‘‘(A) DECREASE TREATED AS GROSS IN-
COME.—If for any taxable year—
‘‘(i) the opening balance for the ter-
rorism commercial business reserve exceeds
‘‘(ii) the closing balance for such re-
serve,
such excess shall be included in gross income
under subsection (b)(1)(F).
‘‘(B) INCREASE
TREATED
AS
DEDUC-
TION.—If for any taxable year—
‘‘(i) the closing balance for the ter-
rorism commercial business reserve exceeds
‘‘(ii) the opening balance for such re-
serve,
such excess shall be taken into account as a de-
duction under subsection (c)(14).
‘‘(2) TERRORISM
COMMERCIAL
BUSINESS
RE-
SERVE.—For purposes of this section, the term ‘ter-
rorism commercial business reserve’ means amounts
held in a segregated account (or other separately
identifiable arrangement or account) which are set
aside exclusively—
‘‘(A) to mature or liquidate, either by pay-
ment or reinsurance, future unaccrued claims
arising from declared terrorism losses under
commercial lines of business, and
‘‘(B) if so directed by the insurance com-
missioner of any State, to pay other claims as
part of a plan of the company to avoid insol-
vency.
‘‘(3) LIMITATION ON AMOUNT OF RESERVE.—
‘‘(A) IN GENERAL.—If the closing balance
of any terrorism commercial business reserve
for any taxable year exceeds such reserve’s limit
for such year—
‘‘(i) such excess shall be included in
gross income under subsection (b)(1)(F)
for the following taxable year, and
‘‘(ii) if such excess is distributed dur-
ing such following taxable year, the open-
ing balance of such reserve for such fol-
lowing taxable year shall be determined
without regard to such excess.
‘‘(B) RESERVE LIMIT.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A), a reserve’s limit for any
taxable year is such reserve’s allocable
share of the national limit for the calendar
year in which such taxable year begins.
‘‘(ii) NATIONAL LIMIT.—The national
limit is $40,000,000,000 ($13,340,000,000
for 2002).
‘‘(iii) ALLOCATION OF LIMIT.—
‘‘(I) IN
GENERAL.—A reserve’s
allocable share of the national limit
for any calendar year is the amount
which bears the same ratio to the na-
tional limit for such year as the com-
pany’s net written premiums for com-
mercial lines of business bears to such
net written premiums for all compa-
nies for commercial line of business.
‘‘(II) EXCLUSION OF PREMIUMS
FOR INSURANCE NOT COVERING DE-
CLARED TERRORISM LOSSES AND FOR
REINSURANCE.—Subclause (I) shall
be applied without regard to pre-
miums for insurance which does not
cover declared terrorism losses and
premiums for reinsurance.
‘‘(III) DETERMINATION OF NET
WRITTEN PREMIUMS.—Except as oth-
erwise provided in this section, all de-
terminations under this subsection
shall be made on the basis of the
amounts required to be set forth on
the annual statement approved by the
National Association of Insurance
Commissioners.
‘‘(iv) INFLATION
ADJUSTMENT
OF
LIMIT.—In the case of any calendar year
after 2002, the $40,000,000,000 amount
in clause (ii) shall be increased by an
amount equal to the product of—
‘‘(I) such dollar amount, and
‘‘(II) the cost-of-living adjust-
ment determined under subsection
(f)(3) for such calendar year, deter-
mined by substituting ‘calendar year
2001’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof.
If any amount after adjustment under the
preceding sentence is not a multiple of
$1,000,000, such amount shall be rounded
to the nearest multiple of $1,000,000.
‘‘(4) DECLARED TERRORISM LOSSES.—For pur-
poses of this subsection—
‘‘(A) IN
GENERAL.—The term ‘declared
terrorism losses’ means, with respect to a tax-
able year—
‘‘(i) the amount of losses and loss ad-
justment expenses incurred in commercial
lines of business that are attributable to 1
or more declared terrorism events, plus
‘‘(ii) any nonrecoverable assessments,
surcharges, or other liabilities that are
borne by the company and are attributable
to such events.
