IB
Union Calendar No. 470
103D CONGRESS
2D SESSION
H. R. 9
[Report No. 103–853]
To modify the antitrust exemption applicable to the business of insurance.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 5, 1993
Mr. BROOKS introduced the following bill; which was referred to the
Committee on the Judiciary
JUNE 2, 1994
Additional sponsors: Mr. EDWARDS of California, Miss COLLINS of Michigan,
Mr. KOPETSKI, and Mr. JOHNSTON of Florida
OCTOBER 7, 1994
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed in italic]
[For text of introduced bill, see copy of bill as introduced on January 5, 1993]
A BILL
To modify the antitrust exemption applicable to the business
of insurance.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Insurance Competitive
Pricing Act of 1994’’.
SEC. 2. RULES OF CONSTRUCTION.
The amendments made by this Act preserve—
(1) the provisions relating to State taxing and
regulatory authority in section 2 of the Act of March
9, 1945 (59 Stat. 34; 15 U.S.C. 1012), commonly
known as the McCarran-Ferguson Act;
(2) the availability, to persons engaged in the
business of insurance, of the defense of State action in
the same manner and to the same extent as such de-
fense is available to other persons;
(3) the availability, to persons engaged in the
business of insurance, of any antitrust immunity or
defense that may be applicable under law other than
the McCarran-Ferguson Act;
(4) the legal standards applicable under the
McCarran-Ferguson Act, as in effect before such Act
is amended by this Act, to all conduct described in the
safe harbors found in subparagraphs (B), (C), (D),
and (E) of section 2(b)(1) of the McCarran-Ferguson
Act, as amended by this Act; and
(5) the provisions relating to boycott, coercion, or
intimidation in section 3(b) of the McCarran-Fer-
guson Act.
SEC. 3. AMENDMENTS.
Section 2 of the Act of March 9, 1945 (59 Stat. 34;
15 U.S.C. 1012), commonly known as the McCarran-Fer-
guson Act, is amended—
(1) in subsection (b) by striking ‘‘: Provided,’’
and all that follows through ‘‘law.’’ and inserting the
following:
‘‘except as follows:
‘‘(1)(A) The antitrust laws shall be applicable to
the business of insurance except as provided in sub-
paragraphs (B), (C), (D), and (E).
‘‘(B) The antitrust laws shall not be applicable
to conduct that consists of making an agreement or
engaging in joint conduct—
‘‘(i)(I) to collect, compile, classify, or dis-
seminate historical data;
‘‘(II) to develop procedures to collect, com-
pile, classify, or disseminate historical data; or
‘‘(III) to verify that historical data is accu-
rate and complete;
‘‘(ii) to determine, using standard actuarial
techniques, or disseminate, a loss development
factor or developed losses;
‘‘(iii) to develop or disseminate a standard
insurance policy form (including a standard ad-
dendum to an insurance policy form and stand-
ard terminology in an insurance policy form) if
such agreement or joint conduct does not include
an agreement to adhere to such standard form,
or to require adherence to such standard form,
except that the fact that 2 or more persons en-
gaged in the business of insurance use such
standard form—
‘‘(I) shall not be sufficient in itself to
support a finding that an agreement to ad-
here, or to require adherence, to such stand-
ard form exists; and
‘‘(II) may be used only for the purpose
of supplementing or explaining direct evi-
dence of the existence of an agreement to ad-
here, or to require adherence, to such stand-
ard form;
‘‘(iv) to develop or disseminate, for use in
providing insurance in a State, a manual that
is filed, before dissemination, with the State en-
tity that regulates the business of insurance
under State law, if such manual includes only—
‘‘(I) information and conduct described
in clauses (i), (ii), and (iii), including rel-
ativity factors;
‘‘(II) during the transition period, a
trend factor or information to which a
trend factor has been applied, to the extent
permitted under subparagraph (C); and
‘‘(III) explanations and instructions
for using the manual (or any of the infor-
mation contained in the manual), if such
agreement or joint conduct does not include
an agreement among competitors to adhere,
or to require adherence, to any of such ex-
planations or instructions;
‘‘(v) to provide insurance pursuant to a
public necessity market mechanism;
‘‘(vi) to provide insurance as a historical
underwriting capacity risk pool;
‘‘(vii) to administer a public necessity mar-
ket mechanism in a State, pursuant to the au-
thorization of and under the supervision of such
State, if all persons who provide insurance in
such State pursuant to such mechanism, and all
persons seeking to obtain insurance through such
mechanism, have a reasonable opportunity to
appeal determinations affecting them to a gov-
ernmental entity;
to the extent that such conduct is regulated by State
law.
