Terrorism Risk Insurance Revision Act of 2005 - (Sec. 2) Revises the Terrorism Risk Insurance Act of 2002 (TRIA) to establish Program Year 4 beginning on January 1, 2006, and ending on December 31, 2006. Provides for Additional Program Years following Program Year 4 (thereby extending the Terrorism Risk Insurance Program).
Redefines an act of terrorism to repeal the $5 million minimum for an act to be certified by the Secretary of the Treasury.
Redefines: (1) casualty insurance; and (2) exempt commercial purchaser.
Sets forth a statutory formula for insurer deductibles for Program Year 4 and additional Program Years.
Revises mandatory availability guidelines to include NBCR terrorism (terrorism involving nuclear, biological, chemical and, or, radioactive reactions, releases, or contaminations, to the extent any insured losses are caused by any of them).
Instructs the Secretary to issue regulations applying TRIA title I to state workers' compensation reinsurance pools.
Revamps guidelines governing the federal share of compensation covering insured losses of an insurer. Establishes a Program trigger for such federal share.
Prescribes guidelines under which an insurer may establish a TRIA Capital Reserve Fund (CRF) in which it may hold funds in a fiduciary capacity on behalf of the Secretary.
Directs the Secretary to collect and use CRF funds offset the federal share of compensation.
States that TRIA title I does not prohibit insurers from developing risk-sharing mechanisms (including mutual reinsurance facilities and agreements) to voluntarily reinsure certain terrorism losses among themselves.
Requires the Secretary to appoint an Advisory Committee to encourage the creation and development of such mechanisms.
Provides for full recoupment of federal financial assistance provided in connection with all acts of terrorism.
Requires the Comptroller General to study and report to Congress on: (1) the exposure of personal lines (including homeowners insurance) to terrorism risk, the coverage currently available, and potential policy responses; (2) the risk of potential terrorist acts stemming from the use of nuclear, biological, chemical, and radioactive weapons; and (3) the need for a federal program that provides for a system of shared public and private compensation for insured losses resulting from natural disaster.
Establishes the Commission on Terrorism Risk Insurance (Commission) to identify and report to Congress on: (1) actions to encourage, facilitate, and sustain provision by the domestic private insurance industry of affordable coverage for losses due to acts of terrorism; (2) the utility and viability of TRIA Capital Reserve Funds; (3) any risk sharing mechanism created or made available under TRIA title I; and (4) a federally created or mandated reinsurance facility (which shall issue pre-event and post-event financing bonds, assessments, single or multiple pooling arrangements, and other risk sharing arrangements).
Directs the Commission to report to Congress on whether there is a need for a federal terrorism risk insurance program and, if so, to make a specific, detailed recommendation for the replacement of the current Program, including specific, detailed recommendations for the creation of a terrorism reinsurance facility or facilities or single or multiple pooling arrangements, or both.
Sets limitations upon state regulatory authority in connection with mandatory availability of terrorism risk insurance.
Declares that Congress intends that all states will implement by December 31, 2007, the System for Electronic Rate and Form Filing and streamlined surplus lines diligent search policies.
Extends the current Program's termination date from December 31, 2007, to December 31, 2008, unless the Commission has not satisfied its obligations, in which case it shall terminate on December 31, 2007.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4314 Introduced in House (IH)]
109th CONGRESS
1st Session
H. R. 4314
To extend the applicability of the Terrorism Risk Insurance Act of
2002.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
November 14, 2005
Mr. Baker (for himself, Mr. Oxley, Mrs. Kelly, Ms. Pryce of Ohio, Mr.
Sessions, Mr. Ferguson, Mr. Renzi, Mr. Fossella, and Mr. Davis of
Kentucky) introduced the following bill; which was referred to the
Committee on Financial Services
_______________________________________________________________________
A BILL
To extend the applicability of the Terrorism Risk Insurance Act of
2002.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Terrorism Risk Insurance Revision
Act of 2005''.
SEC. 2. EXTENSION OF PROGRAM AND PROGRAM CHANGES.
(a) In General.--Title I of the Terrorism Risk Insurance Act of
2002 (15 U.S.C. 6701 note) is amended--
(1) by striking sections 102 through 106 and inserting the
following new sections:
``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 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 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 group life coverage.
``(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 insurer that owns, is owned by, or is under
common ownership with another insurer.
