--H.R.3210--
H.R.3210
One Hundred Seventh Congress
of the
United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Wednesday,
the twenty-third day of January, two thousand and two
An Act
To ensure the continued financial capacity of insurers to provide
coverage for risks from terrorism.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE- This Act may be cited as the `Terrorism Risk Insurance
Act of 2002'.
(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. 103. Terrorism Insurance Program.
Sec. 104. General authority and administration of claims.
Sec. 105. Preemption and nullification of pre-existing terrorism
exclusions.
Sec. 106. Preservation provisions.
Sec. 107. Litigation management.
Sec. 108. Termination of Program.
TITLE II--TREATMENT OF TERRORIST ASSETS
Sec. 201. Satisfaction of judgments from blocked assets of terrorists,
terrorist organizations, and State sponsors of terrorism.
TITLE III--FEDERAL RESERVE BOARD PROVISIONS
Sec. 301. Certain authority of the Board of Governors of the Federal
Reserve System.
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:
(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--
(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--
(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; and
(E) notwithstanding subparagraphs (A) through (D), for the Transition
Period, Program Year 1, Program Year 2, or Program Year 3, 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.
(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.
(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 surety
insurance; and
(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.); or
(vii) reinsurance or retrocessional reinsurance.
(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-
(1) INITIAL PROGRAM PERIODS- During the period beginning on the first
day of the Transition Period and ending on the last day of Program Year 2,
each entity that meets the definition of an insurer under section
102--
(A) shall make available, in all of its property and casualty
insurance policies, coverage for insured losses; and
(B) 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.
(2) PROGRAM YEAR 3- Not later than September 1, 2004, the Secretary
shall, based on the factors referred to in section 108(d)(1), determine
whether the provisions of subparagraphs (A) and (B) of paragraph (1) should
be extended through Program Year 3.
(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-
(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 shall be equal to 90 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) 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
Program Year 2 or Program Year 3 (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 Program Year 2 or Program Year 3,
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--
(ii) the aggregate amount, for all insurers, of insured losses
during such period;
(B) for Program Year 2, the lesser of--
(ii) the aggregate amount, for all insurers, of insured losses
during such Program Year; and
(C) for Program Year 3, the lesser of--
(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), (B), and (C) 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 subparagraph (A), (B), or (C)
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 subparagraph (A), (B), or (C) 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).
(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. 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.
(b) INTERIM RULES AND PROCEDURES- The Secretary may issue interim final
rules or procedures specifying the manner in which--
(1) insurers may file and certify claims under the Program;
(2) the Federal share of compensation for insured losses will be paid
under the Program, including payments based on estimates of or actual
insured losses;
(3) the Secretary may, at any time, seek repayment from or reimburse any
insurer, based on estimates of insured losses under the Program, to
effectuate the insured loss sharing provisions in section 103; and
(4) the Secretary will determine any final netting of payments under the
Program, including payments owed to the Federal Government from any insurer
and any Federal share of compensation for insured losses owed to any
insurer, to effectuate the insured loss sharing provisions in section
103.
(c) CONSULTATION- The Secretary shall consult with the NAIC, as the
Secretary determines appropriate, concerning the Program.
(d) CONTRACTS FOR SERVICES- The Secretary may employ persons or contract
for services as may be necessary to implement the Program.
(1) IN GENERAL- The Secretary may assess a civil monetary penalty in an
amount not exceeding the amount under paragraph (2) against any insurer that
the Secretary determines, on the record after opportunity for a
hearing--
(A) has failed to charge, collect, or remit terrorism loss
risk-spreading premiums under section 103(e) in accordance with the
requirements of, or regulations issued under, this title;
(B) has intentionally provided to the Secretary erroneous information
regarding premium or loss amounts;
(C) submits to the Secretary fraudulent claims under the Program for
insured losses;
(D) has failed to provide the disclosures required under subsection
(f); or
(E) has otherwise failed to comply with the provisions of, or the
regulations issued under, this title.
(2) AMOUNT- The amount under this paragraph is the greater of $1,000,000
and, in the case of any failure to pay, charge, collect, or remit amounts in
accordance with this title or the regulations issued under this title, such
amount in dispute.
(3) RECOVERY OF AMOUNT IN DISPUTE- A penalty under this subsection for
any failure to pay, charge, collect, or remit amounts in accordance with
this title or the regulations under this title shall be in addition to any
such amounts recovered by the Secretary.