‘‘(B) DECLARED TERRORISM EVENT.—The
term ‘declared terrorism event’ means any event
declared by the President to be an act of ter-
rorism against the United States for purposes
of this section.
‘‘(5) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be appropriate to
carry out this subsection, and shall prescribe such
regulations after consultation with the National As-
sociation of Insurance Commissioners.’’
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (1) of section 832(b) of such
Code is amended by striking ‘‘and’’ at the end of
subparagraph (D), by striking the period at the end
of subparagraph (E) and inserting in lieu thereof ‘‘,
and’’, and by adding at the end the following new
subparagraph:
‘‘(F) each net decrease in reserves which is
required by paragraph (1) or (3) of subsection
(h) to be taken into account under this sub-
paragraph.’’
(2) Subsection (c) of section 832 of such Code
is amended by striking ‘‘and’’ at the end of para-
graph (12), by striking the period at the end of
paragraph (13) and inserting in lieu thereof ‘‘; and’’,
and by adding at the end the following new para-
graph:
‘‘(14) each net increase in reserves which is re-
quired by subsection (h)(1) to be taken into account
under this paragraph.’’
(c) EFFECTIVE DATE.—The amendments made by
this subsection shall apply to taxable years beginning after
December 31, 2001.
SEC. 11. STATE PREEMPTION.
(a) COVERED PERILS.—A commercial insurer shall
be considered to have complied with any State law that
requires or regulates the provision of insurance coverage
for acts of terrorism if the insurer provides coverage in
accordance with the definitions regarding acts of terrorism
under the regulations issued by the Administrators.
(b) RATE LAWS.—If any provision of any State law
prevents an insurer from increasing its premium rates in
an amount necessary to recover any assessments pursuant
to section 7, such provision is preempted only to the extent
necessary to provide for such insurer to recover such
losses.
(c) FILE AND USE.—With respect only to commercial
property and casualty insurance covering acts of ter-
rorism, any provision of State law that requires, as a con-
dition precedent to the effectiveness of rates or policies
for such insurance that is made available by an insurer
licensed to transact such business in the State, any action
(including prior approval by the State insurance regulator
for such State) other than filing of such rates and policies
and related information with such State insurance regu-
lator is preempted to the extent such law requires such
additional actions for such insurance coverage. This sub-
section shall not be considered to preempt a provision of
State law solely because the law provides that rates and
policies for such insurance coverage are, upon such filing,
subject to subsequent review and action, which may in-
clude actions to disapprove or discontinue use of such
rates or policies, by the State insurance regulator.
SEC. 12. CONSISTENT STATE GUIDELINES FOR COVERAGE
FOR ACTS OF TERRORISM.
(a) SENSE
OF CONGRESS REGARDING COVERED
PERILS.—It is the sense of the Congress that—
(1) the NAIC, in consultation with the appro-
priate Administrator, should develop appropriate
definitions for acts of terrorism and appropriate
standards for making determinations regarding
events or occurrences of acts of terrorism;
(2) each State should adopt the definitions and
standards developed by the NAIC for purposes of
regulating insurance coverage made available in that
State;
(3) in consulting with the NAIC, the appro-
priate Administrator should advocate and promote
the development of definitions and standards that
are appropriate for purposes of this Act; and
(4) after consultation with the NAIC, the ap-
propriate Administrator should adopt definitions for
acts of terrorism and standards for determinations
that are appropriate for this Act.
(b) INSURANCE RESERVE GUIDELINES.—
(1) SENSE OF CONGRESS REGARDING ADOPTION
BY STATES.—It is the sense of the Congress that—
(A) the NAIC should develop appropriate
guidelines for commercial insurers and pools re-
garding maintenance of reserves against the
risks of acts of terrorism; and
(B) each State should adopt such guide-
lines for purposes of regulating commercial in-
surers doing business in that State.