``(3) Casualty insurance.--The term `casualty insurance'
means--
``(A) insurance, including excess insurance and
surety insurance, against legal liability for losses
caused by the death, injury, or disability of any
person or for damage to property, with provision for
medical, hospital and surgical benefits to the injured
persons; and
``(B) for the purposes of this Act, does not
include any type of commercial automobile or workers'
compensation insurance.
``(4) Covered line of insurance.--The term `covered line of
insurance' means--
``(A) commercial property insurance, commercial
casualty insurance, workers' compensation insurance and
group life 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, except
group life insurance;
``(vi) flood insurance provided under the
National Flood Insurance Act of 1968 (42 U.S.C.
4001 et seq.);
``(vii) reinsurance or retrocessional
reinsurance; or
``(viii) commercial automobile insurance.
``(5) Direct earned premium.--The term `direct earned
premium' means a direct earned premium for commercial property,
commercial casualty, workers' compensation, or group life
insurance issued by any insurer for insurance against losses
occurring at the locations described in subparagraphs (A) and
(B) of paragraph (10).
``(6) Exempt commercial purchaser.--The term `exempt
commercial purchaser' means any person purchasing commercial
insurance that meets the following requirements:
``(A) The person employs or retains a qualified
risk manager to negotiate insurance coverage.
``(B) The person meets at least two of the
following criteria:
``(i) The person possesses a net worth in
excess of $10,000,000.
``(ii) The person generates annual revenues
in excess of $25,000,000.
``(iii) The person employs more than 25
full time or full time equivalent employees per
individual insured or is a member of affiliated
group employing more than 50 employees in the
aggregate.
``(iv) The person pays annual aggregate
nationwide insurance premiums in excess of
$10,000 for covered lines of insurance.
``(v) The person is a not-for-profit
organization or public entity generating annual
budgeted expenditures of at least $10,000,000.
``(vi) The person is a municipality with a
population in excess of 30,000 persons.
``(7) Exempt commercial purchaser certification.--The term
`exempt commercial purchaser certification' means a written
certification that the insurer offering a policy to an exempt
commercial purchaser has obtained, at least within the previous
12 months, a certification signed by the qualified risk
manager, the chief executive officer, or the chief financial
officer of the exempt commercial purchaser, certifying with
respect to the insurance to which the requirements of section
103(c)(1) apply to that insurer that--
``(A) the purchaser has an employee that meets the
definition of a qualified risk manager under this
section;
``(B) the purchaser meets the definition of an
exempt commercial purchaser in accordance with this
section;
``(C) the purchaser is aware that the policy being
considered for purchase contains forms and rates that
are not subject to State regulatory review or approval;
``(D) the purchaser has or has retained the
necessary expertise to negotiate its own policy
language and rates; and
``(E) the purchaser agrees to the use of exempted
rates and forms by its insurer or insurers.
``(8) Group life insurance.--The term `group life
insurance' means an insurance contract that provides term life
insurance coverage, accidental death coverage, or a combination
thereof, for a number of individuals under a single contract,
on the basis of a group selection of risks, but does not
include `Corporate Owned Life Insurance' or `Business Owned
Life Insurance,' each as defined under the Internal Revenue
Code of 1986, or any similar product.
``(9) Home state.--The term `home State' means as follows:
``(A) In the case of a policy written for
commercial risks that are primarily located in a State,
such term means such State.
``(B) If subparagraph (A) does not apply, such term
means the State where the commercial policyholder has
its principal place of business (such as where the
policyholder's headquarters are located, as determined
by the predominant physical location in the United
States of the officers and senior management of the
policyholder).
``(10) 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 and group life
insurance) that is covered by primary or excess property,
casualty, workers' compensation, or group life 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.
``(11) 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 a covered line of 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 covered line of insurance coverage, other than
in the case of entities described in subsections (d)
and (f) of section 103; and
``(C) that meets any other criteria that the
Secretary may reasonably prescribe.
