

    H.R. 2761, the Terrorism Risk Insurance Revision and 
Extension Act of 2007, is intended to extend the Terrorism Risk 
Insurance Act of 2002 (TRIA) for a second time to ensure the 
continued availability of terrorism insurance coverage, limit 
market disruptions, encourage economic development and growth, 
and maintain the economic security of the United States.
    In the aftermath of the terrorist attacks on September 11, 
2001, TRIA initially was designed as a three-year program to 
provide a Federal backstop to the insurance industry through a 
system of shared public and private compensation for insured 
losses resulting from acts of terrorism. However, the 
developing private marketplace for terrorism insurance coverage 
was not sufficiently robust to obviate the need for TRIA. 
Congress therefore acted in late 2005 to pass the Terrorism 
Risk Insurance Extension Act (TRIEA), which extended TRIA for 
an additional two years until December 31, 2007.
    H.R. 2761, as reported, would further extend TRIA beyond 
its current expiration date of December 31, 2007 for an 
additional 15-year period. H.R. 2761 would also make several 
revisions to the existing program, such as expanding the 
availability of terrorism insurance to protect against nuclear, 
biological, chemical, or radiological (NBCR) events; adding 
group life insurance as a line covered by the program; and 
covering domestic terrorism events.

                  Background and Need for Legislation

    Prior to the events of September 11, 2001, insurers 
generally did not exclude terrorism losses from their insurance 
policies. After the 2001 attacks that caused more than $35 
billion of insured losses, however, reinsurers and insurers 
reassessed their terrorism exposure as a result of depleted 
surpluses and uncertainty over the likelihood and severity of 
future terrorist attacks. Many of them withdrew outright from 
the marketplace and placed developers and those with mortgages 
in a difficult position. To avoid technical default on their 
loan contracts, borrowers needed insurance against terrorism, 
but the private market for terrorism insurance coverage was 
initially extremely limited.
    Congress enacted TRIA to make terrorism insurance coverage 
more widely available, with the Federal government sharing the 
risk of loss from future terrorist attacks with the insurance 
industry for a fixed period of time while the market readjusted 
and transitioned towards providing additional coverage. TRIA 
mandated insurer participation in the Terrorism Insurance 
Program and required that insurers make available terrorism 
coverage in all covered commercial property and casualty 
insurance policies.
    While the initial TRIA did help address an economic need, 
the private marketplace did not recover as quickly as many had 
hoped. As a result, Congress enacted TRIEA in late 2005 to 
extend TRIA for an additional two years until December 31, 
2007. This extension left much of the original TRIA program 
intact, but raised industry retention and insurer deductible 
levels, increased the event ``trigger'' of losses before 
requiring Federal involvement, and pared back the insurance 
lines covered by the program.
    Despite the two-year extension by TRIEA, the terrorism 
insurance marketplace remains tenuous, according to many 
experts, and there remains a strong need for TRIA. At a June 
21, 2007 hearing before the Subcommittee on Capital Markets, 
Insurance, and Government Sponsored Enterprises (``Capital 
Markets Subcommittee''), a number of witnesses testified in 
support of a long-term or permanent extension of TRIA. At the 
same hearing, the Superintendent of the New York Insurance 
Department testified that the private sector will not offer 
terrorism insurance without TRIA. Also, a witness testifying on 
behalf of Independent Insurance Agents & Brokers of America 
expressed concern that insurance companies, particularly small 
and monoline insurers, may not continue to write terrorism risk 
insurance if the Federal backstop expires. Moreover, rating 
agencies that evaluate the solvency of insurers have already 
begun to ask what steps the companies will take to mitigate 
their potential exposures if the Program expires. While 
insurers and reinsurers have worked to improve their modeling 
and pricing systems, they remain uncertain with regard to their 
ability to reliably price the coverage for traditional 
terrorism events like bombing a building using conventional 
means.
    Furthermore, terrorism insurance remains in short supply in 
places like lower Manhattan, as the developers of the new World 
Trade Center noted at a hearing before the Capital Markets 
Subcommittee on March 5, 2007. Insurers also report having 
limited capital available to cover terrorism losses. While the 
President's Working Group on Financial Markets (PWG) observed 
in its September 2006 report that the availability and 
affordability of terrorism risk insurance has improved, it also 
noted that any prediction of the potential degree of long-term 
development of the terrorism risk insurance market is 
difficult.
    Additional factors call for an extension of TRIA. From an 
economic perspective, terrorism insurance is a sector likely to 
experience market failure. Participants in the terrorism 
insurance marketplace have access to imperfect information, 
which hampers their decisions about whether to buy the product 
and how to price the product. The government's classification 
of information related to terrorism for national security 
purposes further contributes to the difficulties that insurers 
and insureds face when assessing risk. Other factors 
contributing to market failure include a limited number of 
terrorism reinsurance providers and the virtual inability of 
insurers to alter a contract's terms or cancel a policy. TRIA 
and TRIEA have helped to overcome some of these economic 
difficulties, but the private marketplace in the United States 
is not yet mature enough to handle the risk without some type 
of assistance. Finally, the private marketplace cannot prevent 
or defend against acts of terrorism, and the private 
marketplace should not be expected to provide for recovery from 
acts of terrorism by itself. Providing economic security 
against acts of terrorism is a matter of national defense and 
national security, which is a uniquely governmental function. 
There is thus a strong need to extend TRIA.
    Moreover, in the period since TRIA's enactment, the 
insurance markets and the economy have continued to grow. 
Aggregate industrydirect earned premiums for TRIA-covered lines 
in 2002 were approximately $130 billion and in 2006 were approximately 
$170 billion for those same TRIA-covered lines. As a result, there is a 
corresponding need to modestly grow the program beyond its current cap 
of $100 billion in aggregate insured losses.
    Also, while TRIA only covers acts of terrorism committed on 
behalf of a foreign person or foreign interest, experience has 
shown that the distinction between foreign and domestic 
terrorism may be artificial. Witnesses at hearings before the 
Subcommittee have noted that post-TRIA events such as the 
London Underground bombing and the thwarted attack on John F. 
Kennedy Airport have demonstrated both the meaninglessness and 
the practical difficulty of making this distinction.
    TRIA to date has not applied to group life insurance. After 
the 2005 extension of TRIA, the PWG analyzed the group life 
marketplace and found that ``group life insurance still appears 
to be widely available in the private market and there has not 
been any impact on cost to policyholders.'' Indeed, the group 
life industry has maintained capacity. However, group life 
carriers face potential insolvency should a terrorist event 
affect a large group of insureds. Group life insurance is not 
written and priced with anticipation that an entire group would 
file claims in the same year. Moreover, terrorism reinsurance 
availability has greatly decreased since the events of 
September 11, 2001, and now has higher deductibles, more 
exclusions, and smaller overall coverage limits. It is 
important to the economic security of America's workers and 
their families that group life carriers remain solvent and 
capable of paying claims after a terrorist event.
    Additionally, the metric used for the inclusion of group 
life in TRIA should be economically fair to group life insurers 
and their policyholders. If group life recoupment were based on 
premium, individuals with smaller policies and policies with 
higher work-related risks (e.g., roofers) will be assessed the 
most even though they are not necessarily at higher risk. 
Arguably, they may be at a slightly lower risk, since 
terrorists are more likely to select ``white collar'' targets. 
Moreover, group life premiums are not consistent across product 
lines. Therefore, if deductibles were based on premiums, group 
life insurers will meet their deductible at different levels 
depending on their mix of business.
    In addition, many now fear NBCR terrorist attacks. For 
instance, according to testimony at a hearing before the 
Capital Markets Subcommittee on June 21, 2007, a 2005 survey of 
85 non-proliferation and national security experts led by 
Senator Richard Lugar put the likelihood of a nuclear attack 
somewhere in the world within the next ten years at 20% and the 
likelihood of a radiological attack at 40%. The same testimony 
noted that the national terrorism insurance programs in France 
and the United Kingdom provide NBCR coverage.
    The insurance market for NBCR terrorism coverage in the 
United States, however, is virtually non-existent. In fact, 
witnesses before the Subcommittee testified that NBCR terrorism 
exposures are essentially uninsurable without a Federal 
government program. These NBCR threats are distinctly different 
from those hazards that are predictable, measurable in dollar 
terms, and unlikely to result in catastrophic losses. As 
currently structured, TRIA only covers NBCR losses to the 
extent that insurers provide the coverage, such as in the case 
of workers' compensation. Difficulties in modeling and pricing, 
however, have resulted in most insurers generally not offering 
coverage to protect against NBCR terrorism. Some have referred 
to this gap in the nation's economic security plan as an 
Achilles' heel.
    Moreover, the risk of an NBCR terrorism event is 
essentially uninsurable absent a Federal government program. A 
September 2006 Government Accountability Office report entitled 
``Terrorism Insurance: Measuring and Predicting Losses from 
Unconventional Weapons Is Difficult, but Some Industry Exposure 
Exists'' found that ``any purely market-driven expansion of 
coverage'' for NBCR terrorism risk is ``highly unlikely in the 
foreseeable future.'' Similarly, the 2006 PWG report also noted 
that reinsurance for NBCR terrorism events is virtually 
unavailable and observed that ``[g]iven the general reluctance 
of insurance companies to provide coverage for these types of 
risks, there may be little potential for future market 
development.''
    Although the United States has avoided major terrorist 
attacks since 2001, recent attacks in London, Madrid, and 
Glasgow make it clear that the threat of terrorism will remain 
a national concern for the foreseeable future. As such, there 
is a need to extend the Federal backstop before the expiration 
of TRIEA at the end of 2007 to ensure continued availability of 
terrorism insurance coverage, address the gap in NBCR coverage, 
and remove the artificial distinction between foreign and 
domestic acts of terrorism. These actions, among others, would 
allow commercial property owners, developers, and lenders to 
obtain the insurance needed to protect their property, comply 
with mortgage covenants, and acquire project financing. They 
would also promote economic growth and stability as our nation 
maintains vigilance against the threat of future terrorist 
attacks at home.
    The Committee received the following correspondence:

             Coalition to Insure Against Terrorism,
                                      Washington DC, July 30, 2007.
Hon. Barney Frank,
Chairman, House Financial Services Committee,
Rayburn House Office Building, Washington, DC.
    Dear Chairman Frank: The Coalition to Insure Against 
Terrorism (CIAT), a broad-based coalition of business insurance 
policyholders representing a significant segment of the 
nation's GDP, strongly endorses H.R. 2761, the Terrorism Risk 
Insurance Revision and Extension Act (TRIREA) of 2007 
introduced by Representative Michael Capuano and others that 
would extend and improve the Terrorism Risk Insurance Extension 
Act (TRIEA). As the principal consumers of this vital insurance 
coverage, CIAT thanks you for your long-standing support and 
leadership on the issue of terrorism risk insurance.
    The current federal terrorism risk insurance program has 
been a tremendous success. TRIEA has helped keep the economy 
going in the face of continued terrorist threats by allowing 
businesses across America to secure this commercially necessary 
product, saving countless jobs in the process. Moreover, it 
serves as an important tool to minimize the severe economic 
disruption that almost certainly will occur from a future 
terrorist attack.
    With TRIEA's expiration looming at the end of 2007, CIAT 
earlier this year outlined a number of key enhancements to the 
program that we believe need to be part of any extension 
legislation. CIAT is pleased that H.R. 2761 includes these key 
provisions.
    Most important to policyholders are four provisions. First, 
the program's term would be extended to ten years. We applaud 
H.R. 2761 for recognizing that such an extension affords 
policyholders with the certainty necessary for long-term 
projects and economic activity to move forward. With this in 
mind, CIAT strongly supports the amendment to be offered by 
Rep. Peter King to extend the program to fifteen years.
    Second, H.R. 2761 would give businesses an important new 
option to purchase insurance for catastrophic non-conventional 
terrorism risks--the types of risks our government warns us 
about repeatedly--by making available to policyholders 
insurance against weapons of mass destruction--so-called NBCR 
risks--under ``same terms and conditions'' as ``conventional'' 
risks.
    Third, this legislation would eliminate the distinction 
between foreign and domestic acts. As the London bombings and 
the foiled Kennedy Airport plot demonstrate, we must be 
prepared for ``home-grown'' terrorism as well as threats from 
abroad.
    Fourth, H.R. 2761 would lower substantially the program's 
trigger level which will encourage smaller insurers, currently 
unable to participate in the program, to return to the 
terrorism risk insurance marketplace, thereby providing 
policyholders with a wider choice of insurance options.
    Lastly, there is an additional issue of importance to CIAT. 
CIAT strongly opposes any increase in the ``recoupment'' 
provision contained in TRIEA. We consider any increase above 
the current amount to be an excessive burden on the victims of 
terrorism and has the potential to be a lengthy drag on the 
economy in the aftermath of the next terrorist attack.
    CIAT thanks you for taking a significant step towards 
securing the economy against terrorism risk by scheduling this 
mark-up.
            Sincerely,
                         The Coalition to Insure Against Terrorism.

                                Hearings

    The Subcommittee on Capital Markets, Insurance, and 
Government Sponsored Enterprises of the Committee on Financial 
Services held three hearings to examine the need for 
legislation, the policy options for legislation, and the 
legislation itself.
    The Subcommittee on Capital Markets, Insurance, and 
Government Sponsored Enterprises held a hearing on March 5, 
2007, entitled ``The Need to Extend the Terrorism Risk 
Insurance Act.'' The following witnesses testified: The 
Honorable Charles E. Schumer, United States Senator; The 
Honorable Michael R. Bloomberg, Mayor of New York City; Mr. 
Eric R. Dinallo, Acting Superintendent, New York Insurance 
Department; Dr. Roger W. Ferguson, Chairman, Swiss Re America 
Holding Corporation; Mr. John N. Lieber, Senior Vice President, 
World Trade Center Properties, LLC; Mr. Stephen L. Green, Chief 
Executive Officer, SL Green Realty Corporation; Mr. Steven K. 
Graves, Chief Operating Officer, Principal Real Estate 
Investors; Mr. Edmund F. Kelly, Chairman, President and Chief 
Executive Officer, Liberty Mutual Group; Mr. Warren Heck, CPCU, 
President & CEO, Greater New York Mutual Insurance Company; and 
Mr. Donald J. Bailey, Chief Executive Officer, Willis NA.
    The Subcommittee on Capital Markets, Insurance, and 
Government Sponsored Enterprises held a hearing on April 24, 
2007, entitled ``Policy Options for Extending the Terrorism 
Risk Insurance Act.'' The following witnesses testified: Mr. 
Leonard W. Cotton, Vice Chairman, Centerline Capital Group; Mr. 
Brian E. Dowd, Chief Executive Officer, Insurance--North 
America, ACE Group; Mr. Vincent T. Donnelly, President and 
Chief Executive Officer, PMA Insurance Group; Mr. Thomas R. 
Watjen, President and Chief Executive Officer, Unum Group; Mr. 
Joseph P. Ditchman, Jr., Partner, Colliers Ostendorff Morris, 
on behalf of the National Association of REALTORS; and Ms. 
Janice M. Abraham, President and Chief Executive Officer, 
United Educators.
    The Subcommittee on Capital Markets, Insurance, and 
Government Sponsored Enterprises held a hearing on June 21, 
2007, entitled ``Examining a Legislative Solution to Extend and 
Revise the Terrorism Risk Insurance Act.'' The following 
witnesses testified: The Honorable David G. Nason, Assistant 
Secretary for Financial Institutions, U.S. Department of the 
Treasury; The Honorable Eric R. Dinallo, Superintendent, New 
York Insurance Department; The Honorable Marc Racicot, Chief 
Executive Officer and President, American Insurance 
Association; Mr. Christopher J. Nassetta, President and Chief 
Executive Officer, Host Hotels & Resorts, Inc. and Chairman, 
The Real Estate Roundtable, on behalf of the Coalition to 
Insure Against Terrorism; Ms. Jill M. Dalton, Managing 
Director, Global Property & Multinational Practice, Marsh, 
Inc., on behalf of the Council of Insurance Agents and Brokers; 
Ms. Sharon Emek, Ph.D., C.I.C., Partner, CBS Coverage Group, 
Inc., on behalf of the Independent Insurance Agents & Brokers 
of America; Mr. Warren Heck, CPCU, Chairman and Chief Executive 
Officer, Greater New York Mutual Insurance Company, on behalf 
of the National Association of Mutual Insurance Companies and 
the Property Casualty Insurance Association of America; Dr. 
Howard Kunreuther, Ph.D., Cecilia Yen Koo Professor of Decision 
Sciences & Public Policy, Co-Director Risk Management and 
Decision Processes Center, Wharton School, University of 
Pennsylvania; Mr. Frank Nutter, President, Reinsurance 
Association of America; and Mr. Dennis W. Smith, President and 
Chief Executive Officer, Missouri Employers Mutual Insurance.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
August 1, 2007, and ordered H.R. 2761, Terrorism Risk Insurance 
Revision and Extension Act of 2007, as amended, favorably 
reported to the House by a record vote of 49 yeas and 20 nays. 
Previously, the Subcommittee on Capital Markets, Insurance, and 
Government Sponsored Enterprises met in open session on July 
24, 2007, and ordered H.R. 2761, as amended, forwarded to the 
Full Committee with a favorable recommendation by a record vote 
of 26 yeas and 17 nays.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. A 
motion by Mr. Frank toreport the bill, as amended, to the House 
with a favorable recommendation was agreed to by a record vote of 49 
yeas and 20 nays (Record vote No. FC-66). The names of Members voting 
for and against follow:

                                              RECORD VOTE NO. FC-66
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank......................        X   ........  .........  Mr. Bachus.......  ........        X   .........
Mr. Kanjorski..................        X   ........  .........  Mr. Baker........  ........        X   .........
Ms. Waters.....................        X   ........  .........  Ms. Pryce (OH)...        X   ........  .........
Mrs. Maloney...................        X   ........  .........  Mr. Castle.......  ........        X   .........
Mr. Gutierrez..................        X   ........  .........  Mr. King (NY)....        X   ........  .........
Ms. Velazquez..................        X   ........  .........  Mr. Royce........  ........        X   .........
Mr. Watt.......................        X   ........  .........  Mr. Lucas........  ........        X   .........
Mr. Ackerman...................        X   ........  .........  Mr. Paul.........  ........        X   .........
Ms. Carson.....................        X   ........  .........  Mr. Gillmor......        X   ........  .........
Mr. Sherman....................        X   ........  .........  Mr. LaTourette...        X   ........  .........
Mr. Meeks......................        X   ........  .........  Mr. Manzullo.....  ........        X   .........
Mr. Moore (KS).................        X   ........  .........  Mr. Jones........        X   ........  .........
Mr. Capuano....................        X   ........  .........  Mrs. Biggert.....  ........        X   .........
Mr. Hinojosa...................        X   ........  .........  Mr. Shays........        X   ........  .........
Mr. Clay.......................        X   ........  .........  Mr. Miller (CA)..        X   ........  .........
Mrs. McCarthy..................        X   ........  .........  Mrs. Capito......        X   ........  .........
Mr. Baca.......................  ........  ........  .........  Mr. Feeney.......  ........        X   .........
Mr. Lynch......................        X   ........  .........  Mr. Hensarling...  ........        X   .........
Mr. Miller (NC)................        X   ........  .........  Mr. Garrett (NJ).  ........        X   .........
Mr. Scott......................        X   ........  .........  Ms. Brown-Waite..        X   ........  .........
Mr. Green......................        X   ........  .........  Mr. Barrett (SC).  ........        X   .........
Mr. Cleaver....................        X   ........  .........  Mr. Gerlach......        X   ........  .........
Ms. Bean.......................        X   ........  .........  Mr. Pearce.......  ........        X   .........
Ms. Moore (WI).................        X   ........  .........  Mr. Neugebauer...        X   ........  .........
Mr. Davis (TN).................        X   ........  .........  Mr. Price (GA)...  ........        X   .........
Mr. Sires......................        X   ........  .........  Mr. Davis (KY)...        X   ........  .........
Mr. Hodes......................        X   ........  .........  Mr. McHenry......        X   ........  .........
Mr. Ellison....................        X   ........  .........  Mr. Campbell.....  ........        X   .........
Mr. Klein......................        X   ........  .........  Mr. Putnam.......        X   ........  .........
Mr. Mahoney (FL)...............        X   ........  .........  Mrs. Bachmann....  ........        X   .........
Mr. Wilson.....................        X   ........  .........  Mr. Roskam.......  ........        X   .........
Mr. Perlmutter.................        X   ........  .........  Mr. Marchant.....  ........        X   .........
Mr. Murphy.....................        X   ........  .........  Mr. McCotter.....  ........        X   .........
Mr. Donnelly...................        X   ........  .........
Mr. Wexler.....................        X   ........  .........
Mr. Marshall...................  ........        X   .........
Mr. Boren......................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    The following amendments to the amendment in the nature of 
a substitute recommended by the Subcommittee on Capital 
Markets, Insurance, and Government Sponsored Enterprises were 
decided by record votes. The names of Members voting for and 
against follow:
    An amendment by Mr. Putnam, No. 5, inserting an 8+2 year 
extension of the program, was not agreed to by a record vote of 
26 yeas and 39 nays (Record vote No. FC-63):

                                              RECORD VOTE NO. FC-63
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank......................  ........        X   .........  Mr. Bachus.......        X   ........  .........
Mr. Kanjorski..................  ........        X   .........  Mr. Baker........        X   ........  .........
Ms. Waters.....................  ........        X   .........  Ms. Pryce (OH)...        X   ........  .........
Mrs. Maloney...................  ........        X   .........  Mr. Castle.......        X   ........  .........
Mr. Gutierrez..................  ........        X   .........  Mr. King (NY)....  ........        X   .........
Ms. Velazquez..................  ........        X   .........  Mr. Royce........        X   ........  .........
Mr. Watt.......................  ........        X   .........  Mr. Lucas........        X   ........  .........
Mr. Ackerman...................  ........        X   .........  Mr. Paul.........        X   ........  .........
Ms. Carson.....................  ........        X   .........  Mr. Gillmor......  ........  ........  .........
Mr. Sherman....................  ........        X   .........  Mr. LaTourette...  ........        X   .........
Mr. Meeks......................  ........        X   .........  Mr. Manzullo.....        X   ........  .........
Mr. Moore (KS).................  ........        X   .........  Mr. Jones........  ........        X   .........
Mr. Capuano....................  ........        X   .........  Mrs. Biggert.....        X   ........  .........
Mr. Hinojosa...................  ........        X   .........  Mr. Shays........  ........  ........  .........
Mr. Clay.......................  ........        X   .........  Mr. Miller (CA)..  ........        X   .........
Mrs. McCarthy..................  ........        X   .........  Mrs. Capito......        X   ........  .........
Mr. Baca.......................  ........  ........  .........  Mr. Feeney.......        X   ........  .........
Mr. Lynch......................  ........        X   .........  Mr. Hensarling...        X   ........  .........
Mr. Miller (NC)................  ........        X   .........  Mr. Garrett (NJ).        X   ........  .........
Mr. Scott......................  ........        X   .........  Ms. Brown-Waite          X   ........  .........
                                                                 (FL).
Mr. Green......................  ........        X   .........  Mr. Barrett (SC).        X   ........  .........
Mr. Cleaver....................  ........        X   .........  Mr. Gerlach......        X   ........  .........
Ms. Bean.......................  ........        X   .........  Mr. Pearce.......        X   ........  .........
Ms. Moore (WI).................  ........        X   .........  Mr. Neugebauer...        X   ........  .........
Mr. Davis (TN).................  ........        X   .........  Mr. Price (GA)...        X   ........  .........
Mr. Sires......................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
Mr. Hodes......................  ........        X   .........  Mr. McHenry......  ........  ........  .........
Mr. Ellison....................  ........        X   .........  Mr. Campbell.....        X   ........  .........
Mr. Klein......................  ........        X   .........  Mr. Putnam.......        X   ........  .........
Mr. Mahoney (FL)...............  ........        X   .........  Mrs. Bachmann....        X   ........  .........
Mr. Wilson.....................  ........        X   .........  Mr. Roskam.......        X   ........  .........
Mr. Perlmutter.................  ........        X   .........  Mr. Marchant.....        X   ........  .........
Mr. Murphy.....................  ........        X   .........  Mr. McCotter.....        X   ........  .........
Mr. Donnelly...................  ........        X   .........
Mr. Wexler.....................  ........  ........  .........
Mr. Marshall...................  ........        X   .........
Mr. Boren......................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment by Mr. King (N.Y.), No. 6, extending the 
program by 15 years, was agreed to by a record vote of 39 yeas 
and 30 nays (Record vote No. FC-64):