(f) SUBMISSION OF PREMIUM INFORMATION-
(1) IN GENERAL- The Secretary shall annually compile information on the
terrorism risk insurance premium rates of insurers for the preceding
year.
(2) ACCESS TO INFORMATION- To the extent that such information is not
otherwise available to the Secretary, the Secretary may require each insurer
to submit to the NAIC terrorism risk insurance premium rates, as necessary
to carry out paragraph (1), and the NAIC shall make such information
available to the Secretary.
(3) AVAILABILITY TO CONGRESS- The Secretary shall make information
compiled under this subsection available to the Congress, upon
request.
(1) FEDERAL PAYMENTS- There are hereby appropriated, out of funds in the
Treasury not otherwise appropriated, such sums as may be necessary to pay
the Federal share of compensation for insured losses under the
Program.
(2) ADMINISTRATIVE EXPENSES- There are hereby appropriated, out of funds
in the Treasury not otherwise appropriated, such sums as may be necessary to
pay reasonable costs of administering the Program.
SEC. 105. PREEMPTION AND NULLIFICATION OF PRE-EXISTING TERRORISM
EXCLUSIONS.
(a) GENERAL NULLIFICATION- Any terrorism exclusion in a contract for
property and casualty insurance that is in force on the date of enactment of
this Act shall be void to the extent that it excludes losses that would
otherwise be insured losses.
(b) GENERAL PREEMPTION- Any State approval of any terrorism exclusion from
a contract for property and casualty insurance that is in force on the date of
enactment of this Act, shall be void to the extent that it excludes losses
that would otherwise be insured losses.
(c) REINSTATEMENT OF TERRORISM EXCLUSIONS- Notwithstanding subsections (a)
and (b) or any provision of State law, an insurer may reinstate a preexisting
provision in a contract for property and casualty insurance that is in force
on the date of enactment of this Act and that excludes coverage for an act of
terrorism only--
(1) if the insurer has received a written statement from the insured
that affirmatively authorizes such reinstatement; or
(A) the insured fails to pay any increased premium charged by the
insurer for providing such terrorism coverage; and
(B) the insurer provided notice, at least 30 days before any such
reinstatement, of--
(i) the increased premium for such terrorism coverage;
and
(ii) the rights of the insured with respect to such coverage,
including any date upon which the exclusion would be reinstated if no
payment is received.
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
(A) the definition of the term `act of terrorism' in section 102 shall
be the exclusive definition of that term for purposes of compensation for
insured losses under this title, and shall preempt any provision of State
law that is inconsistent with that definition, to the extent that such
provision of law would otherwise apply to any type of insurance covered by
this title;
(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 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.
(b) EXISTING REINSURANCE AGREEMENTS- Nothing in this title shall be
construed to alter, amend, or expand the terms of coverage under any
reinsurance agreement in effect on the date of enactment of this Act. The
terms and conditions of such an agreement shall be determined by the language
of that agreement.
SEC. 107. LITIGATION MANAGEMENT.
(a) PROCEDURES AND DAMAGES-
(1) IN GENERAL- If the Secretary makes a determination pursuant to
section 102 that an act of terrorism has occurred, there shall exist a
Federal cause of action for property damage, personal injury, or death
arising out of or resulting from such act of terrorism, which shall be the
exclusive cause of action and remedy for claims for property damage,
personal injury, or death arising out of or relating to such act of
terrorism, except as provided in subsection (b).
(2) PREEMPTION OF STATE ACTIONS- All State causes of action of any kind
for property damage, personal injury, or death arising out of or resulting
from an act of terrorism that are otherwise available under State law are
hereby preempted, except as provided in subsection (b).
(3) SUBSTANTIVE LAW- The substantive law for decision in any such action
described in paragraph (1) shall be derived from the law, including choice
of law principles, of the State in which such act of terrorism occurred,
unless such law is otherwise inconsistent with or preempted by Federal
law.
(4) JURISDICTION- For each determination described in paragraph (1), not
later than 90 days after the occurrence of an act of terrorism, the Judicial
Panel on Multidistrict Litigation shall designate 1 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
(including any claim for loss of property, personal injury, or death)
relating to or arising out of an act of terrorism subject to this section.
The Judicial Panel on Multidistrict Litigation shall select and assign the
district court or courts based on the convenience of the parties and the
just and efficient conduct of the proceedings. For purposes of personal
jurisdiction, the district court or courts designated by the Judicial Panel
on Multidistrict Litigation shall be deemed to sit in all judicial districts
in the United States.