``(12) Insurer deductible.--The term `insurer deductible'
means--
``(A) for the Transition Period, the value of an
insurer's direct earned premiums over the calendar year
immediately preceding the date of enactment of this
Act, multiplied by 1 percent;
``(B) for Program Year 1, the value of an insurer's
direct earned premiums over the calendar year
immediately preceding Program Year 1, multiplied by 7
percent;
``(C) for Program Year 2, the value of an insurer's
direct earned premiums over the calendar year
immediately preceding Program Year 2, multiplied by 10
percent;
``(D) for Program Year 3, the value of an insurer's
direct earned premiums over the calendar year
immediately preceding Program Year 3, multiplied by 15
percent;
``(E) for Program Year 4--
``(i) except as provided in clause (ii),
the value of an insurer's direct earned premium
for a covered line of insurance over the
calendar year immediately preceding Program
Year 4, multiplied by--
``(I) for workers' compensation
insurance, 17.5 percent;
``(II) for group life insurance, 20
percent;
``(III) for property insurance, 20
percent; and
``(IV) for casualty insurance, 25
percent; and
``(ii) with respect to NBCR terrorism
coverage, the value of an insurer's direct
earned premium for a covered line of insurance
over the calendar year immediately preceding
Program Year 4, multiplied by the following
percentages which shall be treated as sub-
deductibles that apply in lieu of the
deductibles set forth in clause (i) for NBCR
terrorism losses--
``(I) for workers' compensation
insurance, 7.5 percent;
``(II) for group life insurance,
7.5 percent;
``(III) for property insurance, 7.5
percent; and
``(IV) for casualty insurance, 7.5
percent; and
``(iii) if, for any covered line of
insurance, an insurer incurs insured losses
caused by NBCR terrorism, such NBCR insured
losses shall be applied against both the
deductible set forth in clause (i) and the NBCR
terrorism deductible set forth in clause (ii)
for that covered line of insurance;
``(F) for any Additional Program Years--
``(i) except as provided in clause (ii),
the value of an insurer's direct earned premium
for a covered line of insurance over the
calendar year immediately preceding that year,
multiplied by the insurer deductible for each
covered line of insurance for the preceding
calendar year plus an additional percentage, as
follows--
``(I) for workers' compensation
insurance, 2.5 percent;
``(II) for group life insurance,
2.5 percent;
``(III) for property insurance, 2.5
percent; and
``(IV) for casualty insurance, 5.0
percent; and
``(ii) with respect to NBCR terrorism
coverage, the value of an insurer's direct
earned premium for a covered line of insurance
over the calendar year immediately preceding
that year, multiplied by the NBCR terrorism
deductible for the preceding year for that
covered line of insurance plus the following
additional percentages, all of which shall be
treated as subdeductibles that apply in lieu of
the deductibles listed in clause (i) for NBCR
terrorism insured losses--
``(I) for workers' compensation
insurance, 0.75 percent;
``(II) for group life insurance,
0.75 percent;
``(III) for property insurance,
0.75 percent; and
``(IV) for casualty insurance, 0.75
percent; and
``(iii) if, for any covered line of
insurance, an insurer incurs insured losses
caused by NBCR terrorism, such NBCR insured
losses shall be applied against both the
deductible set forth in clause (i) and the NBCR
terrorism deductible set forth in clause (ii)
for that covered line of insurance;
``(G) notwithstanding subparagraphs (A) through
(F), for the Transition Period and any other Program
Year or other calendar year, if an insurer has not had
a full year of operations during the calendar year
immediately preceding such Period or 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; and
``(H) if, in any calendar year, aggregate industry
insured losses exceed $1,000,000,000, the insurer
deductibles for the next calendar year shall be reduced
by 0.1 percent for each $1,000,000,000 in insured
losses that have occurred during the preceding calendar
year, except that no insurer deductible shall be
reduced below 5 percent.
``(13) NAIC.--The term `NAIC' means the National
Association of Insurance Commissioners.
``(14) Ownership.--An insurer `owns' another insurer if the
insurer, directly or indirectly or acting through one or more
other persons, owns 25 percent or more of any class of voting
securities of the other insurer.
``(15) NBCR terrorism.--The term `NBCR terrorism' means an
act of terrorism involving nuclear, biological, chemical and,
or, radiological reactions, releases, or contaminations, to the
extent any insured losses are caused by any such reactions,
releases, or contaminations.
``(16) 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.
``(17) Program.--The term `Program' means the Terrorism
Insurance Program established by this title.
``(18) Program years.--
``(A) Transition period.--The term `Transition
Period' means the period beginning on the date of
enactment of this Act and ending on December 31, 2002.
``(B) Program year 1.--The term `Program Year 1'
means the period beginning on January 1, 2003 and
ending on December 31, 2003.
``(C) Program year 2.--The term `Program Year 2'
means the period beginning on January 1, 2004 and
ending on December 31, 2004.
``(D) Program year 3.--The term `Program Year 3'
means the period beginning on January 1, 2005 and
ending on December 31, 2005.