‘‘(C) During the transition period, the antitrust
laws shall not be applicable to conduct that consists
of making an agreement or engaging in joint conduct
to determine or disseminate a trend factor, to the ex-
tent that such conduct is regulated by State law.
‘‘(D) The antitrust laws shall not be applicable
to conduct by a director, officer, or employee of a na-
tional 
trade 
association 
representing 
insurance
agents, or of a State trade association representing
insurance agents that is affiliated with such national
trade association, acting within the scope of the au-
thority vested in such director, officer, or employee by
the trade association involved, that consists of prepar-
ing, disseminating, or discussing a report or comment
(including describing, evaluating, and suggesting pos-
sible responses for members of the association whose
directors, officers, or employees prepared such report
or such comment to consider) with respect to any in-
surer practice affecting the relationship between in-
surers and insurance agents, if—
‘‘(i) such report or such comment includes
a conspicuous statement that each insurance
agent is expected to make his or her own decision
regarding matters contained in such report or
such comment and that anticompetitive agree-
ments among insurance agents with respect to
any response to such practice are illegal under
the antitrust laws;
‘‘(ii) such conduct does not involve—
‘‘(I) monitoring or policing the extent
to which any insurance agent follows, or
pressuring any insurance agent to follow,
any of such responses;
‘‘(II) initiating any communication
(including a mailing, association publica-
tion, or association meeting) with any
member of any such association with respect
to such report or such comment (including
any of such responses), other than by a
means designed to reach all members, or all
directors and officers, of such association;
‘‘(III) referring to any of such re-
sponses in any discussion unless the discus-
sion emphasizes that each insurance agent
is expected to make his or her own decision
regarding matters contained in such report
or such comment and that anticompetitive
agreements among insurance agents with
respect to any response to such practice are
illegal under the antitrust laws; or
‘‘(IV) the formal endorsement of such
report or such comment (including any of
such responses) by any part of the member-
ship of any such association, other than a
statement that dissemination of such report
or such comment has been approved by the
directors or officers of the association whose
directors, officers, or employees prepared
such report or such comment; and
‘‘(iii) the number of directors and officers of
any such association who are involved in pre-
paring, disseminating, or discussing such report
or such comment (including any of such re-
sponses) does not substantially exceed the number
of directors and officers of such association serv-
ing on April 30, 1994;
and if the business of insurance is regulated by State
law.
‘‘(E) The antitrust laws shall not be applicable
to conduct of an insurance agent that is a member of
an association referred to in subparagraph (D) that
consists of independently initiating a communication,
in an issue of a regularly scheduled association publi-
cation or at a regularly scheduled association meet-
ing, to members of a local trade association represent-
ing insurance agents of which such agent is a mem-
ber, that describes or summarizes all or part of the
contents of a report or comment described in such
subparagraph provided to such agent by such associa-
tion described in such subsection and that is made
only by a means designed to reach all such members,
if—
‘‘(i) such conduct does not involve—
‘‘(I) monitoring or policing the extent
to which any insurance agent follows, or
pressuring any insurance agent to follow,
any of the possible responses contained in
such report or such comment;
‘‘(II) referring to any of such responses
unless the reference emphasizes that each in-
surance agent is expected to make his or her
own decision regarding matters contained
in such report or such comment and that
anticompetitive agreements among insur-
ance agents with respect to any response to
an insurance practice discussed in such re-
port or such comment are illegal under the
antitrust laws; or
‘‘(III) the formal endorsement of such
report or such comment (including any of
such responses); and
‘‘(ii) the primary purpose of such meeting,
or of such issue of such publication, is not the
discussion of such report or such comment (in-
cluding any of such responses);
and if the business of insurance is regulated by State
law.
