Terrorism Risk Insurance Act of 2002
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. 102. Definitions.
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:
(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; 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.
(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.
(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
(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.); 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-
(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 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--
(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; and
(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.
(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).
(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. 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.
(e) CIVIL PENALTIES-
(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.
(g) FUNDING-
(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
(2) if--
(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
(2) except that--
(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.
(b) PRESIDENTIAL WAIVER-
(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-
`(1) PRIOR JUDGMENTS-
`(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
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