``(E) Program year 4.--The term `Program Year 4'
means the period beginning on January 1, 2006 and
ending on December 31, 2006.
``(F) Additional program years.--The term
`Additional Program Year' means any additional one-year
period after Program Year 4 during which the Program is
in effect, which period shall begin on January 1 and
end on December 31 of the same calendar year.
``(19) Property insurance.--The term `property insurance'
means--
``(A) except as provided in subparagraph (B),
insurance on real or personal property of every kind,
including excess insurance, against loss or damage from
any and all hazard or cause and against loss
consequential upon such loss or damage, including
business interruption insurance, other than non-
contractual legal liability for such loss or damage;
and
``(B) does not include any type of commercial
automobile or workers' compensation insurance.
``(20) Qualified risk manager.--The term `qualified risk
manager' means any person who meets all of the following
criteria:
``(A) The person is an employee of, or third party
consultant retained by, the commercial policyholder.
``(B) The person provides skilled services in loss
prevention, loss reduction, or risk and insurance
coverage analysis, and purchase of insurance.
``(C) The person possesses at least 1 of the
following credentials:
``(i) A bachelor's or higher degree in risk
management issued by an accredited college or
university.
``(ii) A designation as a Chartered
Property and Casualty Underwriter (in this
subparagraph referred to as `CPCU') issued by
the American Institute for CPCU/Insurance
Institute of America.
``(iii) A designation as an Associate in
Risk Management (ARM) issued by American
Institute for CPCU/Insurance Institute of
America.
``(iv) A designation as a Certified Risk
Manager (CRM) issued by the National Alliance
for Insurance Education & Research.
``(v) A designation as a Fellow in Risk
Management (FRM) issued by the Global Risk
Management Institute/Risk & Insurance
Management.
``(vi) At least 5 years of experience in 1
or more of the following areas of commercial
property insurance and/or commercial casualty
insurance:
``(I) Risk financing.
``(II) Claims administration.
``(III) Loss prevention.
``(IV) Risk and insurance coverage
analysis.
``(21) Secretary.--The term `Secretary' means the Secretary
of the Treasury.
``(22) 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.
``(23) Transparent standards.--The term `transparent
standards' means that any disapproval of a rate or form filing
for an applicable line of insurance--
``(A) is clearly stated in writing;
``(B) is based on specific standards that are
published in a State statute, rule, or regulation (with
general `public policy' grounds alone not being
considered a specific standard unless based on a good
faith comprehensive actuarial analysis by the State of
a covered risk); and
``(C) if based on an interpretation, is based on an
identical or substantially similar interpretation by
majority of States with interpretations of an identical
or substantially similar provision of a statute or
regulation, if a substantial number of States has made
such interpretation.
``(24) 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).
``(25) Workers' compensation.--The term `workers'
compensation' means insurance against loss from liability
imposed by law upon employers to compensate employees and their
dependents for injury sustained by the employees arising out of
and in the course of the employment, irrespective of negligence
or of the fault of either party.
``(26) 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.--Each entity that meets the
definition of an insurer under section 102--
``(1) shall make available, in all of its covered lines of
insurance policies, coverage for insured losses that does not
differ materially from the terms, amounts, and other coverage
limitations applicable to losses arising from events other than
acts of terrorism; and
``(2) shall make available, in any of its covered lines of
insurance policies that exclude coverage for losses resulting
from NBCR terrorism, coverage for losses resulting from NBCR
terrorism that may differ materially from the terms, amounts,
and other coverage limitations applicable to losses arising
from events other than NBCR terrorism.
``(d) State Residual Market Insurance Entities.--
``(1) In general.--The Secretary shall issue regulations,
as soon as practicable after the date of enactment of this Act,
that apply the provisions of this title to State residual
market insurance entities and State workers' compensation
funds.
``(2) Treatment of certain entities.--For purposes of the
regulations issued pursuant to paragraph (1)--
``(A) a State residual market insurance entity that
does not share its profits and losses with private
sector insurers shall be treated as a separate insurer;
and
``(B) a State residual market insurance entity that
shares its profits and losses with private sector
insurers shall not be treated as a separate insurer,
and shall report to each private sector insurance
participant its share of the insured losses of the
entity, which shall be included in each private sector
insurer's insured losses.
``(3) Treatment of participation in certain entities.--Any
insurer that participates in sharing profits and losses of a
State residual market insurance entity shall include in its
calculations of premiums any premiums distributed to the
insurer by the State residual market insurance entity.