‘‘(2) Subsequent to the transition period, the
independent purchase of a trend factor by a person
engaged in the business of insurance from a person
not engaged in providing insurance (and not affili-
ated with a person engaged in providing insurance)
shall be presumed not to violate the antitrust laws.
‘‘(3) The Federal Trade Commission Act shall be
applicable to the business of insurance to the extent
that such business is not regulated by State law, ex-
cept that, with respect to enforcement of the antitrust
laws, section 5 of such Act shall be applicable to the
business of insurance to the same extent as the other
antitrust laws.’’, and
(2) by adding at the end the following:
‘‘(c) For purposes of subsection (b)—
‘‘(1) the term ‘antitrust laws’ has the meaning
given it in subsection (a) of the first section of the
Clayton Act (15 U.S.C. 12), except that such term in-
cludes section 5 of the Federal Trade Commission Act
(15 U.S.C. 45) as such section 5 applies to conduct
that constitutes a violation of the Sherman Act or the
Clayton Act;
‘‘(2) the term ‘developed losses’ means aggregate
paid losses and aggregate reserves held for received
claims, as adjusted by a loss development factor;
‘‘(3) the term ‘historical data’ means informa-
tion respecting—
‘‘(A) losses paid by, claims received by, re-
serves for such claims set aside by, or units of ex-
posure to loss in insurance policies sold by any
person engaged in the business of insurance; or
‘‘(B) insurance premiums received by any
person engaged in the business of insurance, if
such information is not disseminated in a form
from which information respecting premiums re-
ceived by any separately identifiable person en-
gaged in the business of insurance may be de-
rived;
‘‘(4) the term ‘historical underwriting capacity
risk pool’ means an underwriting capacity risk pool
established prior to April 30, 1994—
‘‘(A) the purpose of which is to provide in-
surance for a commercial risk relating to—
‘‘(i) an airport, aviation, or aerospace
activity;
‘‘(ii) a large commercial or industrial
property (including machinery, boilers, and
pressure vessels);
‘‘(iii) a grain elevator or feed mill;
‘‘(iv) an oil, gas, or chemical peril;
‘‘(v) the construction or operation of a
nuclear energy facility;
‘‘(vi) an inland marine peril or an
ocean marine enterprise;
‘‘(vii) a natural disaster;
‘‘(viii) an occupational accident or ill-
ness;
‘‘(ix) transportation of currency, mail,
securities, bullion, or other valuables by a
person with fiduciary responsibility for
their safe transport;
‘‘(x) foreign commercial activities un-
dertaken in cooperation with the United
States Export-Import Bank; or
‘‘(xi) a war, rebellion, riot, or similar
civil commotion;
‘‘(B) whose conduct has not materially
changed from the conduct described in accord-
ance with subparagraph (C)(ii) in which such
pool—
‘‘(i) was authorized to engage under its
charter, bylaws, or other documents of orga-
nization or governance filed in accordance
with subparagraph (C)(iii); and
‘‘(ii) did engage as so authorized;
prior to April 30, 1994; and
‘‘(C) that, before the effective date of the In-
surance Competitive Pricing Act of 1994, filed
with the Attorney General of the United States,
in accordance with such rules as the Attorney
General may have issued, a notification—
‘‘(i) disclosing the identities of the
members of such pool on April 30, 1994;
‘‘(ii) describing the nature and scope of
the activities of such pool, and the lines of
insurance in which such pool was engaged,
prior to April 30, 1994; and
‘‘(iii) containing the charter, bylaws,
and other documents of organization or gov-
ernance of such pool in effect on or before
April 30, 1994;
‘‘(5) the term ‘insurance agent’ means a person
that is—
‘‘(A) engaged as an independent contractor