                                              RECORD VOTE NO. FC-64
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank......................        X   ........  .........  Mr. Bachus.......  ........        X   .........
Mr. Kanjorski..................  ........        X   .........  Mr. Baker........  ........        X   .........
Ms. Waters.....................        X   ........  .........  Ms. Pryce (OH)...  ........        X   .........
Mrs. Maloney...................        X   ........  .........  Mr. Castle.......  ........        X   .........
Mr. Gutierrez..................        X   ........  .........  Mr. King (NY)....        X   ........  .........
Ms. Velazquez..................        X   ........  .........  Mr. Royce........  ........        X   .........
Mr. Watt.......................        X   ........  .........  Mr. Lucas........  ........        X   .........
Mr. Ackerman...................        X   ........  .........  Mr. Paul.........  ........        X   .........
Ms. Carson.....................        X   ........  .........  Mr. Gillmor......  ........        X   .........
Mr. Sherman....................        X   ........  .........  Mr. LaTourette...        X   ........  .........
Mr. Meeks......................        X   ........  .........  Mr. Manzullo.....  ........        X   .........
Mr. Moore (KS).................        X   ........  .........  Mr. Jones........        X   ........  .........
Mr. Capuano....................  ........        X   .........  Mrs. Biggert.....  ........        X   .........
Mr. Hinojosa...................        X   ........  .........  Mr. Shays........        X   ........  .........
Mr. Clay.......................        X   ........  .........  Mr. Miller (CA)..        X   ........  .........
Mrs. McCarthy..................        X   ........  .........  Mrs. Capito......  ........        X   .........
Mr. Baca.......................  ........  ........  .........  Mr. Feeney.......  ........        X   .........
Mr. Lynch......................        X   ........  .........  Mr. Hensarling...  ........        X   .........
Mr. Miller (NC)................        X   ........  .........  Mr. Garrett (NJ).  ........        X   .........
Mr. Scott......................        X   ........  .........  Ms. Brown-Waite    ........        X   .........
                                                                 (FL).
Mr. Green......................        X   ........  .........  Mr. Barrett (SC).  ........        X   .........
Mr. Cleaver....................        X   ........  .........  Mr. Gerlach......  ........        X   .........
Ms. Bean.......................        X   ........  .........  Mr. Pearce.......  ........        X   .........
Ms. Moore (WI).................        X   ........  .........  Mr. Neugebauer...  ........        X   .........
Mr. Davis (TN).................        X   ........  .........  Mr. Price (GA)...  ........        X   .........
Mr. Sires......................        X   ........  .........  Mr. Davis (KY)...  ........        X   .........
Mr. Hodes......................        X   ........  .........  Mr. McHenry......        X   ........  .........
Mr. Ellison....................        X   ........  .........  Mr. Campbell.....  ........        X   .........
Mr. Klein......................        X   ........  .........  Mr. Putnam.......  ........        X   .........
Mr. Mahoney (FL)...............        X   ........  .........  Mrs. Bachmann....  ........        X   .........
Mr. Wilson.....................        X   ........  .........  Mr. Roskam.......  ........        X   .........
Mr. Perlmutter.................        X   ........  .........  Mr. Marchant.....  ........        X   .........
Mr. Murphy.....................        X   ........  .........  Mr. McCotter.....  ........        X   .........
Mr. Donnelly...................        X   ........  .........
Mr. Wexler.....................        X   ........  .........
Mr. Marshall...................  ........        X   .........
Mr. Boren......................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    An amendment by Mr. Garrett, No. 10, regarding a revised 5 
percent deductible, was agreed to by a record vote of 42 yeas 
and 27 nays (Record vote No. FC-65):

                                              RECORD VOTE NO. FC-65
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank......................  ........        X   .........  Mr. Bachus.......        X   ........  .........
Mr. Kanjorski..................        X   ........  .........  Mr. Baker........        X   ........  .........
Ms. Waters.....................        X   ........  .........  Ms. Pryce (OH)...        X   ........  .........
Mrs. Maloney...................  ........        X   .........  Mr. Castle.......        X   ........  .........
Mr. Gutierrez..................  ........        X   .........  Mr. King (NY)....  ........        X   .........
Ms. Velazquez..................  ........        X   .........  Mr. Royce........        X   ........  .........
Mr. Watt.......................  ........        X   .........  Mr. Lucas........        X   ........  .........
Mr. Ackerman...................  ........        X   .........  Mr. Paul.........        X   ........  .........
Ms. Carson.....................  ........        X   .........  Mr. Gillmor......        X   ........  .........
Mr. Sherman....................  ........        X   .........  Mr. LaTourette...        X   ........  .........
Mr. Meeks......................  ........        X   .........  Mr. Manzullo.....        X   ........  .........
Mr. Moore (KS).................        X   ........  .........  Mr. Jones........        X   ........  .........
Mr. Capuano....................  ........        X   .........  Mrs. Biggert.....        X   ........  .........
Mr. Hinojosa...................        X   ........  .........  Mr. Shays........        X   ........  .........
Mr. Clay.......................  ........        X   .........  Mr. Miller (CA)..        X   ........  .........
Mrs. McCarthy..................  ........        X   .........  Mrs. Capito......        X   ........  .........
Mr. Baca.......................  ........  ........  .........  Mr. Feeney.......        X   ........  .........
Mr. Lynch......................  ........        X   .........  Mr. Hensarling...        X   ........  .........
Mr. Miller (NC)................  ........        X   .........  Mr. Garrett (NJ).        X   ........  .........
Mr. Scott......................  ........        X   .........  Ms. Brown-Waite)         X   ........  .........
                                                                 (FL).
Mr. Green......................  ........        X   .........  Mr. Barrett (SC).        X   ........  .........
Mr. Cleaver....................  ........        X   .........  Mr. Gerlach......        X   ........  .........
Ms. Bean.......................        X   ........  .........  Mr. Pearce.......        X   ........  .........
Ms. Moore (WI).................  ........        X   .........  Mr. Neugebauer...        X   ........  .........
Mr. Davis (TN).................        X   ........  .........  Mr. Price (GA)...        X   ........  .........
Mr. Sires......................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
Mr. Hodes......................  ........        X   .........  Mr. McHenry......        X   ........  .........
Mr. Ellison....................  ........        X   .........  Mr. Campbell.....        X   ........  .........
Mr. Klein......................        X   ........  .........  Mr. Putnam.......        X   ........  .........
Mr. Mahoney (FL)...............  ........        X   .........  Mrs. Bachmann....        X   ........  .........
Mr. Wilson.....................  ........        X   .........  Mr. Roskam.......        X   ........  .........
Mr. Perlmutter.................  ........        X   .........  Mr. Marchant.....        X   ........  .........
Mr. Murphy.....................  ........        X   .........  Mr. McCotter.....        X   ........  .........
Mr. Donnelly...................        X   ........  .........
Mr. Wexler.....................  ........        X   .........
Mr. Marshall...................        X   ........  .........
Mr. Boren......................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    The following other amendments were also considered by the 
Committee:
    An amendment in the nature of a substitute recommended by 
the Subcommittee on Capital Markets, Insurance, and Government 
Sponsored Enterprises, making various technical and substantive 
changes, as amended, was agreed to by a voice vote.
    The following amendments to the amendment in the nature of 
a substitute were considered:
    An amendment by Mr. Frank, No. 1, a manger's amendment 
making various technical and substantive changes, was agreed to 
by a voice vote.
    An amendment by Mr. Manzullo, No. 2, providing for NBCR 
small insurer exemption, was agreed to by a voice vote.
    An amendment by Mr. Clay, No. 3, including farm owners' 
multiple peril insurance, was agreed to by a voice vote.
    An amendment by Mr. Marchant, No. 4, inserting a rule of 
construction regarding insurer coordination, was agreed to by a 
voice vote.
    An amendment by Ms. Brown-Waite, No. 7, requiring an annual 
adjustment, was agreed to by a voice vote.
    An amendment by Mrs. Bachmann, No. 8, regarding 
discretionary recoupment, was agreed to by a voice vote.
    An amendment by Mr. Garrett, No. 9, regarding a 5 per cent 
deductible, was not agreed to.
    On Tuesday, July 24, 2007, the Subcommittee on Capital 
Markets, Insurance, and Government Sponsored Enterprises met in 
open session and ordered H.R. 2761, as amended, forwarded to 
the Full Committee with a favorable recommendation, by a record 
vote of 26 yeas and 17 nays (Record vote No. CM-4). The names 
of Members voting for and against follow:

                                              RECORD VOTE NO. CM-4
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Kanjorski..................        X   ........  .........  Ms. Pryce........  ........        X   .........
Mr. Ackerman...................        X   ........  .........  Mr. Baker........  ........        X   .........
Mr. Sherman....................        X   ........  .........  Mr. Shays........        X   ........  .........
Mr. Meeks......................        X   ........  .........  Mr. Gillmor......        X   ........  .........
Mr. Moore (KS).................        X   ........  .........  Mr. Castle.......  ........        X   .........
Mr. Capuano....................        X   ........  .........  Mr. King.........        X   ........  .........
Mr. Hinojosa...................        X   ........  .........  Mr. Lucas........  ........  ........  .........
Mrs. McCarthy..................        X   ........  .........  Mr. Manzullo.....  ........        X   .........
Mr. Baca.......................  ........  ........  .........  Mr. Royce........  ........        X   .........
Mr. Lynch......................  ........  ........  .........  Ms. Capito.......  ........        X   .........
Mr. Miller (NC)................        X   ........  .........  Mr. Putnam.......  ........        X   .........
Mr. Scott......................        X   ........  .........  Mr. Barrett (SC).  ........        X   .........
Ms. Velazquez..................        X   ........  .........  Ms. Brown-Waite..  ........        X   .........
Ms. Bean.......................        X   ........  .........  Mr. Feeney.......  ........  ........  .........
Ms. Moore......................        X   ........  .........  Mr. Garrett (NJ).  ........        X   .........
Mr. Davis (TN).................        X   ........  .........  Mr. Gerlach......  ........        X   .........
Mr. Sires......................        X   ........  .........  Mr. Hensarling...  ........  ........  .........
Mr. Hodes......................        X   ........  .........  Mr. Davis (KY)...  ........        X   .........
Mr. Klein......................        X   ........  .........  Mr. Campbell.....  ........        X   .........
Mr. Mahoney....................        X   ........  .........  Mrs. Bachmann....  ........        X   .........
Mr. Perlmutter.................        X   ........  .........  Mr. Roskam.......  ........        X   .........
Mr. Murphy.....................        X   ........  .........  Mr. Marchant.....  ........        X   .........
Mr. Donnelly...................        X   ........  .........  Mr. McCotter.....  ........        X   .........
Mr. Wexler.....................        X   ........  .........  Mr. Bachus, ex     ........  ........  .........
                                                                 officio.
Mr. Marshall...................  ........  ........  .........
Mr. Boren......................        X   ........  .........
Mr. Frank, ex officio..........  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

    During the Subcommittee markup, the following amendments 
were disposed of by record votes. The names of Members voting 
for and against follow:
    An amendment by Mr. Garrett, No. 1f, Section 2 changing of 
date, was not agreed to by a record vote of 14 yeas and 29 nays 
(Record vote No. CM-1):

                                              RECORD VOTE NO. CM-1
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Kanjorski..................  ........        X   .........  Ms. Pryce........  ........        X   .........
Mr. Ackerman...................  ........        X   .........  Mr. Baker........        X   ........  .........
Mr. Sherman....................  ........        X   .........  Mr. Shays........  ........        X   .........
Mr. Meeks......................  ........        X   .........  Mr. Gillmor......        X   ........  .........
Mr. Moore (KS).................  ........        X   .........  Mr. Castle.......        X   ........  .........
Mr. Capuano....................  ........        X   .........  Mr. King.........  ........        X   .........
Mr. Hinojosa...................  ........        X   .........  Mr. Lucas........  ........  ........  .........
Mrs. McCarthy..................  ........        X   .........  Mr. Manzullo.....        X   ........  .........
Mr. Baca.......................  ........  ........  .........  Mr. Royce........        X   ........  .........
Mr. Lynch......................  ........  ........  .........  Ms. Capito.......  ........        X   .........
Mr. Miller (NC)................  ........        X   .........  Mr. Putnam.......        X   ........  .........
Mr. Scott......................  ........        X   .........  Mr. Barrett (SC).        X   ........  .........
Ms. Velazquez..................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
Ms. Bean.......................  ........        X   .........  Mr. Feeney.......  ........  ........  .........
Ms. Moore......................  ........        X   .........  Mr. Garrett (NJ).        X   ........  .........
Mr. Davis (TN).................  ........        X   .........  Mr. Gerlach......  ........        X   .........
Mr. Sires......................  ........        X   .........  Mr. Hensarling...  ........  ........  .........
Mr. Hodes......................  ........        X   .........  Mr. Davis (KY)...  ........        X   .........
Mr. Klein......................  ........        X   .........  Mr. Campbell.....        X   ........  .........
Mr. Mahoney....................  ........        X   .........  Mrs. Bachmann....        X   ........  .........
Mr. Perlmutter.................  ........        X   .........  Mr. Roskam.......        X   ........  .........
Mr. Murphy.....................  ........        X   .........  Mr. Marchant.....        X   ........  .........
Mr. Donnelly...................  ........        X   .........  Mr. McCotter.....        X   ........  .........
Mr. Wexler.....................  ........        X   .........  Mr. Bachus, ex     ........  ........  .........
                                                                 officio.
Mr. Marshall...................  ........  ........  .........
Mr. Boren......................  ........        X   .........
Mr. Frank, ex officio..........  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

    An amendment by Mr. Putnam, No. 1g, striking section 2 and 
inserting new section setting new termination dates, was not 
agreed to by a record vote of 18 yeas and 25 nays (Record vote 
No. CM-2):

                                              RECORD VOTE NO. CM-2
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Kanjorski..................  ........        X   .........  Ms. Pryce........        X   ........  .........
Mr. Ackerman...................  ........        X   .........  Mr. Baker........        X   ........  .........
Mr. Sherman....................  ........        X   .........  Mr. Shays........  ........        X   .........
Mr. Meeks......................  ........        X   .........  Mr. Gillmor......        X   ........  .........
Mr. Moore (KS).................  ........        X   .........  Mr. Castle.......        X   ........  .........
Mr. Capuano....................  ........        X   .........  Mr. King.........  ........        X   .........
Mr. Hinojosa...................  ........        X   .........  Mr. Lucas........  ........  ........  .........
Mrs. McCarthy..................  ........        X   .........  Mr. Manzullo.....        X   ........  .........
Mr. Baca.......................  ........  ........  .........  Mr. Royce........        X   ........  .........
Mr. Lynch......................  ........  ........  .........  Ms. Capito.......        X   ........  .........
Mr. Miller (NC)................  ........        X   .........  Mr. Putnam.......        X   ........  .........
Mr. Scott......................  ........        X   .........  Mr. Barrett (SC).        X   ........  .........
Ms. Velazquez..................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
Ms. Bean.......................  ........        X   .........  Mr. Feeney.......  ........  ........  .........
Ms. Moore......................  ........        X   .........  Mr. Garrett (NJ).        X   ........  .........
Mr. Davis (TN).................  ........        X   .........  Mr. Gerlach......        X   ........  .........
Mr. Sires......................  ........        X   .........  Mr. Hensarling...  ........  ........  .........
Mr. Hodes......................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
Mr. Klein......................  ........        X   .........  Mr. Campbell.....        X   ........  .........
Mr. Mahoney....................  ........        X   .........  Mrs. Bachmann....        X   ........  .........
Mr. Perlmutter.................  ........        X   .........  Mr. Roskam.......        X   ........  .........
Mr. Murphy.....................  ........        X   .........  Mr. Marchant.....        X   ........  .........
Mr. Donnelly...................  ........        X   .........  Mr. McCotter.....        X   ........  .........
Mr. Wexler.....................  ........        X   .........  Mr. Bachus, ex     ........  ........  .........
                                                                 officio.
Mr. Marshall...................  ........  ........  .........
Mr. Boren......................  ........        X   .........
Mr. Frank, ex officio..........  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

    An amendment by Mrs. Bachmann, No. 1h, requiring full 
recoupment of Federal financial assistance share, was not 
agreed to by a record vote of 19 yeas and 24 nays (Record vote 
No. CM-3):

                                              RECORD VOTE NO. CM-3
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Kanjorski..................  ........        X   .........  Ms. Pryce........        X   ........  .........
Mr. Ackerman...................  ........        X   .........  Mr. Baker........        X   ........  .........
Mr. Sherman....................  ........        X   .........  Mr. Shays........        X   ........  .........
Mr. Meeks......................  ........        X   .........  Mr. Gillmor......        X   ........  .........
Mr. Moore (KS).................  ........        X   .........  Mr. Castle.......        X   ........  .........
Mr. Capuano....................  ........        X   .........  Mr. King.........  ........        X   .........
Mr. Hinojosa...................  ........        X   .........  Mr. Lucas........  ........  ........  .........
Mrs. McCarthy..................  ........        X   .........  Mr. Manzullo.....        X   ........  .........
Mr. Baca.......................  ........  ........  .........  Mr. Royce........        X   ........  .........
Mr. Lynch......................  ........  ........  .........  Ms. Capito.......        X   ........  .........
Mr. Miller (NC)................  ........        X   .........  Mr. Putnam.......        X   ........  .........
Mr. Scott......................  ........        X   .........  Mr. Barrett (SC).        X   ........  .........
Ms. Velazquez..................  ........        X   .........  Ms. Brown-Waite..        X   ........  .........
Ms. Bean.......................  ........        X   .........  Mr. Feeney.......  ........  ........  .........
Ms. Moore......................  ........        X   .........  Mr. Garrett (NJ).        X   ........  .........
Mr. Davis (TN).................  ........        X   .........  Mr. Gerlach......        X   ........  .........
Mr. Sires......................  ........        X   .........  Mr. Hensarling...  ........  ........  .........
Mr. Hodes......................  ........        X   .........  Mr. Davis (KY)...        X   ........  .........
Mr. Klein......................  ........        X   .........  Mr. Campbell.....        X   ........  .........
Mr. Mahoney....................  ........        X   .........  Mrs. Bachmann....        X   ........  .........
Mr. Perlmutter.................  ........        X   .........  Mr. Roskam.......        X   ........  .........
Mr. Murphy.....................  ........        X   .........  Mr. Marchant.....        X   ........  .........
Mr. Donnelly...................  ........        X   .........  Mr. McCotter.....        X   ........  .........
Mr. Wexler.....................  ........        X   .........  Mr. Bachus, ex     ........  ........  .........
                                                                 officio.
Mr. Marshall...................  ........  ........  .........
Mr. Boren......................  ........        X   .........
Mr. Frank, ex officio..........  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

    During the Subcommittee markup, the following amendments 
were also considered:
    An amendment by Mr. Kanjorski, No. 1, a manager's amendment 
in the nature of a substitute, was agreed to, as amended, by a 
voice vote.
    An amendment by Ms. Pryce, No. 1a, striking Section 2 and 
inserting new termination dates for NBCR, was not agreed to by 
a voice vote.
    An amendment by Mr. Ackerman, No. 1b, including the 
Secretary of Homeland Security in certification for acts of 
terrorism and acts of NBCR terrorism, was agreed to by a voice 
vote.
    An amendment by Mr. Baker, No. 1c, regarding rates and 
disallowed claims at State level may go to Federal court, was 
withdrawn.
    An amendment by Mr. Manzullo, No. 1d, regarding NBCR make-
available exceptions for small businesses, was withdrawn.
    An amendment by Mr. Marchant, No. 1e, to allow NBCR 
insurance partnering, was withdrawn.
    An amendment by Mr. Baker, No. 1i, striking ``in the same 
previously impacted areas'' and ``in the same impacted areas'', 
was agreed to by a voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has held hearings and 
made findings that are reflected in this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    H.R. 2761, the ``Terrorism Risk Insurance Revision and 
Extension Act of 2007,'' is intended to extend the Terrorism 
Risk Insurance Act of 2002 (TRIA) to ensure the continued 
availability of terrorism insurance coverage, limit market 
disruptions, encourage economic development and growth, and 
maintain the economic security of the United States. As 
reported, H.R. 2761 would further extend TRIA beyond its 
current expiration date of December 31, 2007 for an additional 
15-year period. H.R. 2761 would also make several revisions to 
the existing program, such as expanding the availability of 
insurance to protect against nuclear, biological, chemical, or 
radiological (NBCR) events; adding group life insurance as a 
line covered by the program; and covering domestic terrorism 
events.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate of the Director of the Congressional Budget 
Office pursuant to section 402 of the Congressional Budget Act.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                                 September 6, 2007.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2761, the 
Terrorism Risk Insurance Revision and Extension Act of 2007.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                                      Peter Orszag.
    Enclosure.

H.R. 2761--Terrorism Risk Insurance Revision and Extension Act of 2007

    Summary: H.R. 2761 would extend the Terrorism Risk 
Insurance Act (TRIA) for 15 years--through calendar year 2022. 
The bill also would add group life insurance to the lines of 
coverage included under the program and would require insurers 
to make coverage available to property and casualty and group 
life insurance policyholders for losses resulting from domestic 
terrorism and, after January 1, 2009, terrorism involving 
nuclear, biological, chemical, and radioactive (NBCR) 
materials.
    Enacted in 2002, TRIA requires insurance firms that sell 
commercial property and casualty insurance to offer clients 
insurance coverage for damages caused by foreign terrorist 
attacks. Under TRIA, the federal government would help insurers 
cover losses in the event of a terrorist attack under certain 
conditions, and would also impose assessments on the insurance 
industry to recover all or a portion of the federal payments. 
The program is set to expire at the end of calendar year 2007.
    There is no reliable way to predict how much insured damage 
terrorists might cause in any specific year. Rather, CBO's 
estimate of the cost of financial assistance provided under 
H.R. 2761 represents an expected value of payments from the 
program--a weighted average that reflects industry experts' 
opinions of various outcomes ranging from zero damages up to 
very large damages resulting from possible future terrorist 
attacks. The expected value can be thought of as the amount of 
an insurance premium that would be necessary to just offset the 
government's losses from providing this insurance, although 
firms do not pay any premium for the federal assistance offered 
by TRIA.
    On this basis, CBO estimates that enacting H.R. 2761 would 
increase direct spending by $3.7 billion over the 2008-2012 
period and by $10.4 billion over the 2008-2017 period. An 
additional $13.7 billion would be spent after 2017.
    Under H.R. 2761, the Department of the Treasury would be 
directed to recoup some or all of the costs of providing 
financial assistance through taxes imposed on insurance firms 
(surcharges). Over many years, CBO expects that an increase in 
spending for financial assistance would be largely offset (on a 
cash basis) by a corresponding increase in governmental 
receipts (i.e., revenues) depending on the amount of insured 
losses. We assume, however, that the Secretary of the Treasury 
would not impose any surcharges until two years after federal 
assistance is provided and that those amounts would be 
collected over many years. Thus, CBO estimates that enacting 
the recoupment provision of H.R. 2761 would increase 
governmental receipts by about $100 million over the 2008-2012 
period and by $2.0 billion over the 2008-2017 period, net of 
income and payroll tax offsets.
    Considering both the direct spending and revenue impacts of 
the bill, CBO estimates that enacting H.R. 2761 would increase 
budget deficits or decrease surpluses by $200 million in 2008, 
$3.5 billion over the 2008-2012 period, and $8.4 billion over 
the 2008-2017 period.
    H.R. 2761 would extend and impose intergovernmental and 
private-sector mandates as defined in the Unfunded Mandates 
Reform Act (UMRA). CBO estimates that the aggregate costs of 
complying with those mandates would not exceed the annual 
thresholds established by UMRA ($66 million for 
intergovernmental mandates and $131 million for private-sector 
mandates in 2007, adjusted annually for inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 2761 is shown in Table 1. The costs of 
this legislation fall within budget function 370 (commerce and 
housing credit).

                   TABLE 1.--ESTIMATED BUDGETARY IMPACT OF H.R. 2761, THE TERRORISM RISK INSURANCE REVISION AND EXTENSION ACT OF 2007
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  By fiscal year, in billions of dollars--
                                                   -----------------------------------------------------------------------------------------------------
                                                     2008    2009    2010    2011    2012    2013    2014    2015    2016    2017   2008-2012  2008-2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               CHANGES IN DIRECT SPENDING

Estimated Budget Authority........................     0.2     0.5     0.8     1.0     1.1     1.2     1.3     1.4     1.4     1.5       3.6       10.4
Estimated Outlays.................................     0.2     0.5     0.8     1.0     1.1     1.2     1.3     1.4     1.4     1.5       3.6       10.4

                                                                   CHANGES IN REVENUES

Estimated Revenues................................       0       0       *       *     0.1     0.2     0.3     0.4     0.4     0.6       0.1        2.0

                                                                       NET IMPACT

Estimated Change in the Deficit or Surplus\1\.....    -0.2    -0.5    -0.8    -1.0    -1.0    -1.0    -1.0    -1.0    -1.0    -0.9      -3.5      -8.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: * = less than $50 million.
\1\Negative numbers indicate an increase in the deficit or a decrease in the surplus.

    Basis of estimate: For this estimate, CBO assumes that H.R. 
2761 will be enacted before the end of calendar year 2007. We 
estimate that enacting H.R. 2761 would increase direct spending 
by $10.4 billion and would increase governmental revenues by 
$2.0 billion over the 2008-2017 period. While this estimate 
reflects CBO's best judgment on the basis of available 
information, the cost of this federal program is a function of 
inherently unpredictable future terrorist attacks. As such, 
actual costs are likely to vary significantly from the 
estimated amounts. Such costs could be either higher or lower 
than the expected-value estimates provided for each year.