``(e) Insured Loss Shared Compensation.--
``(1) Federal share.--
``(A) In general.--Subject to subparagraphs (B) and
(C), the Federal share of compensation under the
Program to be paid by the Secretary for insured losses
of an insurer during each Program Year shall be equal
to that portion of the amount of such insured losses
for each covered line of insurance that exceeds the
applicable insurer deductible required to be paid
during such Program Year, multiplied by a percentage
based on aggregate industry insured losses for a
Program Year, which shall be as follows:
``(i) 80 percent of the aggregate industry
insured losses of less than $10,000,000,000;
``(ii) 85 percent of the aggregate industry
insured losses between $10,000,000,000 and
$20,000,000,000;
``(iii) 90 percent of the aggregate
industry insured losses between $20,000,000,000
and $40,000,000,000; and
``(iv) 95 percent of the aggregate industry
insured losses above industry losses above
$40,000,000,000;
and shall be prorated by insurer based on each
insurer's percentage of the aggregate industry insured
losses for that Program Year.
``(B) Program trigger.--No compensation shall be
paid by the Secretary under subsection (a) unless the
aggregate industry insured losses exceed--
``(i) $50,000,000, with respect to insured
losses occurring in Program Year 4;
``(ii) $100,000,000, with respect to
insured losses occurring in the Additional
Program Year beginning on January 1, 2007;
``(iii) an additional cumulative
$100,000,000, with respect to each successive
Additional Program Year that coverage is
provided under this program;
except that the applicable Program Trigger amount shall
be reduced by $10,000,000 for each $1,000,000,000 in
insured losses occurring in any preceding year,
provided that the Program Trigger shall not be reduced
below $50,000,000 for any year.
``(C) Prohibition on duplicative compensation.--The
Federal share of compensation for insured losses under
the Program shall be reduced by the amount of
compensation provided by the Federal Government to any
person under any other Federal program for those
insured losses.
``(2) TRIA capital reserve funds.--
``(A) Establishment.--Any insurer may establish a
TRIA Capital Reserve Fund (in this section referred to
as a `CRF') in which it may hold funds in a fiduciary
capacity on behalf of the Secretary.
``(B) Funding.--An insurer may fund a CRF by making
an election, in advance, to treat some or all of the
premiums it has disclosed pursuant to section 103(b)(2)
as TRIA program fee charges imposed by the Secretary.
Any such premiums for which such an election has been
made must be maintained in segregated accounts in a
fiduciary capacity on behalf of the Secretary. Such
funds may be invested in any otherwise legally
permissible manner but all interest, dividends, and
capital accumulations also shall be retained in such
segregated accounts on behalf of the Secretary.
``(C) Use.--Funds from a CRF shall be collected and
used by the Secretary to offset, in whole or in part,
the Federal share of compensation provided to all
insurers under the Program as provided for in paragraph
(1), except that an insurer may first use the funds in
a CRF of that insurer to satisfy any one or more of the
following:
``(i) The applicable insurer deductibles
for the insurer.
``(ii) The portion of the insurer's losses
that exceed the insurer deductible but are not
compensated by the Federal share pursuant to
paragraph (1).
``(iii) The insurer's obligations to pay
for insured losses if the program trigger
established in paragraph (1)(B) is not
satisfied.
``(iv) Any risk sharing obligations the
insurer may have under any agreements made
pursuant to or in accordance with paragraph
(3).
``(D) Termination.--
``(i) Termination of program.--Upon
termination of the Program under section
108(a), and subject to the Secretary's
continuing authority under section 108(b) to
adjust claims in satisfaction of the Federal
share of compensation under the Program as
provided in paragraph (1) of this subsection,
10 percent of each insurer's CRF funds shall be
remitted to the Secretary and the remainder
shall be remitted to the insurer. The Secretary
shall determine the manner in which the
remittance of such income to the insurer shall
be made.
``(ii) Elimination of federal share of
compensation.--If the Program remains in effect
but the Federal share of compensation for
insured losses under the Program is eliminated
from the Program, the CRF funds shall be
retained and used for the purposes set forth in
subparagraph (C) of this paragraph. At such
time as an insurer's liability for insured
losses under the Program terminates, as a
consequence of the insurer's termination of its
business or otherwise, the insurer shall remit
any remaining CRF funds to the Secretary.