(2) CONSIDERATION
OF
ADOPTION
OF
NA-
TIONAL GUIDELINES.—Upon the expiration of the 6-
month period beginning on the date of the enact-
ment of this Act, the appropriate Administrator
shall make a determination of whether the guidelines
referred to in paragraph (1) have, by such time,
been developed and adopted by nearly all States in
a uniform manner. If the appropriate Administrator
determines that such guidelines have not been so de-
veloped and adopted, the appropriate Administrator
shall consider adopting, and may adopt, such guide-
lines on a national basis in a manner that would
supercede any State law regarding maintenance of
reserves against such risks.
(c) GUIDELINES REGARDING DISCLOSURE OF PRIC-
ING AND TERMS OF COVERAGE.—
(1) SENSE OF CONGRESS.—It is the sense of
the Congress that the States should require, by laws
or regulations governing the provision of commercial
property and casualty insurance that includes cov-
erage for acts of terrorism, that the price of any
such terrorism coverage, including the costs of any
terrorism related assessments or surcharges under
this Act, be separately disclosed.
(2) ADOPTION OF NATIONAL GUIDELINES.—If
the appropriate Administrator determines that the
States have not enacted laws or adopted regulations
adequately providing for the disclosures described in
paragraph (1) within a reasonable period of time
after the date of the enactment of this Act, the ap-
propriate Administrator shall, after consultation
with the NAIC, adopt guidelines on a national basis
requiring such disclosure in a manner that
supercedes any State law regarding such disclosure.
SEC. 13. CONSULTATION WITH STATE INSURANCE REGU-
LATORS AND NAIC.
The Administrators shall consult with the State in-
surance regulators and the NAIC in carrying out this Act.
The Administrators may take such actions, including en-
tering into such agreements and providing such technical
and organizational assistance to insurers and State insur-
ance regulators, as may be necessary to provide for the
distribution of financial assistance under section 6 and the
collection of assessments under section 7 and surcharges
under section 8.
SEC. 14. SOVEREIGN IMMUNITY PROTECTIONS.
(a) FEDERAL CAUSE
OF ACTION
FOR DAMAGES
FROM TERRORIST ACTS RESULTING IN TRIGGERING DE-
TERMINATION.—
(1) IN GENERAL.—If a triggering determination
occurs requiring an assessment under section 7 or a
surcharge under section 8, there shall exist a Fed-
eral cause of action, which shall be the exclusive
remedy, for damages claimed pursuant to, or in con-
nection with, any acts of terrorism that caused the
insured losses resulting in such triggering deter-
mination.
(2) SUBSTANTIVE LAW.—The substantive law
for decision in any such action 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 inconsistent with or preempted by Fed-
eral law.
(3) JURISDICTION.—Pursuant to each trig-
gering determination, the Judicial Panel on Multi-
district Litigation shall designate one or more dis-
trict courts of the United States which shall have
original and exclusive jurisdiction over all actions
brought pursuant to this subsection that arise out of
the triggering event involved.
(4) OFFSET FOR RELIEF PAYMENTS.—Any re-
covery by a plaintiff in an action under this sub-
section shall be offset by the amount, if any, re-
ceived by the plaintiff from the United States pursu-
ant to any emergency or disaster relief program, or
from any other collateral source, for compensation of
losses related to the act of terrorism involved.
(b) DAMAGES IN ACTIONS REGARDING INSURANCE
CLAIMS.—In an action brought under this section for
damages claimed by an insured pursuant to, or in connec-
tion with, any commercial property and casualty insurance
providing coverage for acts of terrorism that resulted in
a triggering determination:
(1) PROHIBITION OF PUNITIVE DAMAGES.—No
punitive damages intended to punish or deter may
be awarded.
(2) NONECONOMIC DAMAGES.—
(A) IN GENERAL.—Each defendant in such
an action shall be liable only for the amount of
noneconomic damages allocated to the defend-
ant in direct proportion to the percentage of re-
sponsibility of the defendant for the harm to
the claimant.