Terrorism Risk Insurance Act under current law

    Enacted in 2002 and reauthorized in 2005, the Terrorism 
Risk Insurance Act provides financial assistance to commercial 
property and casualty insurers for losses above certain 
thresholds caused by terrorist attacks by individuals acting on 
behalf of foreign interests. For such assistance to be 
provided, the Secretary of the Treasury must certify that a 
terrorist attack has occurred in the United States or other 
specified locations. TRIA is currently set to expire on 
December 31, 2007.
    TRIA does not require commercial property and casualty 
insurance policies to cover losses from terrorist attacks 
committed by a domestic interest or those involving nuclear, 
biological, chemical, or radioactive materials. If an insurer 
and a policyholder choose to include losses from terrorist 
attacks involving NBCR materials in a policy, TRIA would cover 
a portion of the losses resulting from those risks.
    For the Secretary of the Treasury to certify a terrorist 
attack, insured damages resulting from the attack must exceed 
$5 million. Financial assistance becomes available to insurers 
suffering losses from a certified attack once the industry's 
aggregate insured losses from that attack exceed $100 million 
(in 2007). Once that $100 million threshold is exceeded, 
participating insurance companies that suffer losses are 
responsible for paying claims up to a deductible amount based 
on the premiums they collected for covered lines in the 
calendar year preceding a certified attack. In 2007, the 
deductible is 20 percent of such premiums.
    After meeting their individual deductibles for damage 
claims, insurers and the federal government would each pay a 
portion of the loss above the deductible (the federal 
government would pay 85 percent of insured losses in 2007, 
individual insurers, 15 percent) up to total losses of $100 
billion. The law does not address about how losses above the 
$100 billion cap would be handled.
    The Secretary of the Treasury is authorized to recover 
payments made by the federal government through taxes in the 
form of surcharges paid by the insurance industry and 
purchasers of commercial property and casualty insurance. The 
Secretary is required to recoup federal payments to the extent 
that the total amount paid by the insurance industry including 
the deductible is less than the industry ``retention amount'' 
specified in law, which represents the total liability of the 
property and casualty insurance industry in the event of a 
certified attack. In 2007, that amount is $27.5 billion.

Modifications to TRIA under H.R. 2761

    H.R. 2761 would extend TRIA for 15 years, through December 
31, 2022. The bill also would add group life insurance to the 
lines of insurance covered by the program and would eliminate 
the distinction between foreign and domestic terrorist attacks. 
TRIA would now cover attacks by either foreign or domestic 
interests. Further, both commercial property and casualty 
insurance policies and group life insurance policies would be 
required to offer coverage for losses from terrorist attacks 
involving NBCR materials. Currently, such coverage is typically 
excluded from property and casualty insurance policies, other 
than workers' compensation policies, but is generally covered 
by group life insurance policies.
    H.R. 2761 would lower the threshold for financial 
assistance from $100 million in insured damages from a 
certified attack to $50 million; further, if a certified attack 
caused insured damages to exceed $1 billion, the threshold 
would be set at $5 million in subsequent years.
    As in current law, an insurer suffering losses as a result 
of an attack would pay claims up to a specified deductible. For 
losses incurred by property and casualty insurers, H.R. 2761 
would set different deductible limits based on the cause of the 
loss (conventional vs. NBCR attack) based on the premiums 
collected by each insurer in the calendar year preceding an 
attack. For insurers providing group life coverage, deductibles 
under H.R. 2761 would be based on the insurer's amount at 
risk--that is, the face value of life insurance policies not 
including any additional cash value--and also on the cause of 
the loss.
    Likewise, H.R. 2761 would continue the payment-sharing 
process that exists under current law. Insurers and the federal 
government would each pay a portion of the loss over the 
deductible. For most types of attacks, the federal government's 
portion would remain 85 percent of insured losses up to the 
$100 billion limit for each year of the 15-year extension. In 
the case of losses caused by an attack using NBCR materials, 
however, the federal share would be based on the amount of 
total losses, starting at 85 percent and rising to as high as 
95 percent, up to the $100 billion limit. Table 2 shows a 
breakdown of the industry deductible and federal cost-sharing 
limits.

Direct spending

    By extending financial assistance to certain commercial 
insurers for future acts of terrorism against insured private 
property, enacting H.R. 2761 would expose the federal 
government to potentially large liabilities for 15 more years 
(2008 through 2022). For any particular year, the amount of 
insured damage caused by terrorists could range from zero to 
many billions of dollars. CBO's estimate of the cost of this 
program reflects how much, on average, the government could be 
expected to pay to insurers and recover from the industry over 
the 2008-2017 period.
    The following sections describe our method for estimating 
the expected value of financial assistance under H.R. 2761 and 
explain how we convert that cost to annual estimates of 
spending.

      TABLE 2.--DEDUCTIBLE AND FEDERAL SHARE LIMITS UNDER H.R. 2761
------------------------------------------------------------------------

------------------------------------------------------------------------
                               DEDUCTIBLE

                                            Percent of Direct Earned
                                             Premiums
Property and Casualty Insurance:
    Attack Using Conventional Materials...
        Losses Less Than $1 Billion.......                    20.0
        Losses in Excess of $1 Billion\1\.                    5.0
    Attack Using NBCR Materials\1\........                    3.5
                                            Percent of Amount at Risk
Group Life Insurance:
    Attack Using Conventional Materials...                    .03510
    Attack Using NBCR Materials\2\........                    .00614

             FEDERAL SHARE OF COVERED LOSSES OVER DEDUCTIBLE

                                            Percent of Losses (Up to
                                             $100 Billion)
Attack Using Conventional Materials.......                    85.0
Attack Using NBCR Materials:
    Losses Less Than $10 Billion..........                    85.5
    Losses Between $10 Billion and $20                        87.5
     Billion.
    Losses Between $20 Billion and $40                        90.0
     Billion.
    Losses Between $40 Billion and $60                        92.5
     Billion.
    Losses Between $60 Billion and $100                       95.0
     Billion.
------------------------------------------------------------------------
\1\Increasing by 0.5 percent per year.
\2\Increasing by .00088 percent each year.

    Estimating the Expected Cost of Federal Assistance. For 
this estimate, CBO discussed the concepts involved in 
estimating insured losses with industry actuaries and reviewed 
models used by firms to set premiums for the terrorism 
component of property and casualty insurance and group life 
insurance that they offer. State insurance regulators generally 
require such premiums to be grounded in a widely accepted model 
of expected losses from covered events. After the terrorist 
attacks on September 11, 2001, the insurance industry began 
efforts to set premiums for insurance coverage for terrorist 
events using such models.
    Although estimating losses associated with terrorist events 
is difficult because of the lack of meaningful historical data, 
the insurance industry has experience setting premiums for 
catastrophic events--namely, natural disasters. Setting 
premiums for hurricanes and earthquakes, for example, involves 
determining areas that could sustain damage, the value of the 
losses that could result from various types of events with 
different levels of severity, and the frequency of such events.
    Similarly, estimating premiums for losses resulting from 
terrorist attacks involves judgments regarding potential 
targets and the frequency of such attacks. Because there is a 
very limited history of terrorist attacks in the United States, 
many of the parameters needed by the insurance industry to set 
premiums are based on expert opinion regarding terrorist 
activities and capabilities rather than on historical data.
    Estimating potential insured losses. Based on discussions 
with insurers and information provided by the insurance 
industry, CBO estimates that the expected or average annual 
loss subject to TRIA coverage under H.R. 2761 would be about 
$2.6 billion (in 2007 dollars). This estimate incorporates 
industry expectations of the probabilities of terrorist 
attacks, encompassing the possibility of attacks that result in 
enormous loss of life and property damage, as well as a 
significant likelihood that no such attacks would occur in any 
given year. This estimate also reflects our expectation that 
some portion of losses from terrorism would not be covered by 
TRIA because some policyholders would choose not to purchase 
insurance coverage for terrorism risks.
    Our estimate of expected annual losses covered by TRIA 
under H.R. 2761 includes less than $100 million for the 
inclusion of group life insurance policies and around $200 
million for the inclusion of coverage for domestic terrorism.
    The estimate also includes about $1 billion in additional 
expected losses resulting from a provision in the bill that 
would require insurance policies to include coverage for losses 
resulting from terrorist attacks involving NBCR materials. 
Under current law, insurers are not required to offer this 
coverage, although if an insurer and a policyholder voluntarily 
agree to include this coverage in a policy, TRIA would cover 
some of those losses.
    Based on information provided by the industry, it appears 
that only a small amount of coverage is currently in place for 
losses resulting from terrorist attacks involving NBCR 
materials as compared to coverage for losses involving 
conventional weapons. Thus, under current law the government's 
exposure to losses resulting from terrorist attacks involving 
NBCR materials is relatively small, except in the workers' 
compensation line, where no exclusions are allowed.
    Enacting the legislation could potentially expose firms 
offering NBCR coverage and the federal government to much 
higher losses than under current law. Our estimate of losses 
assumes that the coverage for terrorism losses caused by 
attacks using NBCR materials would increase three-fold over 
current coverage levels. However, we expect that coverage for 
such losses will remain far lower than coverage for losses 
resulting from more conventional methods.
    CBO's estimate assumes that, in most years, losses from 
terrorist attacks covered by TRIA would cost less than $2.6 
billion. We expect that there is a significant chance that no 
terrorist attacks that would be covered by TRIA would occur in 
a given year. Since enactment of TRIA, no covered events have 
occurred; it is unclear whether no such attacks were planned or 
attempted, or whether some were prevented by law enforcement 
and other security measures. Although the risk of a terrorist 
attack with many lives lost and substantial property damage 
still remains, based on industry models, CBO assumes for this 
estimate that attacks causing losses similar in scale to those 
sustained on September 11, 2001, in New York City are likely to 
occur very rarely.\1\
---------------------------------------------------------------------------
    \1\Industry losses on September 11, 2001, are estimated to be about 
$36 billion (in 2006 dollars), including about $30 billion in losses in 
New York City that would have qualified for coverage under TRIA had the 
law been in effect on that date.
---------------------------------------------------------------------------
    Determining the federal share of insured losses. Federal 
payments under TRIA would be lower than expected losses from 
terrorist attacks because TRIA places limits on eligibility for 
federal assistance and requires that insurers pay a share of 
covered losses. CBO took account of these requirements to 
calculate federal spending for any given amount of insured 
losses from future terrorist attacks.
    First, because federal payments under TRIA would be capped 
at $100 billion per event, we excluded costs for potential 
losses above that level. In addition, H.R. 2761 would set the 
minimum losses that would trigger federal payments under TRIA 
at $50 million.
    Second, we accounted for the share of losses that would be 
paid by affected insurers in the event of a covered attack. 
Before the federal government would make any payments under 
TRIA, an insurer incurring losses would first pay claims up to 
a deductible amount. The bill would set different deductible 
levels for property and casualty insurers and for group life 
insurers.
    The total amount of claims paid by insurers below the 
deductible amount could range from a few million dollars to 
several billion dollars, depending on how many insurers provide 
coverage for losses resulting from a particular terrorist 
attack. In addition, the value of each individual insurer's 
deductibles would vary greatly across the industry. For this 
estimate, CBO considered a range of possibilities regarding the 
share of federal assistance, based on industry data regarding 
estimated insurers' deductibles under H.R. 2167. The range 
encompasses the possibility that an attack would affect only a 
few insurers with relatively small deductibles or several 
insurers with relatively large deductibles. CBO expects 
thatinsured losses below a few hundred million dollars would most 
likely be covered by insurers' deductibles and therefore would not 
result in a significant increase in federal spending.
    Finally, once affected insurers have paid claims up to 
their deductibles, the federal government would share a portion 
of the losses above the deductible with each insurer.
    Under H.R. 2761, for losses sustained by both property and 
casualty and group life insurers, the federal government's 
share of claims above the deductible would be at least 85 
percent of total losses up to the $100 billion limit covered by 
the program. In the case of losses resulting from an attack 
using NBCR materials, the federal government's share would 
increase, based on total losses, to as much as 95 percent of 
losses above the deductible.
    After taking into account maximum limits, deductibles, and 
the insurers' share of payments above the deductible, CBO 
estimates that enacting H.R. 2761 would increase direct 
spending by about $24 billion over the full life of the program 
before taking into account any revenues from surcharges on 
policyholders. Actual spending would be spread out over many 
years and most such costs would eventually be recovered through 
surcharges imposed on policyholders.
    Taken another way, if the Secretary of the Treasury were 
authorized to collect premiums for the program, CBO estimates 
that the Secretary would need to charge, on average, about $1.6 
billion per year to fully compensate the government for the 
projected average annual loss due to terrorist attacks under 
H.R. 2761. The bill, however, would not authorize any charges 
prior to a certified attack. Similarly, the bill does not 
contain an explicit requirement for the Secretary to recoup 
interest that would accrue on amounts outstanding.
    Timing of Federal Spending. To estimate federal spending 
for this program on a cash basis, CBO used information from 
insurance experts on historical rates of payment for property 
and casualty claims following catastrophic events. Based on 
such information, CBO estimates that outlays under H.R. 2761 
would total about $3.7 billion over the 2008-2012 period, an 
additional $6.7 billion over the 2013-2017 period, and about 
$13.7 billion after 2017. In general, following a catastrophic 
loss, it takes many years to complete insurance payments 
because of disputes over the value of covered losses by 
property and business owners. For this estimate, we assumed 
that financial assistance to insurers would be paid over 
several years, with most of the spending occurring within the 
first five years following an insurable event.

Revenues

    Enacting H.R. 2761 would affect federal receipts by 
authorizing the Secretary of the Treasury to impose taxes in 
the form of surcharges on policyholders to recover the amount 
of federal payments made under the program, with certain 
limitations. CBO estimates that this provision would increase 
revenues by about $100 million over the 2008-2012 period and 
$2.0 billion over the 2008-2017 period. Surcharges could 
continue for many years beyond 2017.
    In addition, another provision of the bill would allow 
insurers to set aside a portion of premiums charged for 
terrorism coverage in a reserve fund set up in the Department 
of the Treasury. Amounts held in the reserve fund would be used 
by the Secretary of the Treasury, in the event of a certified 
attack, to pay certain deductible and copayment liabilities of 
the insurers incurring losses that had allocated premiums to 
the reserve fund.
    Surcharges. If a terrorist attack were to require the 
government to provide financial assistance, H.R. 2761 would 
require the Secretary of the Treasury to recoup some or all of 
that cost through taxes paid by the insurance industry and 
purchasers of commercial property and casualty and group life 
insurance. The Secretary would be required to recover the 
difference between the total amount paid by the insurance 
industry for deductibles and the industry's share of payments 
over the deductible and the industry retention amount (the 
maximum aggregate loss to be paid by the insurance industry), 
which would be set at $27.5 billion for property and casualty 
insurers and $5 billion for group life insurers.
    The Secretary would have discretion in determining whether 
to recover the full amount of financial assistance provided 
under the program. Should the Secretary determine that amounts 
above the industry retention amount cannot be recovered, the 
Congress would be notified as to the determination and provided 
with an analysis of the effect of that determination on 
taxpayers, the economy, and the burdens on small- and medium-
sized businesses. For this estimate, CBO assumes that the 
Secretary would not seek to recover financial assistance 
provided above the industry retention amount and would not 
collect interest on outstanding amounts.
    Under TRIA, the recoupment of financial assistance would be 
accomplished by assessing each insurer based on its portion of 
aggregate property and casualty premiums or the amount at risk 
for group life insurance policies for the preceding calendar 
year. Surcharges would apply to insurance sold following a 
terrorist attack that necessitated federal assistance; each 
property and casualty insurance company's surcharge would be 
limited to 3 percent of its aggregate premiums, and each group 
life insurance company's surcharge would be limited to 0.0053 
percent of its amount at risk. H.R. 2761 would direct the 
Secretary to impose surcharges for as long as necessary to 
recover the financial assistance provided by the federal 
government (at least up to the industry retention amount). 
Thus, the government could collect surcharges for many years, 
depending on the amount of financial assistance. CBO estimates 
that surcharges resulting from a 15-year extension of TRIA 
would total $23.6 billion--but that recovery would extend well 
past 2017.
    Timing and Tax Offset. The bill would allow the Secretary 
to reduce annual charges after considering the effect on 
taxpayers, the economy, or burdens on small- and medium-sized 
businesses. Therefore, if annual losses were very high, we 
expect that the Secretary would limit annual collections by 
spreading them over many years. CBO assumes that the Secretary 
would not impose surcharges until two years after federal 
assistance is provided and that it would take more than 10 
years to recover the costs of any financial assistance provided 
under H.R. 2761. Thus, we estimate that surcharges would total 
$2.6 billion over the next 10 years and that an additional 
$21.0 billion would be collected after 2017.
    Those gross collections would be partially offset by a loss 
of receipts from income and payroll taxes. Consistent with 
standard procedures for estimating the revenue impact of 
indirect business taxes, CBO reduced the gross revenue impact 
of the insurance surcharges by 25 percent to reflect offsetting 
effects on income and payroll tax receipts. On balance, CBO 
estimates that H.R. 2167 would increase revenues by a total of 
$2.0 billion over the next 10 years and that an additional 
$15.7 billion will be collected after 2017, net of income and 
payroll tax offsets.
    Terrorism Buy-Down Fund. Section 4 of H.R. 2761 would 
establish a Terrorism Buy-Down Fund into which a property and 
casualty insurer could elect to contribute premiums it collects 
for terrorism insurance. The premiums deposited in the fund in 
the Treasury would be available to the Secretary of the 
Treasury, in the event of a certified terrorist attack, to 
satisfy the insurer's deductible amounts as well as the portion 
of the insurer's losses that exceed the deductible but are not 
included in the federal share.
    Because the tax implications of the fund are unclear, the 
Joint Committee on Taxation has not yet prepared an estimate of 
its potential revenue impact.
    Intergovernmental and private-sector impact: H.R. 2761 
would extend and expand mandates contained in the Terrorism 
Risk Insurance Act. Those mandates would:
     Require that certain insurers offer terrorism 
insurance, including insurance for nuclear, biological, 
chemical, and radiological attacks;
     Require that certain insurers and their 
policyholders repay the federal government for the cost of 
assistance (in the form of assessments and surcharges); and
     Preempt state laws regulating insurance.
    CBO estimates that the aggregate costs of complying with 
those mandates would not exceed the annual thresholds 
established by UMRA ($66 million for intergovernmental mandates 
and $131 million for private-sector mandates in 2007, adjusted 
annually for inflation).

                     REQUIREMENT TO OFFER INSURANCE

    Current law requires that through calendar year 2007, 
certain insurance companies offer terrorism insurance as part 
of a property and casualty insurance policy. H.R. 2761 would 
extend that requirement to offer terrorism insurance through 
calendar year 2022. The bill also would add group life 
insurance to the lines of coverage included under the program 
and would require insurers to make coverage available to 
property, casualty, and group life insurance policyholders for 
losses resulting from domestic terrorism and, after January 1, 
2009, terrorism involving NBCR materials. Also, in some cases, 
the bill would restrict insurers' ability to underwrite 
policies based on lawful international travel. According to 
industry representatives, the direct cost to continue making 
terrorism insurance available under property, casualty, and 
group life insurance policies would be minimal. Furthermore, 
the bill would require only that firms offer terrorism 
insurance, including NBCR terrorism insurance; they would set 
their own premium rates and policyholders could choose whether 
or not to purchase such insurance. In the event of a certified 
attack with costs that exceeded deductible requirements, 
insurers who offer such terrorism insurance would receive 
federal payments that would help finance claims payments.

                        REPAYMENT OF ASSISTANCE

    The bill would require the Secretary of the Treasury to 
recoup the costs of financial assistance provided to certain 
insurers through assessments paid by the insurance industry and 
surcharges paid by purchasers of commercial property, casualty 
and group life insurance. This requirement to repay the federal 
government for financial assistance received would be both an 
intergovernmental and private-sector mandate under UMRA because 
both state and local governments and private entities are 
providers and purchasers of insurance.
    Specifically, the bill would require commercial property, 
casualty, and group life insurers, as well as self-insured risk 
pools, to pay back through assessments a portion of the 
financial assistance provided by the federal government. Taken 
individually, some insurers might benefit from the financial 
assistance while others might face only the cost of the 
assessment. CBO cannot predict how these costs and benefits 
would be distributed among private and public insurers. 
However, for that group as a whole, the cost of the assessment 
would be no greater than the financial assistance received, so 
the net cost of this mandate would be zero.
    In addition, the bill would require purchasers of 
commercial property, casualty, and group life insurance to 
repay, in the form of a surcharge, federal assistance provided 
to certain insurers. CBO estimates that the expected value of 
the surcharges paid by policyholders would total about $200 
million over the next five years. The surcharge would be a 
mandate on both private-sector purchasers and state and local 
governments (in their capacity as purchasers of insurance). For 
purchasers as a group, the cost of the surcharges would be no 
greater than the financial assistance received. However, some 
purchasers would receive a direct benefit under the bill that 
would at least partially offset those costs, while other 
purchasers would not.

                        PREEMPTION OF STATE LAW

    The bill also would preempt some state laws that regulate 
insurance. Based on information from state insurance 
regulators, CBO estimates that the cost to states of extending 
these preemptions would be minimal.
    Estimate prepared by: Federal Costs: Susan Willie; Impact 
on State, Local, and Tribal Governments: Elizabeth Cove; Impact 
on the Private Sector: Paige Piper/Bach.
    Estimate approved by: Peter H. Fontaine, Assistant Director 
for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

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

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional Authority of Congress to enact this legislation 
is provided by Article 1, section 8, clause 1 (relating to the 
general welfare of the United States) and clause 3 (relating to 
the power to regulate interstate commerce).

                  Applicability to 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.

                         Earmark Identification

    H.R. 2761 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                  Exchange of Committee Correspondence

        Congress of the United States, House of 
            Representatives, Committee on the Judiciary,
                                 Washington, DC, September 4, 2007.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Chairman Frank: In recognition of the desire to 
expedite consideration of H.R. 2761, the ``Terrorism Risk 
Insurance Revision Act of 2007,'' the Committee on the 
Judiciary agrees to wavie consideration of the bill.
    There are several provisions contained in H.R. 2761 that 
implicate the rule X jurisdiction of the Committee on the 
Judiciary. In addition to reauthorizing a number of provisions 
in the Terrorism Risk Insurance Act of 2002, the legislation 
also adds new litigation management and judicial review and 
venue provisions.
    The Committee takes this action with the understanding that 
by foregoing consideration of H.R. 2761 at this time, the 
Committee on the Judiciary does not waive any jurisdiction over 
subject matter contained in this or similar legislation. The 
Commitee also reserves the right to seek appointment of an 
appropriate number of conferees to any House-Senate conference 
involving this legislation, and requests your support if such a 
request is made.
    I would appreciate your including this letter in your 
Committee's report for H.R. 2761, or in the Congressional 
Record during consideration of the bill on the House floor.
    Thank you for your attention to this matter.
            Sincerely,
                                         John Conyers, Jr.,
                                                          Chairman.
                              ----------                              

                          House of Representatives,
                           Committee on Financial Services,
                                 Washington, DC, September 4, 2007.
Hon. John Conyers,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Chairman Conyers: Thank you for your letter agreeing 
to waive consideration by the Committee on the Judiciary of 
H.R. 2761, the ``Terrorism Risk Insurance Revision Act of 
2007.'' The Committee on Financial Services has ordered this 
bill reported, and the House will be considering it shortly.
    I want to cofirm our mutural understanding with respect to 
the consideration of this bill. I acknowledge that portions of 
the bill as reported fall within the jurisdiction of the 
Committee on the Judiciary and I appreciate your cooperation in 
moving the bill to the House floor expeditiously. I further 
agree that your decision to not to proceed with a markup on 
this bill will not prejudice the Committee on the Judiciary 
with respect to its prerogatives on this or similar 
legislation. I would support your request for conferees on 
those provisions within your jurisdiction in the event of a 
House-Senate conference.
    I will include this exchange of correspondence in the 
Committee report, or in the Congressional Record during 
consideration of the bill. Thank you again for your assistance.
                                              Barney Frank,
                                                          Chairman.

             Section-By-Section Analysis of the Legislation


Section 1. Short title

    This section establishes the short title of the bill as the 
``Terrorism Risk Insurance Revision and Extension Act of 2007'' 
(TRIREA).

Section 2. Termination of program

    This section extends the Terrorism Risk Insurance Act of 
2002 (TRIA) until December 31, 2022.

Section 3. Revision of Terrorism Insurance Program

    This section amends TRIA to extend and revise the Terrorism 
Insurance Program (the Program), replacing sections 101, 102, 
and 103.

