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 smalland medium-sized businesses; and 

(iv) such other factors as the Secretary considers 

appropriate. 

(8) POLICY SURCHARGE FOR TERRORISM LOSS RISKSPREADING 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 riskspreading 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 riskspreading 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 COMPENSATIONFollowing 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