(B) DEFINITION.—For purposes of sub-
paragraph (A), the term ‘‘noneconomic dam-
ages’’ means damages for losses for physical
and emotional pain, suffering, inconvenience,
physical impairment, mental anguish, disfigure-
ment, loss of enjoyment of life, loss of society
and companionship, loss of consortium, hedonic
damages, injury to reputation, and any other
nonpecuniary losses of any kind or nature.
(c) RIGHT OF SUBROGATION.—The United States
shall have the right of subrogation with respect to any
claim paid by the United States under this Act.
(d) PROTECTIVE ORDERS.—The United States or
any appropriate Administrator carrying out responsibil-
ities under this Act may seek protective orders or assert
privileges ordinarily available to the United States to pro-
tect against the disclosure of classified information, in-
cluding the invocation of the military and State secrets
privilege
SEC. 15. STUDY OF POTENTIAL EFFECTS OF TERRORISM
ON LIFE INSURANCE INDUSTRY.
(a) ESTABLISHMENT.—Not later than 30 days after
the date of enactment of this Act, the President shall es-
tablish a commission (in this section referred to as the
‘‘Commission’’) to study and report on the potential ef-
fects of an act or acts of terrorism on the life insurance
industry in the United States and the markets served by
such industry.
(b) MEMBERSHIP AND OPERATIONS.—
(1) APPOINTMENT.—The Commission shall con-
sist of 5 members, as follows:
(A) The appropriate Administrator, as des-
ignated by the President.
(C) 4 members appointed by the President,
who shall be—
(i) a representative of direct under-
writers of life insurance within the United
States;
(ii) a representative of reinsurers of
life insurance within the United States;
(iii) an officer of the NAIC; and
(iv) a representative of insurance
agents for life underwriters.
(2) OPERATIONS.—The chairperson of the
Commission shall determine the manner in which
the Commission shall operate, including funding,
staffing, and coordination with other governmental
entities.
(c) STUDY.—The Commission shall conduct a study
of the life insurance industry in the United States, which
shall identify and make recommendations regarding—
(1) possible actions to encourage, facilitate, and
sustain provision by the life insurance industry in
the United States of coverage for losses due to death
or disability resulting from an act or acts of ter-
rorism, including in the face of threats of such acts;
and
(2) possible actions or mechanisms to sustain or
supplement the ability of the life insurance industry
in the United States to cover losses due to death or
disability resulting from an act or acts of terrorism
in the event that—
(A) such acts significantly affect mortality
experience of the population of the United
States over any period of time;
(B) such loses jeopardize the capital and
surplus of the life insurance industry in the
United States as a whole; or
(C) other consequences from such acts
occur, as determined by the Commission, that
may significantly affect the ability of the life in-
surance industry in the United States to inde-
pendently cover such losses.
(d) RECOMMENDATIONS.—The Commission may
make a recommendation pursuant to subsection (c) only
upon the concurrence of a majority of the members of the
Commission.
(e) REPORT.—Not later than 120 days after the date
of enactment of this Act, the Commission shall submit to
the House of Representatives and the Senate a report de-
scribing the results of the study and any recommendations
developed under subsection (c).
(f) TERMINATION.—The Commission shall terminate
60 days after submission of the report as provided for in
subsection (e).
SEC. 16. DEFINITIONS.
For purposes of this Act, the following definitions
shall apply:
(1) ACT OF TERRORISM.—
(A) IN GENERAL.—The term ‘‘act of ter-
rorism’’ means any act that the appropriate Ad-
ministrator determines meets the requirements
under subparagraph (B), as such requirements
are further defined and specified by the appro-
priate Administrator in consultation with the
NAIC.