TRIA Section 101. Congressional findings and purpose

    This section amends the findings and purposes of TRIA to 
reflect the inclusion of group life insurance and enhanced 
coverage of NBCR terrorism risk in the Program and to clarify 
that the Program provides finite liability limits for insurers 
and the Federal government.

TRIA Section 102. Definitions

    This section establishes definitions for the following 
terms: ``act of terrorism,'' ``affiliate,'' ``amount at risk,'' 
``control,'' ``covered lines,'' ``direct earned premium,'' 
``excess insured loss,'' ``group life insurance,'' ``insured 
loss,'' ``insurer,'' ``insurer deductible,'' ``NAIC,'' ``NBCR 
terrorism,'' ``person,'' ``program,'' ``program years,'' 
``property and casualty insurance,'' ``Secretary,'' ``State,'' 
and ``United States.''
    In particular, TRIREA revises the definition of an ``act of 
terrorism'' to eliminate the requirement that such act be 
committed by individuals acting on behalf of foreign interests, 
thus covering acts of domestic terrorism. The definition of 
``control'' is also revised to conform to the definition in the 
Bank Holding Company Act. Group life insurance is added as a 
covered line. Farm owners multiple peril insurance is no longer 
excluded from the definition of property and casualty 
insurance. A new definition is added for NBCR terrorism and the 
definition of ``act of terrorism'' is revised to include 
certification by the Secretary of Treasury (Secretary) of acts 
of NBCR terrorism. The concurrence of the Secretary of Homeland 
Security, in addition to the Secretary of State and the 
Attorney General, is required to certify an act of terrorism or 
an act of NBCR terrorism. However, nothing in this Act 
generally or in the Secretary's certification authority 
specifically shall be interpreted to affect or change in any 
way an insurer's contractual obligations to a policyholder 
under a lawful insurance contract. Certification of an act of 
terrorism as an act of NBCR terrorism does not mean that all 
insured losses are NBCR losses. Policyholders that do not have 
NBCR coverage may still be covered under their insurance 
contracts in these instances.
    The ``insurer deductible'' definition is amended to fix the 
deductible for acts of conventional terrorism at 20% of an 
insurer's direct earned premiums for property and casualty 
insurance and at 0.0351% of an insurer's amount at risk for 
group life insurance. For acts of NBCR terrorism, the insurer 
deductible starts at 3.5% in the second additional Program Year 
and increases by 50 basis points each succeeding Program Year 
for property and casualty insurance, and starts at 0.00614% in 
the second additional Program Year and increases by 0.088 basis 
point each succeeding Program Year for group life insurance.
    For an act of terrorism resulting in aggregate industry 
insured losses exceeding $1 billion, the deductible for 
property and casualty insurance that would apply to insurers 
affected by that particular $1 billion or greater act of 
terrorism decreases to the following percentage: 5% if such act 
occurs in first additional Program Year, and increasing by 50 
basis points each additional Program Year (i.e., 5.5% if such 
act occurs in the second additional Program Year and 6% if such 
act occurs in the third additional Program Year). However, such 
percentage will reset to 5% in the additional Program Year 
immediately following a $1 billion or greater act of terrorism, 
and starts increasing again by 50 basis points each additional 
Program Year. The Secretary may combine multiple acts of 
terrorism in the same Program Year in the same geographic area 
for determining whether the $1 billion threshold has been 
exceeded. For purposes of section 102(11)(J), regardless of the 
different deductibles that may apply to an insurer from 
multiple acts of terrorism in a given Program Year, an 
insurer's total payment obligation with respect to its 
deductible in a given Program Year is not intended to exceed 
20% of its direct earned premiums from the previous calendar 
year.

TRIA Section 103. Terrorism Insurance Program

    This section continues the Program in the Treasury 
Department and makes a number of improvements to the terrorism 
backstop. Insurers are required to offer coverage for losses 
resulting from acts of terrorism that does not differ 
materially from the terms, amounts, and other coverage 
limitations applicable to losses arising from events other than 
acts of terrorism, and offer coverage for losses resulting from 
acts of NBCR terrorism in a similar manner after a short 
transition period. This section further provides exceptions to 
pollution and nuclear hazard exclusions for losses from acts of 
NBCR terrorism if NBCR coverage is purchased. If a person 
elects not to purchase an insurance policy providing such 
coverage, an insurer may exclude coverage for all losses from 
acts of terrorism (including acts of NBCR terrorism), except 
for workers' compensation and other compulsory insurance law 
prohibiting such exclusions, or may offer other options for 
coverage that differ materially from the terms, amounts, and 
other coverage limitations applicable to losses arising from 
events other than acts of terrorism Section 103(c)(1)(B) 
extends the ``make available'' requirement for policyholders 
that have been provided coverage under subparagraph (A) to 
include the availability of exceptions to pollution and nuclear 
hazard exclusions that would negate those exclusions only as to 
losses from acts of NBCR terrorism. Section 103(c)(1)(B) 
provides certainty to both parties to an insurance contract and 
is intended to require insurers that have policies of insurance 
with pollution and nuclear hazard exclusions to make available 
a clear exception to those exclusions for acts of NBCR 
terrorism upon the payment of an appropriate premium, and is 
intended to confirm to policyholders that do not purchase the 
available exceptions to those exclusions that the exclusions 
continue to apply as written to acts of NBCR terrorism and that 
the policies of insurance do not cover losses arising out of 
acts of NBCR terrorism unless the policyholder and insurer 
otherwise agree to cover such losses. The requirement to make 
available coverage for acts of NBCR terrorism applies beginning 
on January 1, 2009.
    Insurers offering life insurance are required to offer 
coverage that neither considers past nor precludes future 
lawful foreign travel and are prohibited from declining such 
coverage based on past or future lawful foreign travel or 
charging a premium that is excessive and not based on a good 
faith actuarial analysis, except an insurer may decline or 
limit coverage based on plans to engage in future lawful 
foreign travel within 12 months under certain enumerated 
circumstances.
    The Secretary, in consultation with the National 
Association of Insurance Commissioners (NAIC), may exempt 
insurers with less than $50 million in direct earned premiums 
for TRIA-covered lines from complying with the requirement to 
make NBCR coverage available if such insurers demonstrate they 
would become insolvent in the event of certain acts of NBCR 
terrorism. The exemption would be for 2 years, and insurers may 
apply for additional 2-year extensions.
    For acts of conventional terrorism, the total Federal share 
of insured loss compensation is 85% of the aggregate industry 
insured losses that exceed the applicable insurer deductibles 
but do not exceed $100 billion during a Program Year, plus 100% 
of the aggregate industry insured losses that exceed $100 
billion, but only up to the $100 billion cap on total Federal 
compensation. The Secretary will determine the pro rata share 
of insured losses to be paid by each insurer that incurs 
insured losses under the Program.
    For acts of NBCR terrorism, the total Federal share of 
insured loss compensation is 85% of the aggregate industry 
qualified NBCR losses of less than $10 billion, 87.5% of the 
aggregate industry qualified NBCR losses between $10 billion 
and $20 billion, 90% of the aggregate industry qualified NBCR 
losses between $20 billion and $40 billion, 92.5% of the 
aggregate industry qualified NBCR losses between $40 billion 
and $60 billion, and 95% of the aggregate industry qualified 
NBCR losses above $60 billion. The Federal share will be 
prorated per insurer based on each insurer's percentage of the 
aggregate industry qualified NBCR losses for each additional 
Program Year.
    The minimum size of a terrorist event required to trigger 
any potential Federal assistance is set at $50 million, except 
the trigger will decrease to $5 million if a certified act of 
terrorism occurs for which resulting aggregate industry insured 
losses exceed $1 billion. The Federal share of insured loss 
compensation for any single certificate holder under any group 
life insurance coverage may not exceed $1 million.
    The cap on the annual liability of the Federal government 
is set at $100 billion; that is, the aggregate amount of the 
Federal share of compensation to be paid to all insurers will 
not exceed $100 billion. In addition, an insurer that has met 
its insurer deductible will not be liable for the payment of 
any portion of the aggregate insured losses in a year that 
exceed $100 billion.
    If the Secretary determines that estimated or actual 
aggregate Federal compensation equals or exceeds $80 billion, 
the Secretary must promptly provide notification to Congress 
and insurers. The Secretary must also give notice when 
estimated or actual aggregate Federal compensation equals or 
exceeds $100 billion and within ten days of an act of terrorism 
that is likely to pierce the $100 billion cap on Federal 
compensation. The Secretary will reimburse insurers for: (1) 
any payment for portions of aggregate insured losses that 
exceed $100 billion made before the Secretary provides notice 
at $80 billion in Federal compensation; and (2) any payment for 
portions of aggregate insured losses that exceed $100 billion 
made after such notice, but only to the extent that such 
payment is ordered by a court, such payment does not include 
punitive damages or litigation or other costs, and the insurer 
made a good-faith effort to defend against any claims for such 
payment. The Secretary has the right to intervene in any legal 
proceedings related to such claims.
    Federal courts will have original and exclusive 
jurisdiction over claims relating to or arising out of the 
limitation on an insurer's financial responsibility for insured 
losses from acts of terrorism set forth in paragraph 103(e)(3), 
if the Secretary certifies that the $100 billion cap on Federal 
compensation has been or is likely to have been exceeded, and 
the insurer has paid, or is likely to pay, its deductible and 
pro rata share of insured losses. In the event of such 
certification, all pending State court actions relating to or 
arising out of such limitation on an insurer's financial 
responsibility set forth in paragraph 103(e)(3) will be removed 
to the Federal district court, or courts, chosen by the 
Judicial Panel on Multidistrict Litigation.
    The insurance marketplace aggregate retention amount is set 
at the lesser of $27.5 billion and the aggregate amount of 
property and casualty insured losses for property and casualty 
insurance, and the lesser of $5 billion and the aggregate 
amount of group life insured losses for group life insurance. 
The Secretary is granted emergency rulemaking powers during the 
90-day period beginning upon the certification of any act of 
terrorism. The Secretary will adjust each year, based on the 
percentage change in an appropriate index, certain enumerated 
dollar amounts in TRIA, including the trigger and the Program 
cap. It is intended that the dollar amounts be indexed to 
inflation.
    Between the enactment of TRIREA and December 31, 2008, the 
rates and forms for coverage of acts of conventional terrorism 
will not be subject to prior approval or waiting period 
requirement under State law, except that a State may invalidate 
a rate as excessive, inadequate, or unfairly discriminatory and 
a State that had prior approval authority over forms may 
conduct subsequent review of such forms. Between the enactment 
of TRIREA and December 31, 2009, forms for coverage of acts of 
NBCR terrorism (to the extent of the addition ofsuch coverage 
and where such coverage was not previously required) will not be 
subject to prior approval or waiting period requirement under State 
law. Between the enactment of TRIREA and December 31, 2010, rates for 
coverage of acts of NBCR terrorism (to the extent of the addition of 
such coverage and where such coverage was not previously required) will 
not be subject to prior approval or waiting period requirement under 
State law, except a State may invalidate a rate as inadequate or 
unfairly discriminatory.
    An insurer is not prohibited, restricted, or otherwise 
limited from entering into an arrangement with another insurer 
to make available coverage for any portion of insured losses to 
fulfill the mandatory make-available requirements under section 
103(c). It is not intended, however, that an insurer could 
fulfill all of its requirements under section 103(c) solely by 
entering into an arrangement to have another insurer make 
available coverage that would otherwise only fulfill part of 
such requirements. For example, an insurer may not consider its 
requirement under section 103(c)(1)(B) (NBCR coverage) 
fulfilled by simply arranging to have another insurer make 
available coverage for acts of conventional terrorism pursuant 
to section 103(c)(1)(A).

Section 4. Terrorism Buy-Down Fund

    This section directs the Secretary to establish a Terrorism 
Buy-Down Fund (the Fund) that allows insurers to voluntarily 
reserve with the Federal government for their insured losses. 
An insurer may purchase deductible, co-share, or pre-trigger 
buy-down coverage by making an advance election to treat some 
or all of the premiums it has disclosed under the Program as 
fee charges imposed by the Secretary and remitting such amounts 
to the Fund. Such buy-down coverage does not reduce the Federal 
co-share. However, an insurer may not purchase coverage in an 
amount greater than the lesser of (a) the program trigger or 
(b) the insurer's one-in-one-hundred-year risk exposure to acts 
of terrorism.
    An insurer may sell its rights to buy-down coverage from 
the Fund to another insurer as part of or to avoid insolvency 
or as part of a sale, merger, or major reorganization. The 
Secretary may borrow funds from the Fund to offset the Federal 
share of compensation provided to all insurers under the 
Program. The Secretary shall establish voluntary risk-sharing 
mechanisms for insurers participating in the Fund to pool their 
reinsurance purchases and share terrorism risk. Upon 
termination of the Program, the Fund shall become a privately-
operated mutual terrorism reinsurance company owned by the 
insurers that submitted buy-down coverage premiums.

Section 5. Analysis and Study

    This section requires the Secretary, in consultation with 
the NAIC, representatives of the insurance industry, 
representatives of the securities industry, and representatives 
of policyholders, to analyze the long-term availability and 
affordability of private terrorism risk insurance. The 
Secretary will submit biennial reports to and, upon submission 
of each such report, testify before Congress. The Secretary 
will submit the first such report within two years of enactment 
of TRIREA.
    This section also establishes a Commission on Terrorism 
Risk Insurance. The 21-member Commission will consist of the 
Secretary or the Secretary's designee; a State insurance 
commissioner designated by the NAIC; 15 members appointed by 
the President, including a representative of group life 
insurers, property and casualty insurers with direct earned 
premium of $1 billion or less, property and casualty insurers 
with direct earned premium of more than $1 billion, multi-line 
insurers, independent insurance agents, insurance brokers, 
policyholders, the survivors of the victims of the September 
11, 2001 terrorist attacks, the reinsurance industry, workers' 
compensation insurers, the commercial mortgage-backed 
securities industry, a nationally recognized statistical rating 
organization, a real estate developer, workers' compensation 
insurers created by State legislatures, and the commercial real 
estate brokerage industry or the commercial property management 
industry; and four members who will serve as liaisons to 
Congress, two of whom shall be jointly selected by the Chairman 
and Ranking Member of the Committee and two jointly selected by 
the Chairman and Ranking Member of the Committee on Banking, 
Housing, and Urban Affairs of the Senate.
    The Commission will make recommendations to encourage the 
private insurance industry to provide affordable terrorism 
insurance in the United States and significantly reduce the 
Federal role in covering losses resulting from acts of 
terrorism. The Commission will specifically evaluate the 
utility and viability of proposals aimed at improving the 
availability of terrorism insurance in the private marketplace. 
The Commission will submit two reports to Congress that 
evaluate and make recommendations regarding the need for a 
Federal terrorism risk insurance program and include the 
Commission's recommendations for encouraging the growth of 
private marketplace for terrorism insurance and reducing the 
Federal role. The Commission will submit the first report 
within five years of enactment of TRIREA and the second report 
within eight years of TRIREA enactment.

Section 6. Applicability

    This section provides that the provisions of TRIA, as 
amended, will continue to apply through the end of December 31, 
2007, and the amendments made by TRIREA will apply beginning on 
January 1, 2008.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) 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):

                  TERRORISM RISK INSURANCE ACT OF 2002

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a)  * * *
  (b) Table of Contents.--The table of contents for this Act is 
as follows:
Sec. 1. Short title; table of contents.

                  TITLE I--TERRORISM INSURANCE PROGRAM

Sec. 101. Congressional findings and purpose.
     * * * * * * *
Sec. 106A. Terrorism Buy-Down Fund.
     * * * * * * *
Sec. 109. Commission on Terrorism Risk Insurance.

           *       *       *       *       *       *       *


                  TITLE I--TERRORISM INSURANCE PROGRAM

[SEC. 101. CONGRESSIONAL FINDINGS AND PURPOSE.

  [(a) Findings.--The Congress finds that--
          [(1) the ability of businesses and individuals to 
        obtain property and casualty insurance at reasonable 
        and predictable prices, in order to spread the risk of 
        both routine and catastrophic loss, is critical to 
        economic growth, urban development, and the 
        construction and maintenance of public and private 
        housing, as well as to the promotion of United States 
        exports and foreign trade in an increasingly 
        interconnected world;
          [(2) property and casualty insurance firms are 
        important financial institutions, the products of which 
        allow mutualization of risk and the efficient use of 
        financial resources and enhance the ability of the 
        economy to maintain stability, while responding to a 
        variety of economic, political, environmental, and 
        other risks with a minimum of disruption;
          [(3) the ability of the insurance industry to cover 
        the unprecedented financial risks presented by 
        potential acts of terrorism in the United States can be 
        a major factor in the recovery from terrorist attacks, 
        while maintaining the stability of the economy;
          [(4) widespread financial market uncertainties have 
        arisen following the terrorist attacks of September 11, 
        2001, including the absence of information from which 
        financial institutions can make statistically valid 
        estimates of the probability and cost of future 
        terrorist events, and therefore the size, funding, and 
        allocation of the risk of loss caused by such acts of 
        terrorism;
          [(5) a decision by property and casualty insurers to 
        deal with such uncertainties, either by terminating 
        property and casualty coverage for losses arising from 
        terrorist events, or by radically escalating premium 
        coverage to compensate for risks of loss that are not 
        readily predictable, could seriously hamper ongoing and 
        planned construction, property acquisition, and other 
        business projects, generate a dramatic increase in 
        rents, and otherwise suppress economic activity; and
          [(6) the United States Government should provide 
        temporary financial compensation to insured parties, 
        contributing to the stabilization of the United States 
        economy in a time of national crisis, while the 
        financial services industry develops the systems, 
        mechanisms, products, and programs necessary to create 
        a viable financial services market for private 
        terrorism risk insurance.
  [(b) Purpose.--The purpose of this title is to establish a 
temporary Federal program that provides for a transparent 
system of shared public and private compensation for insured 
losses resulting from acts of terrorism, in order to--
          [(1) protect consumers by addressing market 
        disruptions and ensure the continued widespread 
        availability and affordability of property and casualty 
        insurance for terrorism risk; and
          [(2) allow for a transitional period for the private 
        markets to stabilize, resume pricing of such insurance, 
        and build capacity to absorb any future losses, while 
        preserving State insurance regulation and consumer 
        protections.

[SEC. 102. DEFINITIONS.

  [In this title, the following definitions shall apply:
          [(1) Act of terrorism.--
                  [(A) Certification.--The term ``act of 
                terrorism'' means any act that is certified by 
                the Secretary, in concurrence with the 
                Secretary of State, and the Attorney General of 
                the United States--
                          [(i) to be an act of terrorism;
                          [(ii) to be a violent act or an act 
                        that is dangerous to--
                                  [(I) human life;
                                  [(II) property; or
                                  [(III) infrastructure;
                          [(iii) to have resulted in damage 
                        within the United States, or outside of 
                        the United States in the case of--
                                  [(I) an air carrier or vessel 
                                described in paragraph (5)(B); 
                                or
                                  [(II) the premises of a 
                                United States mission; and
                          [(iv) to have been committed by an 
                        individual or individuals acting on 
                        behalf of any foreign person or foreign 
                        interest, as part of an effort to 
                        coerce the civilian population of the 
                        United States or to influence the 
                        policy or affect the conduct of the 
                        United States Government by coercion.
                  [(B) Limitation.--No act shall be certified 
                by the Secretary as an act of terrorism if--
                          [(i) the act is committed as part of 
                        the course of a war declared by the 
                        Congress, except that this clause shall 
                        not apply with respect to any coverage 
                        for workers' compensation; or
                          [(ii) property and casualty insurance 
                        losses resulting from the act, in the 
                        aggregate, do not exceed $5,000,000.
                  [(C) Determinations final.--Any certification 
                of, or determination not to certify, an act as 
                an act of terrorism under this paragraph shall 
                be final, and shall not be subject to judicial 
                review.
                  [(D) Nondelegation.--The Secretary may not 
                delegate or designate to any other officer, 
                employee, or person, any determination under 
                this paragraph of whether, during the effective 
                period of the Program, an act of terrorism has 
                occurred.
          [(2) Affiliate.--The term ``affiliate'' means, with 
        respect to an insurer, any entity that controls, is 
        controlled by, or is under common control with the 
        insurer.
          [(3) Control.--An entity has ``control'' over another 
        entity, if--
                  [(A) the entity directly or indirectly or 
                acting through 1 or more other persons owns, 
                controls, or has power to vote 25 percent or 
                more of any class of voting securities of the 
                other entity;
                  [(B) the entity controls in any manner the 
                election of a majority of the directors or 
                trustees of the other entity; or
                  [(C) the Secretary determines, after notice 
                and opportunity for hearing, that the entity 
                directly or indirectly exercises a controlling 
                influence over the management or policies of 
                the other entity.
          [(4) Direct earned premium.--The term ``direct earned 
        premium'' means a direct earned premium for property 
        and casualty insurance issued by any insurer for 
        insurance against losses occurring at the locations 
        described in subparagraphs (A) and (B) of paragraph 
        (5).
          [(5) Insured loss.--The term ``insured loss'' means 
        any loss resulting from an act of terrorism (including 
        an act of war, in the case of workers' compensation) 
        that is covered by primary or excess property and 
        casualty insurance issued by an insurer if such loss--
                  [(A) occurs within the United States; or
                  [(B) occurs to an air carrier (as defined in 
                section 40102 of title 49, United States Code), 
                to 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), regardless of 
                where the loss occurs, or at the premises of 
                any United States mission.
          [(6) Insurer.--The term ``insurer'' means any entity, 
        including any affiliate thereof--
                  [(A) that is--
                          [(i) licensed or admitted to engage 
                        in the business of providing primary or 
                        excess insurance in any State;
                          [(ii) not licensed or admitted as 
                        described in clause (i), if it is an 
                        eligible surplus line carrier listed on 
                        the Quarterly Listing of Alien Insurers 
                        of the NAIC, or any successor thereto;
                          [(iii) approved for the purpose of 
                        offering property and casualty 
                        insurance by a Federal agency in 
                        connection with maritime, energy, or 
                        aviation activity;
                          [(iv) a State residual market 
                        insurance entity or State workers' 
                        compensation fund; or
                          [(v) any other entity described in 
                        section 103(f), to the extent provided 
                        in the rules of the Secretary issued 
                        under section 103(f);
                  [(B) that receives direct earned premiums for 
                any type of commercial property and casualty 
                insurance coverage, other than in the case of 
                entities described in sections 103(d) and 
                103(f); and
                  [(C) that meets any other criteria that the 
                Secretary may reasonably prescribe.
          [(7) Insurer deductible.--The term ``insurer 
        deductible'' means--
                  [(A) for the Transition Period, the value of 
                an insurer's direct earned premiums over the 
                calendar year immediately preceding the date of 
                enactment of this Act, multiplied by 1 percent;
                  [(B) for Program Year 1, the value of an 
                insurer's direct earned premiums over the 
                calendar year immediately preceding Program 
                Year 1, multiplied by 7 percent;
                  [(C) for Program Year 2, the value of an 
                insurer's direct earned premiums over the 
                calendar year immediately preceding Program 
                Year 2, multiplied by 10 percent;
                  [(D) for Program Year 3, the value of an 
                insurer's direct earned premiums over the 
                calendar year immediately preceding Program 
                Year 3, multiplied by 15 percent;
                  [(E) for Program Year 4, the value of an 
                insurer's direct earned premiums over the 
                calendar year immediately preceding Program 
                Year 4, multiplied by 17.5 percent;
                  [(F) for Program Year 5, the value of an 
                insurer's direct earned premiums over the 
                calendar year immediately preceding Program 
                Year 5, multiplied by 20 percent; and
                  [(G) notwithstanding subparagraphs (A) 
                through (F), for the Transition Period or any 
                Program Year, if an insurer has not had a full 
                year of operations during the calendar year 
                immediately preceding such Period or Program 
                Year, such portion of the direct earned 
                premiums of the insurer as the Secretary 
                determines appropriate, subject to appropriate 
                methodologies established by the Secretary for 
                measuring such direct earned premiums.
          [(8) NAIC.--The term ``NAIC'' means the National 
        Association of Insurance Commissioners.
          [(9) Person.--The term ``person'' means any 
        individual, business or nonprofit entity (including 
        those organized in the form of a partnership, limited 
        liability company, corporation, or association), trust 
        or estate, or a State or political subdivision of a 
        State or other governmental unit.
          [(10) Program.--The term ``Program'' means the 
        Terrorism Insurance Program established by this title.
          [(11) Program years.--
                  [(A) Transition period.--The term 
                ``Transition Period'' means the period 
                beginning on the date of enactment of this Act 
                and ending on December 31, 2002.
                  [(B) Program year 1.--The term ``Program Year 
                1'' means the period beginning on January 1, 
                2003 and ending on December 31, 2003.
                  [(C) Program year 2.--The term ``Program Year 
                2'' means the period beginning on January 1, 
                2004 and ending on December 31, 2004.
                  [(D) Program year 3.--The term ``Program Year 
                3'' means the period beginning on January 1, 
                2005 and ending on December 31, 2005.
                  [(E) Program year 4.--The term ``Program Year 
                4'' means the period beginning on January 1, 
                2006 and ending on December 31, 2006.
                  [(F) Program year 5.--The term ``Program Year 
                5'' means the period beginning on January 1, 
                2007 and ending on December 31, 2007.
          [(12) Property and casualty insurance.--The term 
        ``property and casualty insurance''--
                  [(A) means commercial lines of property and 
                casualty insurance, including excess insurance, 
                workers' compensation insurance, and directors 
                and officers liability insurance; and
                  [(B) does not include--
                          [(i) Federal crop insurance issued or 
                        reinsured under the Federal Crop 
                        Insurance Act (7 U.S.C. 1501 et seq.), 
                        or any other type of crop or livestock 
                        insurance that is privately issued or 
                        reinsured;
                          [(ii) private mortgage insurance (as 
                        that term is defined in section 2 of 
                        the Homeowners Protection Act of 1998 
                        (12 U.S.C. 4901)) or title insurance;
                          [(iii) financial guaranty insurance 
                        issued by monoline financial guaranty 
                        insurance corporations;
                          [(iv) insurance for medical 
                        malpractice;
                          [(v) health or life insurance, 
                        including group life insurance;
                          [(vi) flood insurance provided under 
                        the National Flood Insurance Act of 
                        1968 (42 U.S.C. 4001 et seq.);
                          [(vii) reinsurance or retrocessional 
                        reinsurance;
                          [(viii) commercial automobile 
                        insurance;
                          [(ix) burglary and theft insurance;
                          [(x) surety insurance;
                          [(xi) professional liability 
                        insurance; or
                          [(xii) farm owners multiple peril 
                        insurance.
          [(13) Secretary.--The term ``Secretary'' means the 
        Secretary of the Treasury.
          [(14) State.--The term ``State'' means any State of 
        the United States, the District of Columbia, the 
        Commonwealth of Puerto Rico, the Commonwealth of the 
        Northern Mariana Islands, American Samoa, Guam, each of 
        the United States Virgin Islands, and any territory or 
        possession of the United States.
          [(15) United states.--The term ``United States'' 
        means the several States, and includes the territorial 
        sea and the continental shelf of the United States, as 
        those terms are defined in the Violent Crime Control 
        and Law Enforcement Act of 1994 (18 U.S.C. 2280, 2281).
          [(16) Rule of construction for dates.--With respect 
        to any reference to a date in this title, such day 
        shall be construed--
                  [(A) to begin at 12:01 a.m. on that date; and
                  [(B) to end at midnight on that date.