``(3) Risk-sharing mechanisms.--
``(A) Finding; rule of construction.--Congress
finds that it is desirable to encourage the growth of
nongovernmental, private market reinsurance capacity
for protection against losses arising from acts of
terrorism. Therefore, nothing in this title shall
prohibit insurers from developing risk-sharing
mechanisms (including mutual reinsurance facilities and
agreements) to voluntarily reinsure terrorism losses
between and among themselves that are not subject to
reimbursement under this section 103.
``(B) Establishment of advisory committee.--The
Secretary shall appoint an Advisory Committee to--
``(i) encourage the creation and
development of such mechanisms;
``(ii) assist the Secretary and be
available to administer such mechanisms; and
``(iii) develop articles of incorporation,
bylaws, and a plan of operation for any long-
term reinsurance facility authorized or created
in the future.
``(C) Membership.--The Advisory Committee shall be
composed of nine members who are directors, officers,
or other employees of insurers that are participating
or that desire to participate in such mechanisms, and
who are representative of the affected sectors of the
insurance industry. In making these appointments, the
Secretary shall solicit major trade associations of the
insurance industry to nominate lists of qualified
individuals representative of the commercial property
insurance, commercial casualty insurance, group life
insurance, and reinsurance industries.
``(4) 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
any Program Year (until such time as the Congress may
act otherwise with respect to such losses)--
``(i) the Secretary shall not make any
payment under this title for any portion of the
amount of 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.
``(5) Notice to congress.--The Secretary shall notify the
Congress if estimated or actual aggregate insured losses exceed
$100,000,000,000 during during any Program Year and the
Congress shall determine the procedures for and the source of
any payments for such excess insured losses.
``(6) 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.
``(7) Determinations final.--Any determination of the
Secretary under this subsection shall be final, unless
expressly provided, and shall not be subject to judicial
review.
``(8) Full recoupment of federal share.--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 and group
life insurance), terrorism loss risk-spreading premiums in an
amount equal to the total amount paid by the Secretary in
accordance with this section.
``(9) 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 all covered lines of 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 covered lines of
insurance coverage under the policy.
``(B) Collection.--The Secretary shall provide for
insurers to collect terrorism loss risk-spreading
premiums and remit such amounts collected to the
Secretary.
``(C) Percentage limitation.--A terrorism loss
risk-spreading premium may not exceed, on an annual
basis, the amount equal to 3 percent of the premium
charged for covered lines of 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
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) Replenishment of tria capital reserve
funds.--After any funds expended directly from the
United States Treasury are fully repaid, the balance of
the amounts collected under this paragraph shall be
used to fully replenish all insurer CRFs used by the
Secretary in accordance with the provisions of
paragraph (2)(C) that were not used by the insurer to
satisfy its obligations in accordance with clauses (i)
through (iv) of paragraph (2)(C).
``(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,
including amounts from a CRF used pursuant to subsection
(e)(2)(C), 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) Personal Lines Study.--
``(1) In general.--The Comptroller General of the United
States, after consultation with the NAIC, representatives of
the insurance industry, and other experts in the insurance
field, including a cross-section of insurers, independent
insurance agents and brokers, and policyholders, shall conduct
a study concerning the exposure of personal lines (including
homeowners insurance) to terrorism risk, the coverage currently
available, and potential policy responses.
``(2) Report.--Not later than September 1, 2006, the
Comptroller General shall submit a report to the Congress on
the results of the study conducted under subparagraph (1),
together with specific policy recommendations.
``(i) Study of Risks Stemming From Nuclear, Biological, Chemical
and Radiological Events.--
``(1) In general.--The Comptroller General of the United
States, after consultation with the NAIC, representatives of
the insurance industry, including a cross-section of insurers,
independent insurance agents and brokers, and policyholders,
and other experts in the insurance field, shall conduct a study
concerning the risk of potential terrorist acts stemming from
the use of nuclear, biological, chemical, and radiological
weapons.
``(2) Report.--Not later than September 1, 2006, the
Comptroller General shall submit a report to the Congress on
the results of the study conducted under paragraph (1),
together with specific policy recommendations.
``(j) Study of Need for Federal Natural Disaster Catastrophe
Program.--
``(1) In general.--The Comptroller General of the United
States, after consultation with the NAIC, representatives of
the insurance industry, including a cross-section of insurers,
independent insurance agents and brokers, and policyholders,
and other experts in the insurance field, shall conduct a study
concerning the need for a Federal program that provides for a
system of shared public and private compensation for insured
losses resulting from natural disaster.