in the business of selling insurance;
‘‘(B) licensed under the law of a State as an
insurance agent or insurance broker; and
‘‘(C) neither an insurer in any State in
which such person is so engaged, nor an em-
ployee of an insurer;
‘‘(6) the term ‘insurance policy’ means a con-
tract under which insurance is sold to an insured;
‘‘(7) the term ‘insurer’ means a person that is—
‘‘(A) engaged in the business of providing
insurance; and
‘‘(B) obligated to pay losses under the in-
surance policies under which it provides insur-
ance;
‘‘(8) the term ‘loss’ means an amount paid or to
be paid by a person engaged in the business of insur-
ance to (or for the benefit of) a claimant to satisfy
a claim on an insurance policy, and includes any at-
torney, investigatory, or litigation expenses that are
separately incurred, identified, and allocated by such
person with respect to that particular claim;
‘‘(9) the term ‘loss development factor’ means an
adjustment to be made to the aggregate of losses in-
curred during a prior period of time that have been
paid or for which claims have been received and re-
serves are being held, in order to estimate the aggre-
gate of the losses incurred during such period that
will ultimately be paid;
‘‘(10) the term ‘loss incurred’ means a loss for
which the event has occurred that ultimately gives
rise to liability on a claim on an insurance policy,
without regard to whether a claim based on such
event has been received;
‘‘(11) the term ‘public necessity market mecha-
nism’ means a plan established by State law or by
the State entity that regulates the business of insur-
ance under State law—
‘‘(A) for providing a type of insurance in a
State;
‘‘(B) in which the persons providing such
type of insurance pursuant to such mechanism
represent a substantial number of the persons en-
gaged in the business of providing such type of
insurance in such State and are either required
by State law, or formally requested or ordered by
such State entity, to participate;
‘‘(C) the purpose of which is to make such
type of insurance available to persons who would
not otherwise be able to obtain such type of in-
surance at affordable cost; and
‘‘(D) in which the rate for such type of in-
surance is subject to the approval or disapproval
of such State;
‘‘(12) the term ‘relativity factor’ means a ratio
comparing one classification of historical data to an-
other such classification, or comparing developed
losses in one such classification to developed losses in
another such classification;
‘‘(13) the term ‘transition period’ means the 2-
year period beginning on the effective date of the In-
surance Competitive Pricing Act of 1994;
‘‘(14) the term ‘trend factor’ means an adjust-
ment to be made to developed losses in order to ac-
count for any change that is anticipated to affect
losses; and
‘‘(15) the term ‘underwriting capacity risk pool’
means a business arrangement or association—
‘‘(A) whose members consist of 2 or more
persons engaged in the business of insurance;
and
‘‘(B) that operates for the purpose of pro-
viding insurance under which the liability for
paying losses is spread among such members.’’.
SEC. 4. PUBLICATION AND AVAILABILITY OF HISTORICAL
UNDERWRITING CAPACITY RISK POOL NOTI-
FICATIONS.
The Attorney General shall, not later than 30 days
after receiving a notification filed in accordance with sec-
tion 2(c)(4)(C) of the Act of March 9, 1945 (59 Stat. 34;
15 U.S.C. 1012), commonly known as the McCarran-Fer-
guson Act—
(1) publish in the Federal Register—
(A) a summary of such notification; and
(B) notice that such notification is available
to the public; and
(2) make such notification available to the pub-
lic.
SEC. 5. BUSINESS REVIEW.
If a person engaged in the business of insurance sub-
mits a written request to the Attorney General in accord-