[SEC. 103. TERRORISM INSURANCE PROGRAM.

  [(a) Establishment of Program.--
          [(1) In general.--There is established in the 
        Department of the Treasury the Terrorism Insurance 
        Program.
          [(2) Authority of the secretary.--Notwithstanding any 
        other provision of State or Federal law, the Secretary 
        shall administer the Program, and shall pay the Federal 
        share of compensation for insured losses in accordance 
        with subsection (e).
          [(3) Mandatory participation.--Each entity that meets 
        the definition of an insurer under this title shall 
        participate in the Program.
  [(b) Conditions for Federal Payments.--No payment may be made 
by the Secretary under this section with respect to an insured 
loss that is covered by an insurer, unless--
          [(1) the person that suffers the insured loss, or a 
        person acting on behalf of that person, files a claim 
        with the insurer;
          [(2) the insurer provides clear and conspicuous 
        disclosure to the policyholder of the premium charged 
        for insured losses covered by the Program and the 
        Federal share of compensation for insured losses under 
        the Program--
                  [(A) in the case of any policy that is issued 
                before the date of enactment of this Act, not 
                later than 90 days after that date of 
                enactment;
                  [(B) in the case of any policy that is issued 
                within 90 days of the date of enactment of this 
                Act, at the time of offer, purchase, and 
                renewal of the policy; and
                  [(C) in the case of any policy that is issued 
                more than 90 days after the date of enactment 
                of this Act, on a separate line item in the 
                policy, at the time of offer, purchase, and 
                renewal of the policy;
          [(3) the insurer processes the claim for the insured 
        loss in accordance with appropriate business practices, 
        and any reasonable procedures that the Secretary may 
        prescribe; and
          [(4) the insurer submits to the Secretary, in 
        accordance with such reasonable procedures as the 
        Secretary may establish--
                  [(A) a claim for payment of the Federal share 
                of compensation for insured losses under the 
                Program;
                  [(B) written certification--
                          [(i) of the underlying claim; and
                          [(ii) of all payments made for 
                        insured losses; and
                  [(C) certification of its compliance with the 
                provisions of this subsection.
  [(c) Mandatory Availability.--During each Program Year, each 
entity that meets the definition of an insurer under section 
102--
          [(1) shall make available, in all of its property and 
        casualty insurance policies, coverage for insured 
        losses; and
          [(2) shall make available property and casualty 
        insurance coverage for insured losses that does not 
        differ materially from the terms, amounts, and other 
        coverage limitations applicable to losses arising from 
        events other than acts of terrorism.
  [(d) State Residual Market Insurance Entities.--
          [(1) In general.--The Secretary shall issue 
        regulations, as soon as practicable after the date of 
        enactment of this Act, that apply the provisions of 
        this title to State residual market insurance entities 
        and State workers' compensation funds.
          [(2) Treatment of certain entities.--For purposes of 
        the regulations issued pursuant to paragraph (1)--
                  [(A) a State residual market insurance entity 
                that does not share its profits and losses with 
                private sector insurers shall be treated as a 
                separate insurer; and
                  [(B) a State residual market insurance entity 
                that shares its profits and losses with private 
                sector insurers shall not be treated as a 
                separate insurer, and shall report to each 
                private sector insurance participant its share 
                of the insured losses of the entity, which 
                shall be included in each private sector 
                insurer's insured losses.
          [(3) Treatment of participation in certain 
        entities.--Any insurer that participates in sharing 
        profits and losses of a State residual market insurance 
        entity shall include in its calculations of premiums 
        any premiums distributed to the insurer by the State 
        residual market insurance entity.
  [(e) Insured Loss Shared Compensation.--
          [(1) Federal share.--
                  [(A) In general.--The Federal share of 
                compensation under the Program to be paid by 
                the Secretary for insured losses of an insurer 
                during the Transition Period and each Program 
                Year through Program Year 4 shall be equal to 
                90 percent, and during Program Year 5 shall be 
                equal to 85 percent, of that portion of the 
                amount of such insured losses that exceeds the 
                applicable insurer deductible required to be 
                paid during such Transition Period or such 
                Program Year.
                  [(B) Program trigger.--In the case of a 
                certified act of terrorism occurring after 
                March 31, 2006, no compensation shall be paid 
                by the Secretary under subsection (a), unless 
                the aggregate industry insured losses resulting 
                from such certified act of terrorism exceed--
                          [(i) $50,000,000, with respect to 
                        such insured losses occurring in 
                        Program Year 4; or
                          [(ii) $100,000,000, with respect to 
                        such insured losses occurring in 
                        Program Year 5.
                  [(C) Prohibition on duplicative 
                compensation.--The Federal share of 
                compensation for insured losses under the 
                Program shall be reduced by the amount of 
                compensation provided by the Federal Government 
                to any person under any other Federal program 
                for those insured losses.
          [(2) Cap on annual liability.--
                  [(A) In general.--Notwithstanding paragraph 
                (1) or any other provision of Federal or State 
                law, if the aggregate insured losses exceed 
                $100,000,000,000, during the period beginning 
                on the first day of the Transition Period and 
                ending on the last day of Program Year 1, or 
                during any of Program Years 2 through 5 (until 
                such time as the Congress may act otherwise 
                with respect to such losses)--
                          [(i) the Secretary shall not make any 
                        payment under this title for any 
                        portion of the amount of such losses 
                        that exceeds $100,000,000,000; and
                          [(ii) no insurer that has met its 
                        insurer deductible shall be liable for 
                        the payment of any portion of that 
                        amount that exceeds $100,000,000,000.
                  [(B) Insurer share.--For purposes of 
                subparagraph (A), the Secretary shall determine 
                the pro rata share of insured losses to be paid 
                by each insurer that incurs insured losses 
                under the Program.
          [(3) Notice to congress.--The Secretary shall notify 
        the Congress if estimated or actual aggregate insured 
        losses exceed $100,000,000,000 during the period 
        beginning on the first day of the Transition Period and 
        ending on the last day of Program Year 1, or during any 
        of Program Years 2 through 5, and the Congress shall 
        determine the procedures for and the source of any 
        payments for such excess insured losses.
          [(4) 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.
          [(5) Determinations final.--Any determination of the 
        Secretary under this subsection shall be final, unless 
        expressly provided, and shall not be subject to 
        judicial review.
          [(6) Insurance marketplace aggregate retention 
        amount.--For purposes of paragraph (7), the insurance 
        marketplace aggregate retention amount shall be--
                  [(A) for the period beginning on the first 
                day of the Transition Period and ending on the 
                last day of Program Year 1, the lesser of--
                          [(i) $10,000,000,000; and
                          [(ii) the aggregate amount, for all 
                        insurers, of insured losses during such 
                        period;
                  [(B) for Program Year 2, the lesser of--
                          [(i) $12,500,000,000; and
                          [(ii) the aggregate amount, for all 
                        insurers, of insured losses during such 
                        Program Year;
                  [(C) for Program Year 3, the lesser of--
                          [(i) $15,000,000,000; and
                          [(ii) the aggregate amount, for all 
                        insurers, of insured losses during such 
                        Program Year;
                  [(D) for Program Year 4, the lesser of--
                          [(i) $25,000,000,000; and
                          [(ii) the aggregate amount, for all 
                        insurers, of insured losses during such 
                        Program Year; and
                  [(E) for Program Year 5, the lesser of--
                          [(i) $27,500,000,000; and
                          [(ii) the aggregate amount, for all 
                        insurers, of insured losses during such 
                        Program Year.
          [(7) Recoupment of federal share.--
                  [(A) Mandatory recoupment amount.--For 
                purposes of this paragraph, the mandatory 
                recoupment amount for each of the periods 
                referred to in subparagraphs (A) through (E) of 
                paragraph (6) shall be the difference between--
                          [(i) the insurance marketplace 
                        aggregate retention amount under 
                        paragraph (6) for such period; and
                          [(ii) the aggregate amount, for all 
                        insurers, of insured losses during such 
                        period that are not compensated by the 
                        Federal Government because such 
                        losses--
                                  [(I) are within the insurer 
                                deductible for the insurer 
                                subject to the losses; or
                                  [(II) are within the portion 
                                of losses of the insurer that 
                                exceed the insurer deductible, 
                                but are not compensated 
                                pursuant to paragraph (1).
                  [(B) No mandatory recoupment if uncompensated 
                losses exceed insurance marketplace 
                retention.--Notwithstanding subparagraph (A), 
                if the aggregate amount of uncompensated 
                insured losses referred to in clause (ii) of 
                such subparagraph for any period referred to in 
                any of subparagraphs (A) through (E) of 
                paragraph (6) is greater than the insurance 
                marketplace aggregate retention amount under 
                paragraph (6) for such period, the mandatory 
                recoupment amount shall be $0.
                  [(C) Mandatory establishment of surcharges to 
                recoup mandatory recoupment amount.--The 
                Secretary shall collect, for repayment of the 
                Federal financial assistance provided in 
                connection with all acts of terrorism (or acts 
                of war, in the case of workers compensation) 
                occurring during any of the periods referred to 
                in any of subparagraphs (A) through (E) of 
                paragraph (6), terrorism loss risk-spreading 
                premiums in an amount equal to any mandatory 
                recoupment amount for such period.
                  [(D) Discretionary recoupment of remainder of 
                financial assistance.--To the extent that the 
                amount of Federal financial assistance provided 
                exceeds any mandatory recoupment amount, the 
                Secretary may recoup, through terrorism loss 
                risk-spreading premiums, such additional 
                amounts that the Secretary believes can be 
                recouped, based on--
                          [(i) the ultimate costs to taxpayers 
                        of no additional recoupment;
                          [(ii) the economic conditions in the 
                        commercial marketplace, including the 
                        capitalization, profitability, and 
                        investment returns of the insurance 
                        industry and the current cycle of the 
                        insurance markets;
                          [(iii) the affordability of 
                        commercial insurance for small- and 
                        medium-sized businesses; and
                          [(iv) such other factors as the 
                        Secretary considers appropriate.
          [(8) Policy surcharge for terrorism loss risk-
        spreading premiums.--
                  [(A) Policyholder premium.--Any amount 
                established by the Secretary as a terrorism 
                loss risk-spreading premium shall--
                          [(i) be imposed as a policyholder 
                        premium surcharge on property and 
                        casualty insurance policies in force 
                        after the date of such establishment;
                          [(ii) begin with such period of 
                        coverage during the year as the 
                        Secretary determines appropriate; and
                          [(iii) be based on a percentage of 
                        the premium amount charged for property 
                        and casualty insurance coverage under 
                        the policy.
                  [(B) Collection.--The Secretary shall provide 
                for insurers to collect terrorism loss risk-
                spreading premiums and remit such amounts 
                collected to the Secretary.
                  [(C) Percentage limitation.--A terrorism loss 
                risk-spreading premium (including any 
                additional amount included in such premium on a 
                discretionary basis pursuant to paragraph 
                (7)(D)) may not exceed, on an annual basis, the 
                amount equal to 3 percent of the premium 
                charged for property and casualty insurance 
                coverage under the policy.
                  [(D) Adjustment for urban and smaller 
                commercial and rural areas and different lines 
                of insurance.--
                          [(i) Adjustments.--In determining the 
                        method and manner of imposing terrorism 
                        loss risk-spreading premiums, including 
                        the amount of such premiums, the 
                        Secretary shall take into 
                        consideration--
                                  [(I) the economic impact 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;
                                  [(II) 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
                                  [(III) the various exposures 
                                to terrorism risk for different 
                                lines of insurance.
                          [(ii) Recoupment of adjustments.--Any 
                        mandatory recoupment amounts not 
                        collected by the Secretary because of 
                        adjustments under this subparagraph 
                        shall be recouped through additional 
                        terrorism loss risk-spreading premiums.
                  [(E) Timing of premiums.--The Secretary may 
                adjust the timing of terrorism loss risk-
                spreading premiums to provide for equivalent 
                application of the provisions of this title to 
                policies that are not based on a calendar year, 
                or to apply such provisions on a daily, 
                monthly, or quarterly basis, as appropriate.
  [(f) Captive Insurers and Other Self-Insurance 
Arrangements.--The Secretary may, in consultation with the NAIC 
or the appropriate State regulatory authority, apply the 
provisions of this title, as appropriate, to other classes or 
types of captive insurers and other self-insurance arrangements 
by municipalities and other entities (such as workers' 
compensation self-insurance programs and State workers' 
compensation reinsurance pools), but only if such application 
is determined before the occurrence of an act of terrorism in 
which such an entity incurs an insured loss and all of the 
provisions of this title are applied comparably to such 
entities.
  [(g) Reinsurance to Cover Exposure.--
          [(1) Obtaining coverage.--This title may not be 
        construed to limit or prevent insurers from obtaining 
        reinsurance coverage for insurer deductibles or insured 
        losses retained by insurers pursuant to this section, 
        nor shall the obtaining of such coverage affect the 
        calculation of such deductibles or retentions.
          [(2) Limitation on financial assistance.--The amount 
        of financial assistance provided pursuant to this 
        section shall not be reduced by reinsurance paid or 
        payable to an insurer from other sources, except that 
        recoveries from such other sources, taken together with 
        financial assistance for the Transition Period or a 
        Program Year provided pursuant to this section, may not 
        exceed the aggregate amount of the insurer's insured 
        losses for such period. If such recoveries and 
        financial assistance for the Transition Period or a 
        Program Year exceed such aggregate amount of insured 
        losses for that period and there is no agreement 
        between the insurer and any reinsurer to the contrary, 
        an amount in excess of such aggregate insured losses 
        shall be returned to the Secretary.
  [(h) Group Life Insurance Study.--
          [(1) Study.--The Secretary shall study, on an 
        expedited basis, whether adequate and affordable 
        catastrophe reinsurance for acts of terrorism is 
        available to life insurers in the United States that 
        issue group life insurance, and the extent to which the 
        threat of terrorism is reducing the availability of 
        group life insurance coverage for consumers in the 
        United States.
          [(2) Conditional coverage.--To the extent that the 
        Secretary determines that such coverage is not or will 
        not be reasonably available to both such insurers and 
        consumers, the Secretary shall, in consultation with 
        the NAIC--
                  [(A) apply the provisions of this title, as 
                appropriate, to providers of group life 
                insurance; and
                  [(B) provide such restrictions, limitations, 
                or conditions with respect to any financial 
                assistance provided that the Secretary deems 
                appropriate, based on the study under paragraph 
                (1).
  [(i) Study and Report.--
          [(1) Study.--The Secretary, after consultation with 
        the NAIC, representatives of the insurance industry, 
        and other experts in the insurance field, shall conduct 
        a study of the potential effects of acts of terrorism 
        on the availability of life insurance and other lines 
        of insurance coverage, including personal lines.
          [(2) Report.--Not later than 9 months after the date 
        of enactment of this Act, the Secretary shall submit a 
        report to the Congress on the results of the study 
        conducted under paragraph (1).]

SEC. 101. CONGRESSIONAL FINDINGS AND PURPOSE.

  (a) Findings.--The Congress finds that--
          (1) the ability of businesses and individuals to 
        obtain property and casualty insurance at reasonable 
        and predictable prices, in order to spread the risk of 
        both routine and catastrophic loss, is critical to 
        economic growth, urban development, and the 
        construction and maintenance of public and private 
        housing, as well as to the promotion of United States 
        exports and foreign trade in an increasingly 
        interconnected world;
          (2) property and casualty insurance firms are 
        important financial institutions, the products of which 
        allow mutualization of risk and the efficient use of 
        financial resources and enhance the ability of the 
        economy to maintain stability, while responding to a 
        variety of economic, political, environmental, and 
        other risks with a minimum of disruption;
          (3) the ability of the insurance industry to cover 
        the unprecedented financial risks presented by 
        potential acts of terrorism in the United States can be 
        a major factor in the recovery from terrorist attacks, 
        while maintaining the stability of the economy;
          (4) widespread financial market uncertainties have 
        arisen following the terrorist attacks of September 11, 
        2001, including the absence of information from which 
        financial institutions can make statistically valid 
        estimates of the probability and cost of future 
        terrorist events, and therefore the size, funding, and 
        allocation of the risk of loss caused by such acts of 
        terrorism;
          (5) a decision by property and casualty insurers to 
        deal with such uncertainties, either by terminating 
        property and casualty coverage for losses arising from 
        terrorist events, or by radically escalating premium 
        coverage to compensate for risks of loss that are not 
        readily predictable, could seriously hamper ongoing and 
        planned construction, property acquisition, and other 
        business projects, generate a dramatic increase in 
        rents, and otherwise suppress economic activity;
          (6) the United States Government should coordinate 
        with insurers to provide financial compensation to 
        insured parties for losses from acts of terrorism, 
        contributing to the stabilization of the United States 
        economy in a time of national crisis, and periodically 
        assess the ability of the financial services industry 
        to develop the systems, mechanisms, products, and 
        programs necessary to create a viable financial 
        services market for private terrorism risk insurance 
        that will lessen the financial participation of the 
        United States Government;
          (7) in addition to a terrorist attack on the United 
        States using conventional means or weapons, there is 
        and continues to be a potential threat of a terrorist 
        attack involving the use of unconventional means or 
        weapons, such as nuclear, biological, chemical, or 
        radiological agents;
          (8) as nuclear, biological, chemical, or radiological 
        acts of terrorism (known as NBCR terrorism) present a 
        threat of loss of life, injury, disease, and property 
        damage potentially unparalleled in scope and complexity 
        by any prior event, natural or man-made, the Federal 
        Government's responsibility in providing for and 
        preserving national economic security calls for a 
        strong Federal role in ensuring financial compensation 
        and economic recovery in the event of such an attack;
          (9) a report issued by the Government Accountability 
        Office in September 2006 concluded that ``any purely 
        market-driven expansion of coverage'' for NBCR 
        terrorism risk is ``highly unlikely in the foreseeable 
        future'', and the September 2006 report from the 
        President's Working Group on Financial Markets 
        concluded that reinsurance for NBCR terrorist events is 
        virtually unavailable and that ``[g]iven the general 
        reluctance of insurance companies to provide coverage 
        for these types of risks, there may be little potential 
        for future market development'';
          (10) group life insurance companies are important 
        financial institutions whose products make life 
        insurance coverage affordable for millions of Americans 
        and often serve as their only life insurance benefit;
          (11) the group life insurance industry, in the event 
        of a severe act of terrorism, is vulnerable to 
        insolvency because high concentrations of covered 
        employees work in the same locations, because primary 
        group life insurers do not exclude conventional and 
        NBCR terrorism risks while most catastrophic 
        reinsurance does exclude such terrorism risks, and 
        because a large-scale loss of life would fall outside 
        of actuarial expectations of death; and
          (12) the United States Government should provide 
        temporary financial compensation to insured parties, 
        contributing to the stabilization of the United States 
        economy in a time of national crisis, while the 
        financial services industry develops the systems, 
        mechanisms, products, and programs necessary to create 
        a viable financial services market for private 
        terrorism risk insurance.
  (b) Purpose.--The purpose of this title is to establish a 
temporary Federal program that provides for a transparent 
system of shared public and private compensation for insured 
losses resulting from acts of terrorism, in order to--
          (1) protect consumers by addressing market 
        disruptions and ensure the continued widespread 
        availability and affordability of property and casualty 
        insurance and group life insurance for all types of 
        terrorism risk, including conventional terrorism risk 
        and nuclear, biological, chemical, and radiological 
        terrorism risk;
          (2) allow for a transitional period for the private 
        markets to stabilize, resume pricing of such insurance, 
        and build capacity to absorb any future losses, while 
        preserving State insurance regulation and consumer 
        protections (unless otherwise preempted by this Act); 
        and
          (3) provide finite liability limits for terrorism 
        insurance losses for insurers and the United States 
        Government.

SEC. 102. DEFINITIONS.