``(2) Report.--Not later than September 1, 2006, the
Comptroller General shall submit a report to the Congress on
the results of the study conducted under paragraph (1),
together with specific policy recommendations.
``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 to the extent such Federal
share exceeds funds collected by the Secretary pursuant to
section 103(e)(2).
``(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. ESTABLISHMENT OF COMMISSION ON TERRORISM RISK INSURANCE.
``(a) In General.--There is hereby established the Commission on
Terrorism Risk Insurance (in this section referred to as the
`Commission').
``(b) Membership.--
``(1) The Commission shall consist of nine members, as
follows:
``(A) The Secretary of the Treasury or his
designee.
``(B) One State insurance commissioner designated
by the members of the NAIC.
``(C) Seven members appointed by the President, who
shall be--
``(i) a representative of group life
insurers;
``(ii) a representative of property and
casualty insurers with direct written premium
of $1,000,000,000 or less;
``(iii) a representative of property and
casualty insurers with direct written premium
of more than $1,000,000,000;
``(iv) a representative of multiline
insurers;
``(v) a representative of independent
insurance agents;
``(vi) a representative of insurance
brokers; and
``(vii) a policyholder representative.
``(2) Secretary.--The Program Director of the Terrorism
Risk Insurance Act shall serve as Secretary of the Commission.
The Secretary of the Commission shall determine the manner in
which the Commission shall operate, including funding and
staffing.
``(c) Duties.--
``(1) In general.--The Commission shall identify and make
recommendations regarding--
``(A) possible actions to encourage, facilitate,
and sustain provision by the private insurance industry
in the United States of coverage for losses due to an
act or acts of terrorism;
``(B) possible actions or mechanisms to sustain or
supplement the ability of the insurance industry in the
United States to cover losses resulting from acts of
terrorism in the event that--
``(i) such losses jeopardize the capital
and surplus of the insurance industry in the
United States as a whole; or
``(ii) other consequences from such acts
occur, as determined by the Commission, that
may significantly affect the ability of the
insurance industry in the United States to
independently cover such losses; and
``(C) significantly reducing the expected Federal
role over time in any continuing Federal terrorism risk
insurance program.
``(2) Evaluations.--In identifying and making the
recommendations required under paragraph (1), the Commission
shall specifically evaluate the utility and viability of TRIA
Capital Reserve Funds made available under section 103(e)(2),
any risk sharing mechanism created or made available under
section 103(e)(3), a Federally created or mandated reinsurance
facility, empowering such a facility to issue pre-event
financing bonds, post-event financing bonds, assessments,
single or multiple pooling arrangements, and other risk sharing
arrangements to accomplish, in whole or in part, the specified
objectives, taking into consideration the studies and reports
to the Congress pursuant to subsections (h) and (i) of section
103.
``(3) Report.--Not later than December 31, 2006, the
Commission shall submit a report to Congress evaluating and
making recommendations regarding whether there is a need for a
Federal terrorism risk insurance program and, if so, shall make
a specific, detailed recommendation for the replacement of the
Program, including specific, detailed recommendations for the
creation of a terrorism reinsurance facility or facilities or
single or multiple pooling arrangements, or both.
``(d) Effect on Existing Program.--For purposes of section 108(a),
the Secretary shall make a determination not later than January 31,
2007, of whether the Commission has satisfied its obligations under
subsection (c)(3).
``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; and
``(B) 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; and
``(3) except that with respect to coverage required to be
made available under section 103(c)--
``(A) rates and forms 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 where a State has prior
approval authority, such authority shall apply to allow
subsequent review to invalidate a rate as in adequate
or unfairly discriminatory, and, with respect to forms,
such authority shall apply to allow subsequent review
of such forms for compliance with the statutes and
regulations of the State, except that such subsequent
review must allow sub-limits for coverage for acts of
terrorism for property insurance and casualty insurance
and must be based on transparent standards;
``(B) no laws or regulations of a State with
respect to rate and form approval or disapproval other
than disclosure requirements regarding exempt
commercial purchases and informational filing
requirements, shall apply to insurance offered by an
insurer to an exempt commercial purchaser, so long as
the insurer files and retains the exempt commercial
purchaser certification and any policies issued
pursuant to such certification for at least three years
and makes such certification and policies available to
such State for review as required by the statutes and
regulations of such State;
``(C) no laws or regulations of a State, other than
the home State, shall apply to a multi-State commercial
insurance policy relating to the policy form or the
terms of the policy (including any requirement of the
State relating to policy form filing, the coverages the
policy must afford, the terms of such coverages, policy
termination, policy cancellation, policy renewal,
premium finance, premium payment, and policy
application), except laws and regulations relating to
workers' compensation coverage;
``(D) no laws or regulations of a State imposing a
diligent search requirement for the placement of a
surplus lines policy shall apply in connection with the
purchase of such insurance by an exempt commercial
policyholder; and
``(E) no laws or regulations of a State, except the
home State, imposing a diligent search requirement for
the placement of a surplus lines policy shall apply
with respect to the placement of a multi-State surplus
lines commercial insurance policy, provided the
contract of insurance insures risks in the home State.