(5) PUNITIVE DAMAGES- Any amounts awarded in an action under paragraph
(1) that are attributable to punitive damages shall not count as insured
losses for purposes of this title.
(b) EXCLUSION- Nothing in this section shall in any way limit the
liability of any government, an organization, or person who knowingly
participates in, conspires to commit, aids and abets, or commits any act of
terrorism with respect to which a determination described in subsection (a)(1)
was made.
(c) RIGHT OF SUBROGATION- The United States shall have the right of
subrogation with respect to any payment or claim paid by the United States
under this title.
(d) RELATIONSHIP TO OTHER LAW- Nothing in this section shall be construed
to affect--
(1) any party's contractual right to arbitrate a dispute; or
(2) any provision of the Air Transportation Safety and System
Stabilization Act (Public Law 107-42; 49 U.S.C. 40101 note.).
(e) EFFECTIVE PERIOD- This section shall apply only to actions described
in subsection (a)(1) that arise out of or result from acts of terrorism that
occur or occurred during the effective period of the Program.
SEC. 108. TERMINATION OF PROGRAM.
(a) TERMINATION OF PROGRAM- The Program shall terminate on December 31,
2005.
(b) CONTINUING AUTHORITY TO PAY OR ADJUST COMPENSATION- Following the
termination of the Program, the Secretary may take such actions as may be
necessary to ensure payment, recoupment, reimbursement, or adjustment of
compensation for insured losses arising out of any act of terrorism occurring
during the period in which the Program was in effect under this title, in
accordance with the provisions of section 103 and regulations promulgated
thereunder.
(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) 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
(2) to prevent the availability of funding under section 104(g) during
any period in which the authority of the Secretary under subsection (b) of
this section is in effect.
(d) STUDY AND REPORT ON THE PROGRAM-
(1) STUDY- The Secretary, in consultation with the NAIC, representatives
of the insurance industry and of policy holders, other experts in the
insurance field, and other experts as needed, shall assess the effectiveness
of the Program and the likely capacity of the property and casualty
insurance industry to offer insurance for terrorism risk after termination
of the Program, and the availability and affordability of such insurance for
various policyholders, including railroads, trucking, and public
transit.
(2) REPORT- The Secretary shall submit a report to the Congress on the
results of the study conducted under paragraph (1) not later than June 30,
2005.
TITLE II--TREATMENT OF TERRORIST ASSETS
SEC. 201. SATISFACTION OF JUDGMENTS FROM BLOCKED ASSETS OF TERRORISTS,
TERRORIST ORGANIZATIONS, AND STATE SPONSORS OF TERRORISM.
(a) IN GENERAL- Notwithstanding any other provision of law, and except as
provided in subsection (b), in every case in which a person has obtained a
judgment against a terrorist party on a claim based upon an act of terrorism,
or for which a terrorist party is not immune under section 1605(a)(7) of title
28, United States Code, the blocked assets of that terrorist party (including
the blocked assets of any agency or instrumentality of that terrorist party)
shall be subject to execution or attachment in aid of execution in order to
satisfy such judgment to the extent of any compensatory damages for which such
terrorist party has been adjudged liable.
(1) IN GENERAL- Subject to paragraph (2), upon determining on an
asset-by-asset basis that a waiver is necessary in the national security
interest, the President may waive the requirements of subsection (a) in
connection with (and prior to the enforcement of) any judicial order
directing attachment in aid of execution or execution against any property
subject to the Vienna Convention on Diplomatic Relations or the Vienna
Convention on Consular Relations.
(2) EXCEPTION- A waiver under this subsection shall not apply to--
(A) property subject to the Vienna Convention on Diplomatic Relations
or the Vienna Convention on Consular Relations that has been used by the
United States for any nondiplomatic purpose (including use as rental
property), or the proceeds of such use; or
(B) the proceeds of any sale or transfer for value to a third party of
any asset subject to the Vienna Convention on Diplomatic Relations or the
Vienna Convention on Consular Relations.
(c) SPECIAL RULE FOR CASES AGAINST IRAN- Section 2002 of the Victims of
Trafficking and Violence Protection Act of 2000 (Public Law 106-386; 114 Stat.