  In this title, the following definitions shall apply:
          (1) Act of terrorism.--
                  (A) Certification.--The term ``act of 
                terrorism'' means any act that is certified by 
                the Secretary, in concurrence with the 
                Secretary of State, the Secretary of Homeland 
                Security, and the Attorney General of the 
                United States--
                          (i) to be an act of terrorism;
                          (ii) to be a violent act or an act 
                        that is dangerous to--
                                  (I) human life;
                                  (II) property; or
                                  (III) infrastructure;
                          (iii) to have resulted in damage 
                        within the United States, or outside of 
                        the United States in the case of--
                                  (I) an air carrier or vessel 
                                described in paragraph (9)(B); 
                                or
                                  (II) the premises of a United 
                                States mission; and
                          (iv) to have been committed by an 
                        individual or individuals as part of an 
                        effort to coerce the civilian 
                        population of the United States or to 
                        influence the policy or affect the 
                        conduct of the United States Government 
                        by coercion.
                  (B) Limitation.--No act shall be certified by 
                the Secretary as an act of terrorism if--
                          (i) the act is committed as part of 
                        the course of a war declared by the 
                        Congress, except that this clause shall 
                        not apply with respect to any coverage 
                        for workers' compensation; or
                          (ii) property and casualty insurance 
                        and group life insurance losses 
                        resulting from the act, in the 
                        aggregate, do not exceed $5,000,000.
                  (C) Certification of act of nbcr terrorism.--
                Upon certification of an act of terrorism, the 
                Secretary, in concurrence with the Secretary of 
                State, the Secretary of Homeland Security, and 
                the Attorney General of the United States, 
                shall determine whether the act of terrorism 
                meets the definition of NBCR terrorism in this 
                section. If such determination is that the act 
                does meet such definition, the Secretary shall 
                further certify such act of terrorism as an act 
                of NBCR terrorism.
                  (D) Determinations final.--Any certification 
                of, or determination not to certify, an act as 
                an act of terrorism or as an act of NBCR 
                terrorism under this paragraph shall be final, 
                and shall not be subject to judicial review.
                  (E) Nondelegation.--The Secretary may not 
                delegate or designate to any other officer, 
                employee, or person, any determination under 
                this paragraph of whether, during the effective 
                period of the Program, an act of terrorism, 
                including an act of NBCR terrorism, has 
                occurred.
          (2) Affiliate.--The term ``affiliate'' means, with 
        respect to an insurer, any entity that controls, is 
        controlled by, or is under common control with the 
        insurer.
          (3) Amount at risk.--The term ``amount at risk'' 
        means face amount less statutory policy reserves for 
        group life insurance issued by any insurer for 
        insurance against losses occurring at the locations 
        described in subparagraph (A) of paragraph (9).
          (4) Control.--An entity has ``control'' over another 
        entity, if--
                  (A) the entity directly or indirectly or 
                acting through 1 or more other persons owns, 
                controls, or has power to vote 25 percent or 
                more of any class of voting securities of the 
                other entity;
                  (B) the entity controls in any manner the 
                election of a majority of the directors or 
                trustees of the other entity; or
                  (C) the Secretary determines, after notice 
                and opportunity for hearing, that the entity 
                directly or indirectly exercises a controlling 
                influence over the management or policies of 
                the other entity; except that for purposes of 
                any proceeding under this subparagraph, there 
                shall be a presumption that any entity which 
                directly or indirectly owns, controls, or has 
                power to vote less than 5 percent of any class 
                of voting securities of another entity does not 
                have control over that entity.
          (5) Covered lines.--The term ``covered lines'' means 
        property and casualty insurance and group life 
        insurance, as defined in this section.
          (6) Direct earned premium.--The term ``direct earned 
        premium'' means a direct earned premium for property 
        and casualty insurance issued by any insurer for 
        insurance against losses occurring at the locations 
        described in subparagraph (A) of paragraph (9).
          (7) Excess insured loss.--The term ``excess insured 
        loss'' means, with respect to a Program Year, any 
        portion of the amount of insured losses during such 
        Program Year that exceeds the cap on annual liability 
        under section 103(e)(2)(A).
          (8) Group life insurance.--The term ``group life 
        insurance'' means an insurance contract that provides 
        life insurance coverage, including term life insurance 
        coverage, universal life insurance coverage, variable 
        universal life insurance coverage, and accidental death 
        coverage, or a combination thereof, for a number of 
        individuals under a single contract, on the basis of a 
        group selection of risks, but does not include 
        ``Corporate Owned Life Insurance'' or ``Business Owned 
        Life Insurance,'' each as defined under the Internal 
        Revenue Code of 1986, or any similar product, or group 
        life reinsurance or retrocessional reinsurance.
          (9) Insured loss.--
                  (A) In general.--Except as provided in 
                subparagraph (B), the term ``insured loss'' 
                means any loss resulting from an act of 
                terrorism (including an act of war, in the case 
                of workers' compensation) that is covered by 
                primary or excess property and casualty 
                insurance, or group life insurance to the 
                extent of the amount at risk, issued by an 
                insurer, if such loss--
                          (i) occurs within the United States; 
                        or
                          (ii) occurs to an air carrier (as 
                        defined in section 40102 of title 49, 
                        United States Code), to 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), 
                        regardless of where the loss occurs, or 
                        at the premises of any United States 
                        mission.
                  (B) Limitation for group life insurance.--
                Such term shall not include any losses of an 
                insurer resulting from coverage of any single 
                certificate holder under any group life 
                insurance coverages of the insurer to the 
                extent such losses are not compensated under 
                the Program by reason of section 103(e)(1)(D).
          (10) Insurer.--The term ``insurer'' means any entity, 
        including any affiliate thereof--
                  (A) that is--
                          (i) licensed or admitted to engage in 
                        the business of providing primary or 
                        excess insurance, or group life 
                        insurance, in any State;
                          (ii) not licensed or admitted as 
                        described in clause (i), if it is an 
                        eligible surplus line carrier listed on 
                        the Quarterly Listing of Alien Insurers 
                        of the NAIC, or any successor thereto;
                          (iii) approved for the purpose of 
                        offering property and casualty 
                        insurance by a Federal agency in 
                        connection with maritime, energy, or 
                        aviation activity;
                          (iv) a State residual market 
                        insurance entity or State workers' 
                        compensation fund; or
                          (v) any other entity described in 
                        section 103(f), to the extent provided 
                        in the rules of the Secretary issued 
                        under section 103(f);
                  (B) that receives direct earned premiums for 
                any type of commercial property and casualty 
                insurance coverage, or, in the case of group 
                life insurance, that receives direct premiums, 
                other than in the case of entities described in 
                sections 103(d) and 103(f); and
                  (C) that meets any other criteria that the 
                Secretary may reasonably prescribe.
          (11) Insurer deductible.--The term ``insurer 
        deductible'' means--
                  (A) for the Transition Period, the value of 
                an insurer's direct earned premiums over the 
                calendar year immediately preceding the date of 
                enactment of this Act, multiplied by 1 percent;
                  (B) for Program Year 1, the value of an 
                insurer's direct earned premiums over the 
                calendar year immediately preceding Program 
                Year 1, multiplied by 7 percent;
                  (C) for Program Year 2, the value of an 
                insurer's direct earned premiums over the 
                calendar year immediately preceding Program 
                Year 2, multiplied by 10 percent;
                  (D) for Program Year 3, the value of an 
                insurer's direct earned premiums over the 
                calendar year immediately preceding Program 
                Year 3, multiplied by 15 percent;
                  (E) for Program Year 4, the value of an 
                insurer's direct earned premiums over the 
                calendar year immediately preceding Program 
                Year 4, multiplied by 17.5 percent;
                  (F) for Program Year 5, the value of an 
                insurer's direct earned premiums over the 
                calendar year immediately preceding Program 
                Year 5, multiplied by 20 percent;
                  (G) for each additional Program Year--
                          (i) with respect to property and 
                        casualty insurance, the value of an 
                        insurer's direct earned premiums over 
                        the calendar year immediately preceding 
                        such Program Year, multiplied by 20 
                        percent; and
                          (ii) with respect to group life 
                        insurance, the value of an insurer's 
                        amount at risk over the calendar year 
                        immediately preceding such Program 
                        Year, multiplied by 0.0351 percent;
                  (H) notwithstanding subparagraphs (A) through 
                (G), for the Transition Period or any Program 
                Year, if an insurer has not had a full year of 
                operations during the calendar year immediately 
                preceding such Period or Program Year, such 
                portion of the direct earned premiums with 
                respect to property and casualty insurance, and 
                such portion of the amounts at risk with 
                respect to group life insurance, of the insurer 
                as the Secretary determines appropriate, 
                subject to appropriate methodologies 
                established by the Secretary for measuring such 
                direct earned premiums and amounts at risk;
                  (I) notwithstanding subparagraphs (A) through 
                (H) and (J), in the case of any act of NBCR 
                terrorism, for any additional Program Year--
                          (i) with respect to property and 
                        casualty insurance, the value of an 
                        insurer's direct earned premiums over 
                        the calendar year immediately preceding 
                        such Program Year, multiplied by a 
                        percentage, which--
                                  (I) for the second additional 
                                Program Year, shall be 3.5 
                                percent; and
                                  (II) for each succeeding 
                                Program Year thereafter, shall 
                                be 50 basis points greater than 
                                the percentage applicable to 
                                the preceding additional 
                                Program Year; and
                          (ii) with respect to group life 
                        insurance, the value of an insurer's 
                        amount at risk over the calendar year 
                        immediately preceding such Program 
                        Year, multiplied by a percentage, 
                        which--
                                  (I) for the first additional 
                                Program Year, shall be 0.00614 
                                percent; and
                                  (II) for each succeeding 
                                Program Year thereafter, shall 
                                be 0.088 basis point greater 
                                than the percentage applicable 
                                to the preceding additional 
                                Program Year; and
                  (J) notwithstanding subparagraph (G)(i), if 
                aggregate industry insured losses resulting 
                from a certified act of terrorism exceed 
                $1,000,000,000, for any insurer that sustains 
                insured losses resulting from such act of 
                terrorism, the value of such insurer's direct 
                earned premiums over the calendar year 
                immediately preceding the Program Year, 
                multiplied by a percentage, which--
                          (i) for the first additional Program 
                        Year shall be 5 percent;
                          (ii) for each additional Program Year 
                        thereafter, shall be 50 basis points 
                        greater than the percentage applicable 
                        to the preceding additional Program 
                        Year, except that if an act of 
                        terrorism occurs during any additional 
                        Program Year that results in aggregate 
                        industry insured losses exceeding 
                        $1,000,000,000, the percentage for the 
                        succeeding additional Program Year 
                        shall be 5 percent and the increase 
                        under this clause shall apply to 
                        additional Program Years thereafter;
                except that for purposes of determining under 
                this subparagraph whether aggregate industry 
                insured losses exceed $1,000,000,000, the 
                Secretary may combine insured losses resulting 
                from two or more certified acts of terrorism 
                occurring during such Program Year in the same 
                geographic area (with such area determined by 
                the Secretary), in which case such insurer 
                shall be permitted to combine insured losses 
                resulting from such acts of terrorism for 
                purposes of satisfying its insurer deductible 
                under this subparagraph; and except that the 
                insurer deductible under this subparagraph 
                shall apply only with respect to compensation 
                of insured losses resulting from such certified 
                act, or combined certified acts, and that for 
                purposes of compensation of any other insured 
                losses occurring in the same Program Year, the 
                insurer deductible determined under 
                subparagraph (G)(i) or (I) shall apply.
          (12) NAIC.--The term ``NAIC'' means the National 
        Association of Insurance Commissioners.
          (13) NBCR terrorism.--The term ``NBCR terrorism'' 
        means an act of terrorism that involves nuclear, 
        biological, chemical, or radiological reactions, 
        releases, or contaminations, to the extent any insured 
        losses result from any such reactions, releases, or 
        contaminations.
          (14) Person.--The term ``person'' means any 
        individual, business or nonprofit entity (including 
        those organized in the form of a partnership, limited 
        liability company, corporation, or association), trust 
        or estate, or a State or political subdivision of a 
        State or other governmental unit.
          (15) Program.--The term ``Program'' means the 
        Terrorism Insurance Program established by this title.
          (16) Program years.--
                  (A) Transition period.--The term ``Transition 
                Period'' means the period beginning on the date 
                of enactment of this Act and ending on December 
                31, 2002.
                  (B) Program year 1.--The term ``Program Year 
                1'' means the period beginning on January 1, 
                2003 and ending on December 31, 2003.
                  (C) Program year 2.--The term ``Program Year 
                2'' means the period beginning on January 1, 
                2004 and ending on December 31, 2004.
                  (D) Program year 3.--The term ``Program Year 
                3'' means the period beginning on January 1, 
                2005 and ending on December 31, 2005.
                  (E) Program year 4.--The term ``Program Year 
                4'' means the period beginning on January 1, 
                2006 and ending on December 31, 2006.
                  (F) Program year 5.--The term ``Program Year 
                5'' means the period beginning on January 1, 
                2007 and ending on December 31, 2007.
                  (G) Additional program year.--The term 
                ``additional Program Year'' means any 
                additional one-year period after Program Year 5 
                during which the Program is in effect, which 
                period shall begin on January 1 and end on 
                December 31 of the same calendar year.
          (17) Property and casualty insurance.--The term 
        ``property and casualty insurance''--
                  (A) means commercial lines of property and 
                casualty insurance, including excess insurance, 
                workers' compensation insurance, and directors 
                and officers liability insurance; and
                  (B) does not include--
                          (i) Federal crop insurance issued or 
                        reinsured under the Federal Crop 
                        Insurance Act (7 U.S.C. 1501 et seq.), 
                        or any other type of crop or livestock 
                        insurance that is privately issued or 
                        reinsured;
                          (ii) private mortgage insurance (as 
                        that term is defined in section 2 of 
                        the Homeowners Protection Act of 1998 
                        (12 U.S.C. 4901)) or title insurance;
                          (iii) financial guaranty insurance 
                        issued by monoline financial guaranty 
                        insurance corporations;
                          (iv) insurance for medical 
                        malpractice;
                          (v) health or life insurance, 
                        including group life insurance;
                          (vi) flood insurance provided under 
                        the National Flood Insurance Act of 
                        1968 (42 U.S.C. 4001 et seq.);
                          (vii) reinsurance or retrocessional 
                        reinsurance;
                          (viii) commercial automobile 
                        insurance;
                          (ix) burglary and theft insurance;
                          (x) surety insurance; or
                          (xi) professional liability 
                        insurance.
          (18) Secretary.--The term ``Secretary'' means the 
        Secretary of the Treasury.
          (19) State.--The term ``State'' means any State of 
        the United States, the District of Columbia, the 
        Commonwealth of Puerto Rico, the Commonwealth of the 
        Northern Mariana Islands, American Samoa, Guam, each of 
        the United States Virgin Islands, and any territory or 
        possession of the United States.
          (20) United states.--The term ``United States'' means 
        the several States, and includes the territorial sea 
        and the continental shelf of the United States, as 
        those terms are defined in the Violent Crime Control 
        and Law Enforcement Act of 1994 (18 U.S.C. 2280, 2281).
          (21) Rule of construction for dates.--With respect to 
        any reference to a date in this title, such day shall 
        be construed--
                  (A) to begin at 12:01 a.m. on that date; and
                  (B) to end at midnight on that date.

SEC. 103. TERRORISM INSURANCE PROGRAM.