``(b) Streamlined Rate and Form Filing.--Within two years of the
date of enactment of this Act, the Congress intends that all States,
with respect to submission of a commercial property insurance policy or
commercial casualty insurance policy that includes coverage for acts of
terrorism--
``(1) implement and fully utilize the System for Electronic
Rate and Form Filing (in this section referred to as `SERFF'),
developed by the NAIC, without deviation to provide a single
point for electronic filing of property insurance and casualty
insurance forms for review;
``(2) update SERFF to provide a single coordinated
checklist for inputting the required information used by
various States for filing reviews and designating to which
States the information will be submitted;
``(3) allow the option of filing of self-certified
commercial property insurance and commercial casualty insurance
forms through a substantially nationwide coordinated electronic
filing system that--
``(A) includes a review checklist with uniform
nomenclature clearly establishing what is required
under the laws of such State for a compliant filing of
such forms;
``(B) uses a single input system and transmittal
document that allows the filer to submit such form for
review without required format deviations to any
combination of the States participating in the system;
``(C) does not require prior approval for such
self-certified form filing;
``(D) keeps such filings confidential until they
are implemented, deemed implemented, or disapproved;
and
``(E) only allows disapproval of such filings in
writing based on specific standards that are published
in statute, rule, or regulation.
``(c) Streamlined Surplus Lines Placement.--Within two years of the
date of enactment of this Act, the Congress intends that all States
streamline their surplus lines diligent search rules with respect to
the placement of surplus lines policies in any covered line of
insurance that includes coverage for acts of terrorism by providing
for--
``(1) automatic export for exempt commercial purchasers,
under which a surplus lines broker seeking to obtain, provide,
or place insurance in a State for an insured that qualifies as
an exempt commercial purchaser may procure surplus lines
insurance from or place surplus lines insurance with any
nonadmitted insurer without making a diligent search to
determine whether the full amount or type of insurance sought
by the exempt commercial purchaser can be obtained from
admitted insurers in such State.
``(2) home State regulation of diligent search
requirements, that provides that, except as provided in
paragraph (1), only the home State may impose a diligent search
requirement for the placement of a multi-State surplus lines
commercial insurance policy, provided the contract of insurance
insures risks in the Home State.
``(d) 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.''; and
(2) in section 108--
(A) by striking subsection (a) and inserting the
following new subsection:
``(a) Termination of Program.--
``(1) In general.--Except as provided in paragraph (2), the
Program shall terminate on December 31, 2008.
``(2) Failure of commission to submit report.--If the
Secretary determines pursuant to section 105(d) that the
Commission on Terrorism Risk Insurance established under
section 105 has not satisfied its obligations under section
105(c)(3), the Program shall terminate on December 31, 2007.'';
and
(B) in subsection (c)(1), by striking ``paragraph
(4), (5), (6), (7), or (8) of''.
(b) Applicability.--The amendments made by subsection (a) shall
apply beginning on January 1, 2006. The provisions of the Terrorism
Risk Insurance Act of 2002, as in effect on the day before the date of
the enactment of this Act, shall apply through the end of December 31,
2005.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
Committee Consideration and Mark-up Session Held.
Ordered to be Reported (Amended) by the Yeas and Nays: 64 - 3.
Reported (Amended) by the Committee on Financial Services. H. Rept. 109-327.
Reported (Amended) by the Committee on Financial Services. H. Rept. 109-327.
Placed on the Union Calendar, Calendar No. 180.
Llama 3.2 · runs locally in your browser
Ask anything about this bill. The AI reads the full text to answer.
Enter to send · Shift+Enter for new line