1542), as amended by section 686 of Public Law 107-228, is further
amended--
(1) in subsection (a)(2)(A)(ii), by striking `July 27, 2000, or January
16, 2002' and inserting `July 27, 2000, any other date before October 28,
2000, or January 16, 2002';
(2) in subsection (b)(2)(B), by inserting after `the date of enactment
of this Act' the following: `(less amounts therein as to which the United
States has an interest in subrogation pursuant to subsection (c) arising
prior to the date of entry of the judgment or judgments to be satisfied in
whole or in part hereunder)';
(3) by redesignating subsections (d), (e), and (f) as subsections (e),
(f), and (g), respectively; and
(4) by inserting after subsection (c) the following new subsection
(d):
`(d) DISTRIBUTION OF ACCOUNT BALANCES AND PROCEEDS INADEQUATE TO SATISFY
FULL AMOUNT OF COMPENSATORY AWARDS AGAINST IRAN-
`(A) IN GENERAL- In the event that the Secretary determines that 90
percent of the amounts available to be paid under subsection (b)(2) are
inadequate to pay the total amount of compensatory damages awarded in
judgments issued as of the date of the enactment of this subsection in
cases identified in subsection (a)(2)(A) with respect to Iran, the
Secretary shall, not later than 60 days after such date, make payment from
such amounts available to be paid under subsection (b)(2) to each party to
which such a judgment has been issued in an amount equal to a share,
calculated under subparagraph (B), of 90 percent of the amounts available
to be paid under subsection (b)(2) that have not been subrogated to the
United States under this Act as of the date of enactment of this
subsection.
`(B) CALCULATION OF PAYMENTS- The share that is payable to a person
under subparagraph (A), including any person issued a final judgment as of
the date of enactment of this subsection in a suit filed on a date added
by the amendment made by section 686 of Public Law 107-228, shall be equal
to the proportion that the amount of unpaid compensatory damages awarded
in a final judgment issued to that person bears to the total amount of all
unpaid compensatory damages awarded to all persons to whom such judgments
have been issued as of the date of enactment of this subsection in cases
identified in subsection (a)(2)(A) with respect to Iran.
`(2) SUBSEQUENT JUDGMENT-
`(A) IN GENERAL- The Secretary shall pay to any person awarded a final
judgment after the date of enactment of this subsection, in the case filed
on January 16, 2002, and identified in subsection (a)(2)(A) with respect
to Iran, an amount equal to a share, calculated under subparagraph (B), of
the balance of the amounts available to be paid under subsection (b)(2)
that remain following the disbursement of all payments as provided by
paragraph (1). The Secretary shall make such payment not later than 30
days after such judgment is awarded.
`(B) CALCULATION OF PAYMENTS- To the extent that funds are available,
the amount paid under subparagraph (A) to such person shall be the amount
the person would have been paid under paragraph (1) if the person had been
awarded the judgment prior to the date of enactment of this
subsection.
`(3) ADDITIONAL PAYMENTS-
`(A) IN GENERAL- Not later than 30 days after the disbursement of all
payments under paragraphs (1) and (2), the Secretary shall make an
additional payment to each person who received a payment under paragraph
(1) or (2) in an amount equal to a share, calculated under subparagraph
(B), of the balance of the amounts available to be paid under subsection
(b)(2) that remain following the disbursement of all payments as provided
by paragraphs (1) and (2).
`(B) CALCULATION OF PAYMENTS- The share payable under subparagraph (A)
to each such person shall be equal to the proportion that the amount of
compensatory damages awarded that person bears to the total amount of all
compensatory damages awarded to all persons who received a payment under
paragraph (1) or (2).
`(4) STATUTORY CONSTRUCTION- Nothing in this subsection shall bar, or
require delay in, enforcement of any judgment to which this subsection
applies under any procedure or against assets otherwise available under this
section or under any other provision of law.
`(5) CERTAIN RIGHTS AND CLAIMS NOT RELINQUISHED- Any person receiving
less than the full amount of compensatory damages awarded to that party in a
judgment to which this subsection applies shall not be required to make the
election set forth in subsection (a)(2)(B) or, with respect to subsection
(a)(2)(D), the election relating to relinquishment of any right to execute
or attach property that is subject to section 1610(f)(1)(A) of title 28,
United States Code, except that such person shall be required to relinquish
rights set forth--
`(A) in subsection (a)(2)(C); and
`(B) in subsection (a)(2)(D) with respect to enforcement against
property that is at issue in claims against the United States before an
international tribunal or that is the subject of awards by such
tribunal.