  (a) Establishment of Program.--
          (1) In general.--There is established in the 
        Department of the Treasury the Terrorism Insurance 
        Program.
          (2) Authority of the secretary.--Notwithstanding any 
        other provision of State or Federal law, the Secretary 
        shall administer the Program, and shall pay the Federal 
        share of compensation for insured losses in accordance 
        with subsection (e).
          (3) Mandatory participation.--Each entity that meets 
        the definition of an insurer under this title shall 
        participate in the Program.
          (4) NBCR exemption for certain insurers.--
        Notwithstanding the requirements of paragraph (3):
                  (A) Eligibility.--Upon request, the Secretary 
                may provide an exemption from the requirements 
                of subparagraph (B) of subsection (c)(1) in the 
                Program to an entity that otherwise meets the 
                definition of an insurer under this title if--
                          (i) such insurer's direct earned 
                        premium is less than $50,000,000 in the 
                        calendar year immediately preceding the 
                        current additional Program Year; and
                          (ii) the Secretary makes the 
                        determination set forth in subparagraph 
                        (D).
                  (B) Insurer group.--For purposes of 
                subparagraph (A)(i), the direct earned premium 
                of any insurer shall include the direct earned 
                premiums of every affiliate of that insurer.
                  (C) Information and consultation.--Any 
                insurer requesting an exemption pursuant to 
                this paragraph shall provide any information 
                the Secretary may require to establish its 
                eligibility for the exemption. In developing 
                standards for evaluating eligibility for the 
                exemption under this paragraph, the Secretary 
                shall consult with the NAIC.
                  (D) Determination.--In making any 
                determination regarding eligibility for 
                exemption under this paragraph, the Secretary 
                shall consult with the insurance commissioner 
                of the State or other appropriate State 
                regulatory authority where the insurer is 
                domiciled and determine whether the insurer has 
                demonstrated that it would become insolvent if 
                it were required, in the event of an act of 
                NBCR terrorism, to satisfy--
                          (i) its deductible and maximum 
                        applicable share above the deductible 
                        pursuant to sections 102(11)(I) and 
                        103(e)(1)(B), respectively, for such 
                        act of NBCR terrorism resulting in 
                        aggregate industry insured losses above 
                        the trigger established in section 
                        103(e)(1)(C); or
                          (ii) its maximum payment obligations 
                        for insured losses for such act of NBCR 
                        terrorism resulting in aggregate 
                        industry insured losses below the 
                        trigger established in section 
                        103(e)(1)(C).
                  (E) Workers' compensation and other 
                compulsory insurance law.--In granting an 
                exemption under this paragraph, the Secretary 
                shall not approve any request for exemption 
                with regard to State workers' compensation 
                insurance or other compulsory insurance law 
                requiring coverage of the risks described in 
                subparagraph (B) of subsection (c)(1).
                  (F) Exemption period.--
                          (i) In general.--Any exemption 
                        granted to an insurer by the Secretary 
                        under this paragraph shall have a 
                        duration of not longer than 2 years.
                          (ii) Extension.--Notwithstanding 
                        clause (i), the Secretary may, upon 
                        application by an insurer granted an 
                        exemption under this paragraph, extend 
                        such exemption for additional periods 
                        of not longer than 2 years.
  (b) Conditions for Federal Payments.--No payment may be made 
by the Secretary under this section with respect to an insured 
loss that is covered by an insurer, unless--
          (1) the person that suffers the insured loss, or a 
        person acting on behalf of that person, files a claim 
        with the insurer;
          (2) the insurer provides clear and conspicuous 
        disclosure to the policyholder of the premium charged 
        for insured losses covered by the Program (including 
        the additional premium, if any, charged for the 
        coverage for insured losses resulting from acts of NBCR 
        terrorism as made available pursuant to subsection 
        (c)(1)(B)) and the Federal share of compensation for 
        insured losses under the Program--
                  (A) in the case of any policy that is issued 
                before the date of enactment of this Act, not 
                later than 90 days after that date of 
                enactment;
                  (B) in the case of any policy that is issued 
                within 90 days of the date of enactment of this 
                Act, at the time of offer, purchase, and 
                renewal of the policy; and
                  (C) in the case of any policy that is issued 
                more than 90 days after the date of enactment 
                of this Act, on a separate line item in the 
                policy, at the time of offer, purchase, and 
                renewal of the policy;
          (3) the insurer processes the claim for the insured 
        loss in accordance with appropriate business practices, 
        and any reasonable procedures that the Secretary may 
        prescribe; and
          (4) the insurer submits to the Secretary, in 
        accordance with such reasonable procedures as the 
        Secretary may establish--
                  (A) a claim for payment of the Federal share 
                of compensation for insured losses under the 
                Program;
                  (B) written certification--
                          (i) of the underlying claim; and
                          (ii) of all payments made for insured 
                        losses; and
                  (C) certification of its compliance with the 
                provisions of this subsection.
  (c) Mandatory Availability.--
          (1) Availability of coverage for insured losses.--
        Subject to paragraph (3), during each Program Year, 
        each entity that meets the definition of an insurer 
        under section 102 shall make available--
                  (A) in all of its insurance policies for 
                covered lines, coverage for insured losses that 
                does not differ materially from the terms, 
                amounts, and other coverage limitations 
                applicable to losses arising from events other 
                than acts of terrorism; and
                  (B) in insurance policies for covered lines 
                for which the coverage described in 
                subparagraph (A) is provided, exceptions to the 
                pollution and nuclear hazard exclusions of such 
                policies that render such exclusions 
                inapplicable only as to insured losses arising 
                from acts of NBCR terrorism.
          (2) Allowable exclusions in other coverage.--Subject 
        to paragraph (3) and notwithstanding any other 
        provision of Federal or State law, including any State 
        workers' compensation and other compulsory insurance 
        law, if a person elects not to purchase an insurance 
        policy with the coverage described in paragraph (1)--
                  (A) an insurer may exclude coverage for all 
                losses from acts of terrorism including acts of 
                NBCR terrorism, except for State workers' 
                compensation and other compulsory insurance law 
                requiring coverage of the risks described in 
                subsection (c)(1) (unless permitted by State 
                law); or
                  (B) an insurer may offer other options for 
                coverage that differ materially from the terms, 
                amounts, and other coverage limitations 
                applicable to losses arising from events other 
                than acts of terrorism;
        except that nothing in this paragraph shall affect 
        paragraph (4).
          (3) Applicability for nbcr terrorism.--
        Notwithstanding any other provision of this Act, 
        paragraphs (1)(B) and (2) shall apply, beginning upon 
        January 1, 2009, with respect to coverage for acts of 
        NBCR terrorism, that is purchased or renewed on or 
        after such date.
          (4) Availability of life insurance without regard to 
        lawful foreign travel.--During each Program Year, each 
        entity that meets the definition of an insurer under 
        section 102 shall make available, in all of its life 
        insurance policies issued after the date of the 
        enactment of the Terrorism Risk Insurance Revision and 
        Extension Act of 2007 under which the insured person is 
        a citizen of the United States or an alien lawfully 
        admitted for permanent residence in the United States, 
        coverage that neither considers past, nor precludes 
        future, lawful foreign travel by the person insured, 
        and shall not decline such coverage based on past or 
        future, lawful foreign travel by the person insured or 
        charge a premium for such coverage that is excessive 
        and not based on a good faith actuarial analysis, 
        except that an insurer may decline or, upon inception 
        or renewal of a policy, limit the amount of coverage 
        provided under any life insurance policy based on plans 
        to engage in future lawful foreign travel to occur 
        within 12 months of such inception or renewal of the 
        policy but only if, at time of application--
                  (A) such declination is based on, or such 
                limitation applies only with respect to, travel 
                to a foreign destination--
                          (i) for which the Director of the 
                        Centers for Disease Control and 
                        Prevention of the Department of Health 
                        and Human Services has issued a highest 
                        level alert or warning, including a 
                        recommendation against non-essential 
                        travel, due to a serious health-related 
                        condition;
                          (ii) in which there is an ongoing 
                        military conflict involving the armed 
                        forces of a sovereign nation other than 
                        the nation to which the insured person 
                        is traveling; or
                          (iii)(I) that the insurer has 
                        specifically designated in the terms of 
                        the life insurance policy at the 
                        inception of the policy or at renewal, 
                        as applicable; and
                          (II) with respect to which the 
                        insurer has made a good-faith 
                        determination that--
                                  (aa) a serious unlawful 
                                situation exists which is 
                                ongoing; and
                                  (bb) the credibility of 
                                information by which the 
                                insurer can verify the death of 
                                the insured person is 
                                compromised; and
                  (B) in the case of any limitation of 
                coverage, such limitation is specifically 
                stated in the terms of the life insurance 
                policy at the inception of the policy or at 
                renewal, as applicable.
  (d) State Residual Market Insurance Entities.--
          (1) In general.--The Secretary shall issue 
        regulations, as soon as practicable after the date of 
        enactment of this Act, that apply the provisions of 
        this title to State residual market insurance entities 
        and State workers' compensation funds.
          (2) Treatment of certain entities.--For purposes of 
        the regulations issued pursuant to paragraph (1)--
                  (A) a State residual market insurance entity 
                that does not share its profits and losses with 
                private sector insurers shall be treated as a 
                separate insurer; and
                  (B) a State residual market insurance entity 
                that shares its profits and losses with private 
                sector insurers shall not be treated as a 
                separate insurer, and shall report to each 
                private sector insurance participant its share 
                of the insured losses of the entity, which 
                shall be included in each private sector 
                insurer's insured losses.
          (3) Treatment of participation in certain entities.--
        Any insurer that participates in sharing profits and 
        losses of a State residual market insurance entity 
        shall include in its calculations of premiums any 
        premiums distributed to the insurer by the State 
        residual market insurance entity.
  (e) Insured Loss Shared Compensation.--
          (1) Federal share.--
                  (A) Conventional terrorism.--Except as 
                provided in subparagraph (B), the Federal share 
                of compensation under the Program to be paid by 
                the Secretary for insured losses of an insurer 
                during any additional Program Year shall be 
                equal to the sum of--
                          (i) 85 percent of that portion of the 
                        amount of such insured losses that--
                                  (I) exceeds the applicable 
                                insurer deductible required to 
                                be paid during such Program 
                                Year; and
                                  (II) based upon pro rata 
                                determinations pursuant to 
                                paragraph (2)(B), does not 
                                result in aggregate industry 
                                insured losses during such 
                                Program Year exceeding 
                                $100,000,000,000; and
                          (ii) 100 percent of the insured 
                        losses of the insurer that, based upon 
                        pro rata determinations pursuant to 
                        paragraph (2)(B), result in aggregate 
                        industry insured losses during such 
                        Program Year exceeding 
                        $100,000,000,000, up to the limit under 
                        paragraph (2)(A).
                  (B) NBCR terrorism.--
                          (i) Amount of compensation.--The 
                        Federal share of compensation under the 
                        Program to be paid by the Secretary for 
                        insured losses of an insurer resulting 
                        from NBCR terrorism during any 
                        additional Program Year shall be equal 
                        to the sum of--
                                  (I) the amount of qualified 
                                NBCR losses (as such term is 
                                defined in clause (ii)) of the 
                                insurer, multiplied by a 
                                percentage based on the 
                                aggregate industry qualified 
                                NBCR losses for the Program 
                                Year, which percentage shall 
                                be--
                                          (aa) 85 percent of 
                                        such aggregate industry 
                                        qualified NBCR losses 
                                        of less than 
                                        $10,000,000,000;
                                          (bb) 87.5 percent of 
                                        such aggregate industry 
                                        qualified NBCR losses 
                                        between $10,000,000,000 
                                        and $20,000,000,000;
                                          (cc) 90 percent of 
                                        such aggregate industry 
                                        qualified NBCR losses 
                                        between $20,000,000,000 
                                        and $40,000,000,000;
                                          (dd) 92.5 percent of 
                                        such aggregate industry 
                                        qualified NBCR losses 
                                        of between 
                                        $40,000,000,000 and 
                                        $60,000,000,000; and
                                          (ee) 95 percent of 
                                        such aggregate industry 
                                        qualified NBCR losses 
                                        of more than 
                                        $60,000,000,000;
                                and shall be prorated per 
                                insurer based on each insurer's 
                                percentage of the aggregate 
                                industry qualified NBCR losses 
                                for such additional Program 
                                Year; and
                                  (II) 100 percent of the 
                                insured losses of the insurer 
                                resulting from NBCR terrorism 
                                that, based upon pro rata 
                                determinations pursuant to 
                                paragraph (2)(B), result in 
                                aggregate industry insured 
                                losses during such Program Year 
                                exceeding $100,000,000,000, up 
                                to the limit under paragraph 
                                (2)(A).
                          (ii) Qualified nbcr losses.--For 
                        purposes of this subparagraph, the term 
                        ``qualified NBCR losses'' means, with 
                        respect to insured losses of an insurer 
                        resulting from NBCR terrorism during an 
                        additional Program Year, that portion 
                        of the amount of such insured losses 
                        that--
                                  (I) exceeds the applicable 
                                insurer deductible required to 
                                be paid during such Program 
                                Year; and
                                  (II) based upon pro rata 
                                determinations pursuant to 
                                paragraph (2)(B), does not 
                                result in aggregate industry 
                                insured losses during such 
                                Program Year exceeding 
                                $100,000,000,000.
                  (C) Program trigger.--In the case of a 
                certified act of terrorism occurring after 
                March 31, 2006, no compensation shall be paid 
                by the Secretary under subsection (a), unless 
                the aggregate industry insured losses resulting 
                from such certified act of terrorism exceed 
                $50,000,000, except that if a certified act of 
                terrorism occurs for which resulting aggregate 
                industry insured losses exceed $1,000,000,000, 
                the applicable amount for any subsequent 
                certified act of terrorism shall be the amount 
                specified in section 102(1)(B)(ii).
                  (D) Limitation on compensation for group life 
                insurance.--Notwithstanding any other provision 
                of this Act, the Federal share of compensation 
                under the Program paid by the Secretary for 
                insured losses of an insurer resulting from 
                coverage of any single certificate holder under 
                any group life insurance coverages of the 
                insurer may not during any additional Program 
                Year exceed $1,000,000.
                  (E) Prohibition on duplicative 
                compensation.--The Federal share of 
                compensation for insured losses under the 
                Program shall be reduced by the amount of 
                compensation provided by the Federal Government 
                to any person under any other Federal program 
                for those insured losses.
          (2) Cap on annual liability.--
                  (A) In general.--Notwithstanding paragraph 
                (1) or any other provision of Federal or State 
                law, including any State workers' compensation 
                or other compulsory insurance law, if the 
                aggregate amount of the Federal share of 
                compensation to be paid to all insurers 
                pursuant to paragraph (1) exceeds 
                $100,000,000,000, during any additional Program 
                Year (until such time as the Congress may act 
                otherwise with respect to such losses)--
                          (i) the Secretary shall not make any 
                        payment under this title for any 
                        portion of the amount of the aggregate 
                        insured losses during such Program Year 
                        for which the Federal share exceeds 
                        $100,000,000,000; and
                          (ii) no insurer that has met its 
                        insurer deductible shall be liable for 
                        the payment of any portion of the 
                        aggregate insured losses during such 
                        Program Year that exceeds 
                        $100,000,000,000.
                  (B) Insurer share.--For purposes of 
                subparagraph (A), the Secretary shall determine 
                the pro rata share of insured losses to be paid 
                by each insurer that incurs insured losses 
                under the Program.
                  (C) Claims allocations.--The Secretary shall, 
                by regulation, provide for insurers to allocate 
                claims payments for insured losses under 
                applicable insurance policies in any case 
                described in subparagraph (A). Such regulations 
                shall include provisions for payment, for the 
                purpose of addressing emergency needs of 
                applicable individuals affected by an act of 
                terrorism, of a portion of claims for insured 
                losses promptly upon filing of such claims.
          (3) Limitation on insurer financial responsibility.--
                  (A) Limitation.--Notwithstanding any other 
                provision of Federal or State law, including 
                any State workers' compensation or other 
                compulsory insurance law, an insurer's 
                financial responsibility for insured losses 
                from acts of terrorism shall be limited to its 
                applicable insurer deductible and its 
                applicable share of insured losses that exceed 
                its applicable insurer deductible, subject to 
                the requirements of paragraph (2).
                  (B) Federal reimbursement.--Notwithstanding 
                any other provision of Federal or State law, 
                the Secretary shall--
                          (i) reimburse insurers for any 
                        payment of excess insured losses made 
                        prior to publication of any 
                        notification pursuant to paragraph 
                        (4)(A);
                          (ii) reimburse insurers for any 
                        payment of excess insured losses 
                        occurring on or after the date of any 
                        notification pursuant to paragraph 
                        (4)(A), but only to the extent that--
                                  (I) such payment is ordered 
                                by a court pursuant to 
                                subparagraph (C) of this 
                                paragraph or is directed by 
                                State law, notwithstanding this 
                                paragraph, or by Federal law;
                                  (II) such payment is limited 
                                to compensating insurers for 
                                their payment of excess insured 
                                losses and does not include 
                                punitive damages, or litigation 
                                or other costs; and
                                  (III) the insurer has made a 
                                good-faith effort to defend 
                                against any claims for such 
                                payment; and
                          (iii) have the right to intervene in 
                        any legal proceedings relating to such 
                        claims specified in clause (ii)(III).
                  (C) Federal court jurisdiction.--
                          (i) Conditions.--All claims relating 
                        to or arising out of an insurer's 
                        financial responsibility for insured 
                        losses from acts of terrorism under 
                        this paragraph shall be within the 
                        original and exclusive jurisdiction of 
                        the district courts of the United 
                        States, in accordance with the 
                        procedures established in subparagraph 
                        (D), if the Secretary certifies that 
                        the following conditions have been met, 
                        or that there is a reasonable 
                        likelihood that the following 
                        conditions may be met:
                                  (I) The aggregate amount of 
                                the Federal share of 
                                compensation to be paid to all 
                                insurers pursuant to paragraph 
                                (1) exceeds $100,000,000,000, 
                                pursuant to paragraph (2); and
                                  (II) the insurer has paid its 
                                applicable insurer deductible 
                                and its pro rata share of 
                                insured losses determined 
                                pursuant to paragraph (2)(B).
                          (ii) Removal of state court 
                        actions.--If the Secretary certifies 
                        that conditions set forth in subclauses 
                        (I) and (II) of clause (i) have been 
                        met, all pending State court actions 
                        that relate to or arise out of an 
                        insurer's financial responsibility for 
                        insured losses from acts of terrorism 
                        under this paragraph shall be removed 
                        to a district court of the United 
                        States in accordance with subparagraph 
                        (D).
                  (D) Venue.--For each certification made by 
                the Secretary pursuant to subparagraph (C)(i), 
                not later than 90 days after the Secretary's 
                determination the Judicial Panel on 
                Multidistrict Litigation shall designate one 
                district court or, if necessary, multiple 
                district courts of the United States that shall 
                have original and exclusive jurisdiction over 
                all actions for any claim relating to or 
                arising out of an insurer's financial 
                responsibility for insured losses from acts of 
                terrorism under this paragraph.
          (4) Notices regarding losses and annual liability 
        cap.--
                  (A) Approaching cap.--If the Secretary 
                determines estimated or actual aggregate 
                Federal compensation to be paid pursuant to 
                paragraph (1) equals or exceeds $80,000,000,000 
                during any Program Year, the Secretary shall 
                promptly provide notification in accordance 
                with subparagraph (D)--
                          (i) of such estimated or actual 
                        aggregate Federal compensation to be 
                        paid;
                          (ii) of the likelihood that such 
                        aggregate Federal compensation to be 
                        paid for such Program Year will equal 
                        or exceed $100,000,000,000; and
                          (iii) that, pursuant to paragraph 
                        (2)(A)(ii), insurers are not required 
                        to make payments of excess insured 
                        losses.
                  (B) Event likely to cause losses to exceed 
                cap.--If any act of terrorism occurs that the 
                Secretary determines is likely to cause 
                estimated or actual aggregate Federal 
                compensation to be paid pursuant to paragraph 
                (1) to exceed $100,000,000,000 during any 
                Program Year, the Secretary shall, not later 
                than 10 days after such act, provide 
                notification in accordance with subparagraph 
                (D)--
                          (i) of such estimated or actual 
                        aggregate Federal compensation to be 
                        paid; and
                          (ii) that, pursuant to paragraph 
                        (2)(A)(ii), insurers are not required 
                        to make payments for excess insured 
                        losses.
                  (C) Exceeding cap.--If the Secretary 
                determines estimated or actual aggregate 
                Federal compensation to be paid pursuant to 
                paragraph (1) equals or exceeds 
                $100,000,000,000 during any Program Year--
                          (i) the Secretary shall promptly 
                        provide notification in accordance with 
                        subparagraph (D)--
                                  (I) of such estimated or 
                                actual aggregate Federal 
                                compensation to be paid; and
                                  (II) that, pursuant to 
                                paragraph (2)(A)(ii), insurers 
                                are not required to make 
                                payments for excess insured 
                                losses unless the Congress 
                                provides for payments for 
                                excess insured losses pursuant 
                                to clause (ii) of this 
                                subparagraph; and
                          (ii) the Congress shall determine the 
                        procedures for and the source of any 
                        payments for such excess insured 
                        losses.
                  (D) Parties notified.--Notification is 
                provided in accordance with this subparagraph 
                only if notification is provided--
                          (i) to the Congress, in writing; and
                          (ii) to insurers, by causing such 
                        notice to be published in the Federal 
                        Register.
                  (E) Determinations.--The Secretary shall make 
                determinations regarding estimated and actual 
                aggregate Federal compensation to be paid 
                promptly after any act of terrorism as may be 
                necessary to comply with this paragraph.
                  (F) Mandatory disclosure for insurance 
                contracts.--All policies for property and 
                casualty insurance and group life insurance 
                shall be deemed to contain a provision to the 
                effect that no insurer that has met its 
                applicable insurer deductible and its 
                applicable share of insured losses that exceed 
                its applicable insurer deductible but are not 
                compensated pursuant to paragraph (1), shall be 
                obligated to pay for any portion of excess 
                insured loss. Notwithstanding the preceding 
                sentence, insurers shall include a disclosure 
                in their policies detailing the maximum level 
                of Government assistance and the applicable 
                insurer share.
          (5) 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.
          (6) Determinations final.--Any determination of the 
        Secretary under this subsection shall be final, unless 
        expressly provided, and shall not be subject to 
        judicial review.
          (7) Insurance marketplace aggregate retention 
        amount.--For purposes of paragraph (8), the insurance 
        marketplace aggregate retention amount shall be--
                  (A) for the period beginning on the first day 
                of the Transition Period and ending on the last 
                day of Program Year 1, the lesser of--
                          (i) $10,000,000,000; and
                          (ii) the aggregate amount, for all 
                        insurers, of insured losses during such 
                        period;
                  (B) for Program Year 2, the lesser of--
                          (i) $12,500,000,000; and
                          (ii) the aggregate amount, for all 
                        insurers, of insured losses during such 
                        Program Year;
                  (C) for Program Year 3, the lesser of--
                          (i) $15,000,000,000; and
                          (ii) the aggregate amount, for all 
                        insurers, of insured losses during such 
                        Program Year;
                  (D) for Program Year 4, the lesser of--
                          (i) $25,000,000,000; and
                          (ii) the aggregate amount, for all 
                        insurers, of insured losses during such 
                        Program Year;
                  (E) for Program Year 5, the lesser of--
                          (i) $27,500,000,000; and
                          (ii) the aggregate amount, for all 
                        insurers, of insured losses during such 
                        Program Year; and
                  (F) for each additional Program Year--
                          (i) for property and casualty 
                        insurance, the lesser of--
                                  (I) $27,500,000,000; and
                                  (II) the aggregate amount, 
                                for all such insurance, of 
                                insured losses during such 
                                Program Year; and
                          (ii) for group life insurance, the 
                        lesser of--
                                  (I) $5,000,000,000; and
                                  (II) the aggregate amount, 
                                for all such insurance, of 
                                insured losses during such 
                                Program Year.
          (8) Recoupment of federal share.--
                  (A) Mandatory recoupment amount.--For 
                purposes of this paragraph, the mandatory 
                recoupment amount for each of the Program Years 
                referred to in subparagraphs (A) through (F) of 
                paragraph (7) shall be the difference between--
                          (i) the applicable insurance 
                        marketplace aggregate retention amount 
                        under paragraph (7) for such Program 
                        Year; and
                          (ii) the aggregate amount, for all 
                        applicable insurers (pursuant to 
                        subparagraph (E)), of insured losses 
                        during such Program Year that are not 
                        compensated by the Federal Government 
                        because such losses--
                                  (I) are within the insurer 
                                deductible for the insurer 
                                subject to the losses; or
                                  (II) are within the portion 
                                of losses of the insurer that 
                                exceed the insurer deductible, 
                                but are not compensated 
                                pursuant to paragraph (1).
                  (B) No mandatory recoupment if uncompensated 
                losses exceed applicable insurance marketplace 
                retention.--Notwithstanding subparagraph (A), 
                if the aggregate amount of uncompensated 
                insured losses referred to in clause (ii) of 
                such subparagraph for any Program Year referred 
                to in any of subparagraphs (A) through (F) of 
                paragraph (7) is greater than the applicable 
                insurance marketplace aggregate retention 
                amount under paragraph (7) for such Program 
                Year, the mandatory recoupment amount shall be 
                $0.
                  (C) Mandatory establishment of surcharges to 
                recoup mandatory recoupment amount.--The 
                Secretary shall collect, for repayment of the 
                Federal financial assistance provided in 
                connection with all acts of terrorism (or acts 
                of war, in the case of workers' compensation) 
                occurring during any of the Program Years 
                referred to in any of subparagraphs (A) through 
                (F) of paragraph (7), terrorism loss risk-
                spreading premiums in an amount equal to any 
                mandatory recoupment amount for such Program 
                Year.
                  (D) Discretionary recoupment of remainder of 
                financial assistance.--To the extent that the 
                amount of Federal financial assistance provided 
                exceeds any mandatory recoupment amount, the 
                Secretary may--
                          (i) recoup, through terrorism loss 
                        risk-spreading premiums, such 
                        additional amounts; or
                          (ii) submit a report to the Congress 
                        identifying such amounts that the 
                        Secretary believes cannot be recouped, 
                        based on--
                                  (I) the ultimate costs to 
                                taxpayers of no additional 
                                recoupment;
                                  (II) the economic conditions 
                                in the commercial marketplace, 
                                including the capitalization, 
                                profitability, and investment 
                                returns of the insurance 
                                industry and the current cycle 
                                of the insurance markets;
                                  (III) the affordability of 
                                commercial insurance for small- 
                                and medium-sized businesses; 
                                and
                                  (IV) such other factors as 
                                the Secretary considers 
                                appropriate.
                  (E) Separate recoupment.--``The Secretary 
                shall provide that--
                          (i) any recoupment under this 
                        paragraph of amounts paid for Federal 
                        financial assistance for insured losses 
                        for property and casualty insurance 
                        shall be applied to property and 
                        casualty insurance policies; and
                          (ii) any recoupment under this 
                        paragraph of amounts paid for Federal 
                        financial assistance for insured losses 
                        for group life insurance shall be 
                        applied to group life insurance 
                        policies.
          (9) Policy surcharge for terrorism loss risk-
        spreading premiums.--
                  (A) Policyholder premium.--Subject to 
                paragraph (8)(E), any amount established by the 
                Secretary as a terrorism loss risk-spreading 
                premium shall--
                          (i) be imposed as a policyholder 
                        premium surcharge on property and 
                        casualty insurance policies and group 
                        life insurance policies in force after 
                        the date of such establishment;
                          (ii) begin with such period of 
                        coverage during the year as the 
                        Secretary determines appropriate; and
                          (iii) be based on--
                                  (I) a percentage of the 
                                premium amount charged for 
                                property and casualty insurance 
                                coverage under the policy; and
                                  (II) a percentage of the 
                                amount at risk for group life 
                                insurance coverage under the 
                                policy.
                  (B) Collection.--The Secretary shall provide 
                for insurers to collect terrorism loss risk-
                spreading premiums and remit such amounts 
                collected to the Secretary.
                  (C) Percentage limitation.--A terrorism loss 
                risk-spreading premium may not exceed, on an 
                annual basis--
                          (i) with respect to property and 
                        casualty insurance, the amount equal to 
                        3 percent of the premium charged under 
                        the policy; and
                          (ii) with respect to group life 
                        insurance, the amount equal to 0.0053 
                        percent of the amount at risk under the 
                        policy.
                  (D) Adjustment for urban and smaller 
                commercial and rural areas and different lines 
                of insurance.--
                          (i) Adjustments.--In determining the 
                        method and manner of imposing terrorism 
                        loss risk-spreading premiums, including 
                        the amount of such premiums, the 
                        Secretary shall take into 
                        consideration--
                                  (I) the economic impact 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;
                                  (II) 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
                                  (III) the various exposures 
                                to terrorism risk for different 
                                lines of insurance.
                          (ii) Recoupment of adjustments.--Any 
                        mandatory recoupment amounts not 
                        collected by the Secretary because of 
                        adjustments under this subparagraph 
                        shall be recouped through additional 
                        terrorism loss risk-spreading premiums.
                  (E) Timing of premiums.--The Secretary may 
                adjust the timing of terrorism loss risk-
                spreading premiums to provide for equivalent 
                application of the provisions of this title to 
                policies that are not based on a calendar year, 
                or to apply such provisions on a daily, 
                monthly, or quarterly basis, as appropriate.
  (f) Captive Insurers and Other Self-Insurance Arrangements.--
The Secretary may, in consultation with the NAIC or the 
appropriate State regulatory authority, apply the provisions of 
this title, as appropriate, to other classes or types of 
captive insurers and other self-insurance arrangements by 
municipalities and other entities (such as workers' 
compensation self-insurance programs and State workers' 
compensation reinsurance pools), but only if such application 
is determined before the occurrence of an act of terrorism in 
which such an entity incurs an insured loss and all of the 
provisions of this title are applied comparably to such 
entities.
  (g) Reinsurance to Cover Exposure.--
          (1) Obtaining coverage.--This title may not be 
        construed to limit or prevent insurers from obtaining 
        reinsurance coverage for insurer deductibles or insured 
        losses retained by insurers pursuant to this section, 
        nor shall the obtaining of such coverage affect the 
        calculation of such deductibles or retentions.
          (2) Limitation on financial assistance.--The amount 
        of financial assistance provided pursuant to this 
        section shall not be reduced by reinsurance paid or 
        payable to an insurer from other sources, except that 
        recoveries from such other sources, taken together with 
        financial assistance for the Transition Period or a 
        Program Year provided pursuant to this section, may not 
        exceed the aggregate amount of the insurer's insured 
        losses for such period. If such recoveries and 
        financial assistance for the Transition Period or a 
        Program Year exceed such aggregate amount of insured 
        losses for that period and there is no agreement 
        between the insurer and any reinsurer to the contrary, 
        an amount in excess of such aggregate insured losses 
        shall be returned to the Secretary.

SEC. 104. GENERAL AUTHORITY AND ADMINISTRATION OF CLAIMS.

  (a) General Authority.--The Secretary shall have the powers 
and authorities necessary to carry out the Program, including 
authority--
          (1) to investigate and audit all claims under the 
        Program; [and]
          (2) to prescribe regulations and procedures to 
        effectively administer and implement the Program, and 
        to ensure that all insurers and self-insured entities 
        that participate in the Program are treated comparably 
        under the Program[.]; and
          (3) during the 90-day period beginning upon the 
        certification of any act of terrorism, to issue such 
        regulations as the Secretary considers necessary to 
        carry out this Act without regard to the notice and 
        comment provisions of section 553 of title 5, United 
        States Code.

           *       *       *       *       *       *       *

  (h) Annual Adjustment.--
          (1) In general.--Notwithstanding any other provision 
        of this title, the Secretary shall adjust, for the 
        second additional Program Year and for each additional 
        Program Year thereafter, based upon the percentage 
        change in an appropriate index during the 12-month 
        period preceding such Program Year, each of the 
        following amounts (as such amount may have been 
        previously adjusted):
                  (A) The dollar amount in section 
                102(1)(B)(ii) (relating to act of terrorism).
                  (B) The dollar amount in section 102(11)(J) 
                (relating to aggregate industry insured losses 
                in a previously impacted area).
                  (C) The dollar amounts in subparagraphs (A) 
                and (B) of section 103(e)(1) (relating to 
                limitation on Federal share).
                  (D) The dollar amounts in section 
                103(e)(1)(C) (relating to Program trigger).
                  (E) The dollar amount in section 103(e)(1)(D) 
                (relating to limitation on group life insurance 
                compensation).
                  (F) The dollar amounts in section 103(e)(2) 
                (relating to cap on annual liability).
                  (G) The dollar amounts in section 
                103(e)(3)(C) (relating to limitation on insurer 
                financial liability).
                  (H) The dollar amounts in section 103(e)(4) 
                (relating to notices regarding losses and 
                annual liability cap).
                  (I) The dollar amounts in section 103(e)(7) 
                (relating to insurance marketplace aggregate 
                retention amount).
                  (J) The dollar amounts in section 
                109(b)(1)(C) (relating to membership of 
                Commission on Terrorism Insurance Risk).
          (2) Publication.--The Secretary shall make the dollar 
        amounts for each additional Program Year, as adjusted 
        pursuant to this subsection, publicly available in a 
        timely manner.

           *       *       *       *       *       *       *


SEC. 106. PRESERVATION PROVISIONS.

  (a) State Law.--Nothing in this title shall affect the 
jurisdiction or regulatory authority of the insurance 
commissioner (or any agency or office performing like 
functions) of any State over any insurer or other person--
          (1) except as specifically provided in this title; 
        and
          (2) except that--
                  (A)  * * *
                  (B) during the period beginning on the date 
                of enactment of this Act and ending on December 
                31, 2003, rates and forms for terrorism risk 
                insurance covered by this title and filed with 
                any State shall not be subject to prior 
                approval or a waiting period under any law of a 
                State that would otherwise be applicable, 
                except that nothing in this title affects the 
                ability of any State to invalidate a rate as 
                excessive, inadequate, or unfairly 
                discriminatory, and, with respect to forms, 
                where a State has prior approval authority, it 
                shall apply to allow subsequent review of such 
                forms; [and]
                  (C) during the period beginning on the date 
                of the enactment of the Terrorism Risk 
                Insurance Revision and Extension Act of 2007 
                and ending on December 31, 2008, rates and 
                forms for property and casualty insurance, and 
                group life insurance, required by this title 
                and providing coverage except for NBCR 
                terrorism that are filed with any State shall 
                not be subject to prior approval or a waiting 
                period under any law of a State that would 
                otherwise be applicable, except that nothing in 
                this title affects the ability of any State to 
                invalidate a rate as excessive, inadequate, or 
                unfairly discriminatory, and, with respect to 
                forms, where a State has prior approval 
                authority, it shall apply to allow subsequent 
                review of such forms;
                  (D) during the period beginning on the date 
                of the enactment of the Terrorism Risk 
                Insurance Revision and Extension Act of 2007, 
                and ending on December 31, 2009, forms for 
                property and casualty insurance, and group life 
                insurance, covered by this title and providing 
                coverage for NBCR terrorism that are filed with 
                any State, to the extent of the addition of 
                such coverage for NBCR terrorism and where such 
                coverage was not previously required, shall not 
                be subject to prior approval or waiting period 
                under any law of a State that would otherwise 
                be applicable;
                  (E) during the period beginning on the date 
                of the enactment of the Terrorism Risk 
                Insurance Revision and Extension Act of 2007, 
                and ending on December 31, 2010, rates for 
                property and casualty insurance, and group life 
                insurance, covered by this title and providing 
                coverage for NBCR terrorism that are filed with 
                any State, to the extent of the addition of 
                such coverage for NBCR terrorism and where such 
                coverage was not previously required, shall not 
                be subject to prior approval or waiting period 
                under any law of a State that would otherwise 
                be applicable, except that nothing in this 
                title affects the ability of any State to 
                invalidate a rate as inadequate or unfairly 
                discriminatory; and
                  [(C)] (F) during the period beginning on the 
                date of enactment of this Act and for so long 
                as the Program is in effect, as provided in 
                section 108, including authority in subsection 
                108(b), books and records of any insurer that 
                are relevant to the Program shall be provided, 
                or caused to be provided, to the Secretary, 
                upon request by the Secretary, notwithstanding 
                any provision of the laws of any State 
                prohibiting or limiting such access.

           *       *       *       *       *       *       *

  (c) Rule of Construction Regarding Insurer Coordination.--
Nothing in this Act shall be construed to prohibit, restrict, 
or otherwise limit an insurer from entering into an arrangement 
with another insurer to make available coverage for any portion 
of insured losses to fulfill the requirements of section 
103(c). The Secretary shall develop, in consultation with the 
NAIC, minimum financial solvency standards and other standards 
the Secretary determines appropriate with respect to such 
arrangements. Nothing in this subsection shall be construed to 
establish any legal partnership.

SEC. 106A. TERRORISM BUY-DOWN FUND.