`(6) GUIDELINES FOR ESTABLISHING CLAIMS OF A RIGHT TO PAYMENT- The
Secretary may promulgate reasonable guidelines through which any person
claiming a right to payment under this section may inform the Secretary of
the basis for such claim, including by submitting a certified copy of the
final judgment under which such right is claimed and by providing
commercially reasonable payment instructions. The Secretary shall take all
reasonable steps necessary to ensure, to the maximum extent practicable,
that such guidelines shall not operate to delay or interfere with payment
under this section.'.
(d) DEFINITIONS- In this section, the following definitions shall
apply:
(1) ACT OF TERRORISM- The term `act of terrorism' means--
(A) any act or event certified under section 102(1); or
(B) to the extent not covered by subparagraph (A), any terrorist
activity (as defined in section 212(a)(3)(B)(iii) of the Immigration and
Nationality Act (8 U.S.C. 1182(a)(3)(B)(iii))).
(2) BLOCKED ASSET- The term `blocked asset' means--
(A) any asset seized or frozen by the United States under section 5(b)
of the Trading With the Enemy Act (50 U.S.C. App. 5(b)) or under sections
202 and 203 of the International Emergency Economic Powers Act (50 U.S.C.
1701; 1702); and
(B) does not include property that--
(i) is subject to a license issued by the United States Government
for final payment, transfer, or disposition by or to a person subject to
the jurisdiction of the United States in connection with a transaction
for which the issuance of such license has been specifically required by
statute other than the International Emergency Economic Powers Act (50
U.S.C. 1701 et seq.) or the United Nations Participation Act of 1945 (22
U.S.C. 287 et seq.); or
(ii) in the case of property subject to the Vienna Convention on
Diplomatic Relations or the Vienna Convention on Consular Relations, or
that enjoys equivalent privileges and immunities under the law of the
United States, is being used exclusively for diplomatic or consular
purposes.
(3) CERTAIN PROPERTY- The term `property subject to the Vienna
Convention on Diplomatic Relations or the Vienna Convention on Consular
Relations' and the term `asset subject to the Vienna Convention on
Diplomatic Relations or the Vienna Convention on Consular Relations' mean
any property or asset, respectively, the attachment in aid of execution or
execution of which would result in a violation of an obligation of the
United States under the Vienna Convention on Diplomatic Relations or the
Vienna Convention on Consular Relations, as the case may be.
(4) TERRORIST PARTY- The term `terrorist party' means a terrorist, a
terrorist organization (as defined in section 212(a)(3)(B)(vi) of the
Immigration and Nationality Act (8 U.S.C. 1182(a)(3)(B)(vi))), or a foreign
state designated as a state sponsor of terrorism under section 6(j) of the
Export Administration Act of 1979 (50 U.S.C. App. 2405(j)) or section 620A
of the Foreign Assistance Act of 1961 (22 U.S.C. 2371).
TITLE III--FEDERAL RESERVE BOARD PROVISIONS
SEC. 301. CERTAIN AUTHORITY OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE
SYSTEM.
Section 11 of the Federal Reserve Act (12 U.S.C. 248) is amended by adding
at the end the following new subsection:
`(r)(1) Any action that this Act provides may be taken only upon the
affirmative vote of 5 members of the Board may be taken upon the unanimous
vote of all members then in office if there are fewer than 5 members in office
at the time of the action.
`(2)(A) Any action that the Board is otherwise authorized to take under
section 13(3) may be taken upon the unanimous vote of all available members
then in office, if--
`(i) at least 2 members are available and all available members
participate in the action;
`(ii) the available members unanimously determine that--
`(I) unusual and exigent circumstances exist and the borrower is
unable to secure adequate credit accommodations from other
sources;
`(II) action on the matter is necessary to prevent, correct, or
mitigate serious harm to the economy or the stability of the financial
system of the United States;
`(III) despite the use of all means available (including all available
telephonic, telegraphic, and other electronic means), the other members of
the Board have not been able to be contacted on the matter; and
`(IV) action on the matter is required before the number of Board
members otherwise required to vote on the matter can be contacted through
any available means (including all available telephonic, telegraphic, and
other electronic means); and
`(iii) any credit extended by a Federal reserve bank pursuant to such
action is payable upon demand of the Board.
`(B) The available members of the Board shall document in writing the
determinations required by subparagraph (A)(ii), and such written findings
shall be included in the record of the action and in the official minutes of
the Board, and copies of such record shall be provided as soon as practicable
to the members of the Board who were not available to participate in the
action and to the Chairman of the Committee on Banking, Housing, and Urban
Affairs of the Senate and to the Chairman of the Committee on Financial
Services of the House of Representatives.'.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.
END