  (a) Establishment.--The Secretary shall establish a Terrorism 
Buy-Down Fund (in this section referred to as the ``Fund'') 
that shall make available additional terrorism coverage for the 
insured losses of insurers, which shall be available for 
purchase by insurers on a voluntary basis.
  (b) Purchase of Deductible, co-Share, and Trigger Buy-Down 
Coverage.--
          (1) In general.--An insurer may purchase deductible, 
        co-share, and pre-trigger buy-down coverage (in this 
        section referred to as 'buy-down coverage') through the 
        Fund by making an election, in advance, to treat some 
        or all of the premiums it has disclosed pursuant to 
        section 103(b)(2) as fee charges for the Program 
        imposed by the Secretary and remitting such amounts to 
        the Fund.
          (2) Limits.--An insurer may not purchase buy-down 
        coverage in an amount greater than the lesser of--
                  (A) the highest amount specified in section 
                103(e)(1)(C); and
                  (B) the insurer's one-in-one-hundred-year 
                risk exposure to acts of terrorism.
  (c) Buy-Down Coverage.--The Fund shall provide the buy-down 
coverage to an insurer for losses for acts of terrorism, 
without application of the insurer deductible and in addition 
to any otherwise payable Federal share of compensation pursuant 
to section 103(e).
  (d) Build-up.--The buy-down coverage that shall be payable to 
an insurer for qualifying losses shall be the aggregate of the 
insurer's buy-down coverage premiums plus interest accrued on 
such amounts.
  (e) Use by Insurers.--
          (1) Qualifying losses.--For the purpose of this 
        section, qualifying losses are insured losses by an 
        insurer that are not excess losses and that do not 
        include amounts for which Federal financial assistance 
        pursuant to section 103(e) is received, notwithstanding 
        any limits otherwise applicable regarding section 
        103(e)(1)(C) (regarding program triggers) or section 
        102(11) (regarding insurer deductibles).
          (2) Use of buy-down coverage.--An insurer may use any 
        buy-down coverage payments received under subsection 
        (f) to satisfy--
                  (A) the applicable insurer deductibles for 
                the insurer;
                  (B) the portion of the insurer's losses that 
                exceed the insurer deductible but are not 
                compensated by the Federal share; and
                  (C) the insurer's obligations to pay for 
                insured losses if the Program trigger under 
                section 103(e)(1)(C) is not satisfied.
          (3) Buy-down coverage does not reduce federal co-
        share.--The receipt by an insurer of buy-down coverage 
        under this section for insured losses shall not be 
        considered with respect to calculating the insurer's 
        insured losses with respect to the insurer's deductible 
        and eligibility for Federal financial assistance 
        pursuant to section 103(e).
          (4) Insolvency.--An insurer may sell its rights to 
        buy-down coverage from the Fund to another insurer as 
        part of or to avoid an insolvency or as part of a 
        merger, sale, or major reorganization.
  (f) Payment of Buy-Down Coverage.--The Fund shall pay the 
qualifying losses of an insurer purchasing buy-down coverage up 
to the amount described in subsection (d).
  (g) Government Borrowing.--The Secretary may borrow the funds 
from the Fund to offset, in whole or in part, the Federal share 
of compensation provided to all insurers under the Program, 
except that--
          (1) the Fund shall always immediately provide any 
        buy-down coverage payments required under subsection 
        (f); and
          (2) any such amounts borrowed must be replenished 
        with appropriate interest.
  (h) Risk-Sharing Mechanisms.--The Secretary shall establish 
voluntary risk-sharing mechanisms for insurers purchasing buy-
down coverage from the Fund to pool their reinsurance purchases 
and otherwise share terrorism risk.
  (i) Termination.--Upon termination of the Program under 
section 108, and subject to the Secretary's continuing 
authority under section 108(b) to adjust claims in satisfaction 
under the Program, the Secretary shall provide that the Fund 
shall become a privately-operated mutual terrorism reinsurance 
company owned by the insurers that have submitted buy-down 
coverage premiums in proportion to such premiums minus any buy-
down coverage payments received.

           *       *       *       *       *       *       *


SEC. 108. TERMINATION OF PROGRAM.

  (a) Termination of Program.--The Program shall terminate on 
[December 31, 2007] December 31, 2022.

           *       *       *       *       *       *       *

  (c) Repeal; Savings Clause.--This title is repealed on the 
final termination date of the Program under subsection (a), 
except that such repeal shall not be construed--
          (1) to prevent the Secretary from taking, or causing 
        to be taken, such actions under subsection (b) of this 
        section, [paragraph (4), (5), (6), (7), or (8)] 
        paragraph (5), (6), (7), (8), or (9) of section 103(e), 
        or subsection (a)(1), (c), (d), or (e) of section 104, 
        as in effect on the day before the date of such repeal, 
        or applicable regulations promulgated thereunder, 
        during any period in which the authority of the 
        Secretary under subsection (b) of this section is in 
        effect; or

           *       *       *       *       *       *       *

  [(e) Analysis of Market Conditions for Terrorism Risk 
Insurance.--
          [(1) In general.--The President's Working Group on 
        Financial Markets, in consultation with the National 
        Association of Insurance Commissioners, representatives 
        of the insurance industry, representatives of the 
        securities industry, and representatives of policy 
        holders, shall perform an analysis regarding the long-
        term availability and affordability of insurance for 
        terrorism risk, including--
                  [(A) group life coverage; and
                  [(B) coverage for chemical, nuclear, 
                biological, and radiological events.
          [(2) Report.--Not later than September 30, 2006, the 
        President's Working Group on Financial Markets shall 
        submit a report to the Committee on Banking, Housing, 
        and Urban Affairs of the Senate and the Committee on 
        Financial Services of the House of Representatives on 
        its findings pursuant to the analysis conducted under 
        subsection (a).]
  (e) Analysis of Market Conditions for Terrorism Risk 
Insurance.--
          (1) In general.--The Secretary, in consultation with 
        the NAIC, representatives of the insurance industry, 
        representatives of the securities industry, and 
        representatives of policyholders, shall perform an 
        analysis regarding the long-term availability and 
        affordability of insurance for terrorism risk in the 
        private marketplace, including coverage for--
                  (A) property and casualty insurance;
                  (B) group life insurance;
                  (C) workers' compensation;
                  (D) nuclear, biological, chemical, and 
                radiological events; and
                  (E) commercial real estate.
          (2) Biennial reports.--The Secretary shall submit 
        biennial reports to the Committee on Financial Services 
        of the House of Representatives and the Committee on 
        Banking, Housing, and Urban Affairs of the Senate, on 
        its findings pursuant to the analysis conducted under 
        paragraph (1). The first such report shall be submitted 
        not later than the expiration of the 24-month period 
        beginning on the date of the enactment of the Terrorism 
        Risk Insurance Revision and Extension Act of 2007.
          (3) Testimony.--Upon submission of each biennial 
        report under paragraph (2), the Secretary shall provide 
        oral testimony to the Committee on Financial Services 
        of the House of Representatives and Committee on 
        Banking, Housing, and Urban Affairs of the United 
        States Senate regarding the report and the analysis 
        under this subsection for which the report is 
        submitted.

SEC. 109. COMMISSION ON TERRORISM RISK INSURANCE.

  (a) Establishment.--There is hereby established the 
Commission on Terrorism Risk Insurance (in this section 
referred to as the ``Commission'').
  (b) Membership.--
          (1) The Commission shall consist of 21 members, as 
        follows:
                  (A) The Secretary of the Treasury or the 
                designee of the Secretary.
                  (B) One member who is a State insurance 
                commissioner, designated by the NAIC.
                  (C) 15 members, who shall be appointed by the 
                President, who shall include--
                          (i) a representative of group life 
                        insurers;
                          (ii) a representative of property and 
                        casualty insurers with direct earned 
                        premium of $1,000,000,000 or less;
                          (iii) a representative of property 
                        and casualty insurers with direct 
                        earned premium of more than 
                        $1,000,000,000;
                          (iv) a representative of multiline 
                        insurers;
                          (v) a representative of independent 
                        insurance agents;
                          (vi) a representative of insurance 
                        brokers;
                          (vii) a policyholder representative;
                          (viii) a representative of the 
                        survivors of the victims of the attacks 
                        of September 11, 2001;
                          (ix) a representative of the 
                        reinsurance industry;
                          (x) a representative of workers' 
                        compensation insurers;
                          (xi) a representative from the 
                        commercial mortgage-backed securities 
                        industry;
                          (xii) a representative from a 
                        nationally recognized statistical 
                        rating organization;
                          (xiii) a real estate developer;
                          (xiv) a representative of workers' 
                        compensation insurers created by State 
                        legislatures, selected in consultation 
                        with the American Association of State 
                        Compensation Insurance Funds from among 
                        its members; and
                          (xv) a representative from the 
                        commercial real estate brokerage 
                        industry or the commercial property 
                        management industry.
                  (D) Four members, who shall serve as liaisons 
                to the Congress, who shall include two members 
                jointly selected by the Chairman and Ranking 
                Member of the Committee on Financial Services 
                of the House of Representatives and two members 
                jointly selected by the Chairman and Ranking 
                Member of the Committee on Banking, Housing, 
                and Urban Affairs of the Senate.
          (2) Secretary.--The Program Director of the Terrorism 
        Risk Insurance Act of the Department of the Treasury 
        shall serve as Secretary of the Commission. The 
        Secretary of the Commission shall determine the manner 
        in which the Commission shall operate, including 
        funding and staffing.
  (c) Duties.--
          (1) In general.--The Commission shall identify and 
        make recommendations regarding--
                  (A) possible actions to encourage, 
                facilitate, and sustain provision by the 
                private insurance industry in the United States 
                of affordable coverage for losses due to an act 
                or acts of terrorism;
                  (B) possible actions or mechanisms to sustain 
                or supplement the ability of the insurance 
                industry in the United States to cover losses 
                resulting from acts of terrorism in the event 
                that--
                          (i) such losses jeopardize the 
                        capital and surplus of the insurance 
                        industry in the United States as a 
                        whole; or
                          (ii) other consequences from such 
                        acts occur, as determined by the 
                        Commission, that may significantly 
                        affect the ability of the insurance 
                        industry in the United States to cover 
                        such losses independently; and
                  (C) possible actions to significantly reduce 
                the Federal role in covering losses resulting 
                from acts of terrorism.
          (2) Evaluations.--In identifying and making the 
        recommendations required under paragraph (1), the 
        Commission shall specifically evaluate the utility and 
        viability of proposals aimed at improving the 
        availability of insurance against terrorism risk in the 
        private marketplace.
          (3) Initial meeting.--The Commission shall hold its 
        first meeting during the 3-month period that begins 15 
        months after the date of the enactment of the Terrorism 
        Risk Insurance Revision and Extension Act of 2007.
          (4) Reports.--
                  (A) Contents.--The Commission shall submit 
                two reports to the Congress that--
                          (i) evaluate and make recommendations 
                        regarding whether there is a need for a 
                        Federal terrorism risk insurance 
                        program;
                          (ii) if so, include a specific, 
                        detailed recommendation for the 
                        replacement of the Program under this 
                        title; and
                          (iii) include the identifications, 
                        evaluations, and recommendations 
                        required under paragraphs (1) and (2).
                  (B) Timing.--The first report required under 
                subparagraph (A) shall be submitted before the 
                expiration of the 60-month period beginning on 
                the date of the enactment of the Terrorism Risk 
                Insurance Revision and Extension Act of 2007. 
                The second such report shall be submitted 
                before the expiration of the 96-month period 
                beginning upon such date of enactment.

           *       *       *       *       *       *       *


                      ADDITIONAL REPUBLICAN VIEWS

    Enacted after the September 11, 2001 terrorist attacks, the 
Terrorism Risk Insurance Act (TRIA) was intended to be ``a 
temporary Federal program . . . to allow for a transitional 
period for the private market to stabilize, resume pricing of 
[terrorism] insurance, and build capacity.'' Subsequently, 
Congress recognized the need for a short-term extension of this 
new program to curb uncertainty and maintain market stability. 
To ensure that the taxpayers' liability under TRIA would not 
become permanent, several mechanisms were included to phase out 
the Federal subsidy over time, including: increasing the 
insurer deductibles from 7 to 20 percent, increasing the 
program trigger from $5 million to $100 million, increasing the 
insurer co-share from 10 to 15 percent, increasing industry 
retention from $10 billion to $27.5 billion, and narrowing 
lines of coverage.
    TRIA has successfully fulfilled its mandate. According to a 
report by the President's Working Group on Financial Markets, 
as the Federal subsidies for terrorism insurance have been 
slowly phased out, take-up rates have risen, prices have 
declined, reinsurance has expanded, and the private marketplace 
has been successfully diversifying and absorbing additional 
risk exposure. Unfortunately, H.R. 2761 radically revises TRIA, 
changing it from a temporary hand-up into a permanent hand-out. 
Instead of continuing to expand the private sector role in the 
marketplace, H.R. 2761 turns the program on its head, shifting 
the responsibility from a majority-private sector program to a 
more government-run program with taxpayers on the hook for 
massive increased potential liabilities.
    While Republicans authored the original TRIA proposals and 
continue to strongly support extending it for a reasonable 
period of time, H.R. 2761 goes in the wrong direction with 
respect to the proper balance between private and public sector 
participation. The 15 year program extension is too long for 
such an enormous taxpayer liability--particularly with the 
terrorist threat continuing to rapidly evolve. The phase-out of 
the Federal role and narrowing of scope under current law would 
be largely reversed, the program trigger halved, and required 
deductibles and co-shares would be dramatically reduced for 
insurance companies. While deductibles would continue to 
slightly increase annually, they are reset below Year 1 levels, 
with the rate of increase not bringing the deductibles even 
close to current levels until long after the 15 year extension.
    Despite H.R. 2761's vast expansion of TRIA's federal 
subsidies, Committee Republicans and Democrats worked together 
in a number of critical areas to provide more protection from 
terrorist threats in the marketplace. For example, many of the 
provisions of H.R. 2761 protecting policyholders from domestic 
threats and nuclear, biological, chemical, and radiological 
(NBCR) risks were initially developed in TRIA extension 
legislation that passed the House last Congress. Republicans 
were also successful in getting several important amendments 
adopted to add more market reforms to TRIA, encourage the long-
term build-up of dedicated terrorism surplus, protect 
taxpayers, increase private sector responsibility, and better 
implement the NBCR mandates.
    For example, the manager's amendment to H.R. 2761 offered 
by Chairman Frank at the Committee markup contained several key 
Republican provisions to create a transition period for 
implementation of the new NBCR requirements, better balance the 
application of insurance company deductibles, and allow 
insurers to accumulate and pool dedicated long-term terrorism 
reserves for their deductibles and co-shares. State forms 
requirements for NBCR terrorism coverage not previously 
required will be exempt from state review for the first two 
years as the NBCR marketplace adjusts and evolves. State price 
controls will be partly preempted for three years to allow 
insurers to charge appropriate rates for NBCR coverage as they 
adjust their risk portfolios during this transition period, 
although states will still be permitted to invalidate a rate as 
inadequate or unfairly discriminatory. Insurers are allowed to 
voluntarily participate in a terrorism buy-down fund, to lower 
their liability for deductibles and co-shares after an event by 
contributing premiums to a fund that would accumulate interest 
over time. The funds can be pooled to help create additional 
capacity over time, particularly to help insurers absorb the 
increasing deductibles or increases in the Program trigger. 
These reforms are based on amendments offered by Rep. Richard 
Baker at the Capital Markets, Insurance, and Government 
Sponsored Enterprises Subcommittee markup of H.R. 2761, and 
will especially benefit smaller insurers, who may find it 
difficult to initially price and set aside reserves for NBCR 
coverage.
    In addition to the Manager's Amendment, the Committee 
approved two Republican amendments that improve the ability of 
insurers to comply with the NBCR make-available mandate. Rep. 
Kenny Marchant offered a measure clarifying that an insurer may 
partner with another insurer with a comparable credit rating to 
provide NBCR coverage. This will allow insurers that may find 
it more difficult to offer NBCR coverage without risking 
insolvency or a ratings downgrade to continue offering 
commercial property and casualty insurance in high-risk areas. 
Rep. Donald Manzullo had an amendment accepted to allow 
exemptions to the NBCR make-available mandate for small 
insurers that demonstrate a likelihood of insolvency in the 
case of nuclear, biological, chemical, or radiological 
terrorism. This amendment allows small insurers to continue 
offering their underlying coverage to policyholders even though 
the NBCR mandate would otherwise magnify their risk exposure 
and force a significant coverage contraction. These reforms 
will ease the implementation of the NBCR mandates for covered 
lines under the TRIA program. It should be noted that TRIA does 
not provide a backstop for homeowners' insurance or other 
personal lines, and NBCR risks are expected to continue to be 
excluded from most homeowners' policies. Past Committee reports 
have suggested that NBCR is a relatively uninsurable risk 
absent some form of government backstop.
    Republican amendments were also accepted to better protect 
taxpayers from bearing the brunt of an expanded TRIA program. 
Rep. Michele Bachmann offered an amendment directing Treasury 
to either require full taxpayer recoupment of any Federal 
payouts to cover terrorism losses, or to report to Congress on 
why full recoupment is not appropriate, based on such factors 
as cost to taxpayers, the economic environment, and insurance 
affordability for small- and mediumsized companies. Full 
recoupment is a vital component of any TRIA extension. While 
mandatory 100% payback of the taxpayers has been included in 
every previous Committee-passed TRIA bill, requiring Treasury 
to either recoup such amounts or report to Congress why and to 
what extent such full recoupment cannot be made is an 
improvement over the introduced language of H.R. 2761. The 
Committee also adopted an amendment offered by Rep. Scott 
Garrett increasing the TRIA deductible each year for events 
over $1 billion by one-half a percentage point each year (50 
basis points), with a reset mechanism to bring the deductibles 
back down if another major terrorist event occurred. 
Deductibles have increased by at least 2.5% each year since the 
creation of TRIA. Though the new increase is much more modest, 
adding at least some increase to H.R. 2761 ensures that private 
sector responsibility will continue to grow and the Federal 
subsidy decline over time. Rep. Ginny Brown-Waite also offered 
a fiscal responsibility amendment designed to reduce taxpayer 
exposure to terrorism losses. Under this amendment, Treasury is 
directed to index the TRIA program--including the trigger and 
cap--to adjust each year for inflation. This will ensure that 
the dollar amounts do not decline in actual value each year, 
protecting the government and taxpayers from having to 
intervene in relatively small events that do not threaten the 
functioning or solvency of the marketplace.
    The vast majority of Republicans remain strongly committed 
to TRIA and its extension for a reasonable length of time. H.R. 
2761 includes a number of important reforms that have been 
developed as the result of bipartisan efforts over several 
years. It is my hope that H.R. 2761 can be rebalanced, either 
on the House Floor or in conference with the Senate, to better 
reflect its intended temporary and private sector focused 
nature. TRIA is working extremely well today. Its Federal 
subsidies should not be increased, but rather slowly decreased 
to encourage private sector solutions and innovation. If this 
goal can be achieved, final passage of TRIA will have 
overwhelming bipartisan support.

                                    Spencer Bachus, Ranking Member.

               DISSENTING VIEWS OF RON PAUL ON H.R. 2761

    Six years ago, when the Congress considered the bill 
creating the terrorism insurance program, I urged my colleagues 
to reject it. One of the reasons I opposed the bill was my 
concern that, contrary to the claims of the bill's supporters, 
terrorism insurance would not be allowed to sunset. As I said 
then:

          The drafters of H.R. 3210 claim that this creates a 
        ``temporary'' government program. However, Mr. Speaker, 
        what happens in three years if industry lobbyists come 
        to Capitol Hill to explain that there is still a need 
        for this program because of the continuing threat of 
        terrorist attacks. Does anyone seriously believe that 
        Congress will refuse to reauthorize this ``temporary'' 
        insurance program or provide some other form of 
        taxpayer help to the insurance industry? I would like 
        to remind my colleagues that the federal budget is full 
        of expenditures for long-lasting programs that were 
        originally intended to be ``temporary.''

    I am disappointed to be proven correct. I am also skeptical 
that, having renewed the program twice, this time for fifteen 
years, Congress will ever allow it to expire.
    As Congress considers extending this program, I renew my 
opposition to it for substantially the same reasons I stated 
six years ago. However, I do have a suggestion on how to 
improve the program. Since one claimed problem with allowing 
the private market to provide terrorism insurance is the 
difficulty of quantifying the risk of an attack, the taxpayers' 
liability under the terrorism reinsurance program should be 
reduced for an attack occurring when the country is under 
orange or red alert. After all, because the point of the alert 
system is to let Americans know when there is an increased 
likelihood of an attack it is reasonable to expect insurance 
companies to demand that their clients take extra precautionary 
measures during periods of high alert. Reducing taxpayer 
subsidies will provide an incentive to ensure private parties 
take every possible precaution to minimize the potential damage 
from possible terrorists attack.
    Since my fundamental objections to the program remain the 
same as six years ago, I am attaching my statement regarding 
H.R. 3210, which created the terrorist insurance program in the 
107th Congress:
    Mr. Speaker, no one doubts that the government has a role 
to play in compensating American citizens who are victimized by 
terrorist attacks. However, Congress should not lose sight of 
fundamental economic and constitutional principles when 
considering how best to provide the victims of terrorist 
attacks just compensation. I am afraid that H.R. 3210, the 
Terrorism Risk Protection Act, violates several of those 
principles and therefore passage of this bill is not in the 
best interests of the American people.
    Under H.R. 3210, taxpayers are responsible for paying 90% 
of the costs of a terrorist incident when the total cost of 
that incident exceeds a certain threshold. While insurance 
companies technically are responsible under the bill for paying 
back monies received from the Treasury, the administrator of 
this program may defer repayment of the majority of the subsidy 
in order to ``avoid the likely insolvency of the commercial 
insurer,'' or avoid ``unreasonable economic disruption and 
market instability.'' This language may cause administrators to 
defer indefinitely the repayment of the loans, thus causing 
taxpayers to permanently bear the loss. This scenario is 
especially likely when one considers that ``avoid . . . likely 
insolvency, unreasonable economic disruption, and market 
instability'' are highly subjective standards, and that any 
administrator who attempts to enforce a strict repayment 
schedule likely will come under heavy political pressure to be 
more ``flexible'' in collecting debts owed to the taxpayers.
    The drafters of H.R. 3210 claim that this creates a 
``temporary'' government program. However, Mr. Speaker, what 
happens in three years if industry lobbyists come to Capitol 
Hill to explain that there is still a need for this program 
because of the continuing threat of terrorist attacks. Does 
anyone seriously believe that Congress will refuse to 
reauthorize this ``temporary'' insurance program or provide 
some other form of taxpayer help to the insurance industry? I 
would like to remind my colleagues that the federal budget is 
full of expenditures for long-lasting programs that were 
originally intended to be ``temporary.''
    H.R. 3210 compounds the danger to taxpayers because of what 
economists call the ``moral hazard'' problem. A moral hazard is 
created when individuals have the costs incurred from a risky 
action subsidized by a third party. In such a case individuals 
may engage in unnecessary risks or fail to take steps to 
minimize their risks. After all, if a third party will bear the 
costs of negative consequences of risky behavior, why should 
individuals invest their resources in avoiding or minimizing 
risk?
    While no one can plan for terrorist attacks, individuals 
and businesses can take steps to enhance security. For example, 
I think we would all agree that industrial plants in the United 
States enjoy reasonably good security. They are protected not 
by the local police, but by owners putting up barbed wire 
fences, hiring guards with guns, and requiring identification 
cards to enter. One reason private firms put these security 
measures in place is because insurance companies provide them 
with incentives, in the form of lower premiums, to adopt 
security measures. H.R. 3210 contains no incentives for this 
private activity. The bill does not even recognize the 
important role insurance plays in providing incentives to 
minimize risks. By removing an incentive for private parties to 
avoid or at least mitigate the damage from a future terrorist 
attack, the government inadvertently increases the damage that 
will be inflicted by future attacks!
    Instead of forcing taxpayers to subsidize the costs of 
terrorism insurance, Congress should consider creating a tax 
credit or deduction for premiums paid for terrorism insurance, 
as well as a deduction for claims and other costs borne by the 
insurance industry connected with offering terrorism insurance. 
A tax credit approach reduces government's control over the 
insurance market. Furthermore, since a tax credit approach 
encourages people to devote more of their own resources to 
terrorism insurance, the moral hazard problems associated with 
federally funded insurance is avoided.
    The version of H.R. 3210 passed by the Financial Services 
committee took a good first step in this direction by repealing 
the tax penalty which prevents insurance companies from 
properly reserving funds for human-created catastrophes. I am 
disappointed that this sensible provision was removed from the 
final bill. Instead, H.R. 3210 instructs the Treasury 
Department to study the benefits of allowing insurers to 
establish tax-free reserves to cover losses from terrorist 
events. The perceived need to study the wisdom of cutting taxes 
while expanding the federal government without hesitation 
demonstrates much that is wrong with Washington.
    In conclusion, Mr. Speaker, H.R. 3210 may reduce the risk 
to insurance companies from future losses, but it increases the 
costs incurred by an American taxpayer. More significantly, by 
ignoring the moral hazard problem this bill may have the 
unintended consequence of increasing the losses suffered in any 
future terrorist attacks. Therefore, passage of this bill is 
not in the long-term interests of the American people.
                                                          Ron Paul.

                                  
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