(B) REQUIREMENTS.—An act meets the
requirements of this subparagraph if the act—
(i) is unlawful;
(ii) causes harm to a person, property,
or entity, in the United States;
(iii) is committed by a group of per-
sons or associations who—
(I) are not a government of a
foreign country or the de facto gov-
ernment of a foreign country; and
(II) are recognized by the De-
partment of State or the appropriate
Administrator as a terrorist group or
have conspired with such a group or
the group’s agents or surrogates; and
(iv) has as its purpose to overthrow or
destabilize the government of any country
or to influence the policy or affect the con-
duct of the government of the United
States by coercion.
(2) APPROPRIATE ADMINISTRATORS.—The term
‘‘appropriate Administrator’’ means, with respect to
any function or responsibility of the Federal Govern-
ment under this Act, the Federal officer designated
by the President pursuant to section 3 as respon-
sible for carrying out such function or responsibility.
(3) AFFILIATE.—The term ‘‘affiliate’’ means,
with respect to an insurer, any company that con-
trols, is controlled by, or is under common control
with the insurer.
(4) 
AGGREGATE
WRITTEN
PREMIUM.—The
term ‘‘aggregate written premium’’ means, with re-
spect to a year, the aggregate premium amount of
all commercial property and casualty insurance cov-
erage written during such year for persons or prop-
erties in the United States under all lines of com-
mercial property and casualty insurance.
(5) 
COMMERCIAL
INSURANCE.—The 
term
‘‘commercial insurance’’ means property and cas-
ualty insurance that is not insurance for home-
owners, tenants, private passenger nonfleet auto-
mobiles, mobile homes, or other insurance for per-
sonal, family, or household needs.
(6) COMMERCIAL INSURER.—The term ‘‘com-
mercial insurer’’ means any corporation, association,
society, order, firm, company, mutual, partnership,
individual, aggregation of individuals, or any other
legal entity that is engaged in the business of pro-
viding commercial property and casualty insurance
for persons or properties in the United States. Such
term includes any affiliates of a commercial insurer.
(7) COMMERCIAL PROPERTY AND CASUALTY IN-
SURANCE.—The term ‘‘commercial property and cas-
ualty insurance’’ means property and casualty insur-
ance that is commercial insurance.
(8) CONTROL.—A company has control over an-
other company if—
(A) the company directly or indirectly or
acting through one or more other persons owns,
controls, or has power to vote 25 percent or
more of any class of voting securities of the
other company;
(B) the company controls in any manner
the election of a majority of the directors or
trustees of the other company; or
(C) the appropriate Administrator deter-
mines, after notice and opportunity for hearing,
that the company directly or indirectly exercises
a controlling influence over the management or
policies of the other company.
(9) COVERED PERIOD.—The term ‘‘covered pe-
riod’’ has the meaning given such term in section
5(b).
(10) INDUSTRY-WIDE LOSSES.—The term ‘‘in-
dustry-wide losses’’ means the aggregate insured
losses sustained by all insurers, from coverage writ-
ten for persons or properties in the United States,
under all lines of commercial property and casualty
insurance.
(11) INSURED LOSS.—The term ‘‘insured loss’’
means any loss in the United States covered by com-
mercial property and casualty insurance.
(12) INSURER.—The term ‘‘insurer’’ means any
corporation, association, society, order, firm, com-
pany, mutual, partnership, individual, aggregation of
individuals, or any other legal entity that is engaged
in the business of providing property and casualty
insurance for persons or properties in the United
States. Such term includes any affiliates of an in-
surer.
(13) NAIC.—The term ‘‘NAIC’’ means the Na-
tional Association of Insurance Commissioners.
(14) PROPERTY AND CASUALTY INSURANCE.—
The term ‘‘property and casualty insurance’’ means
insurance against—
(A) loss of or damage to property;
(B) loss of income or extra expense in-
curred because of loss of or damage to prop-
erty; and
(C) third party liability claims caused by
negligence or imposed by statute or contract.
Such term does not include health or life insurance.
(15) STATE.—The term ‘‘State’’ means the
States of the United States, the District of Colum-
bia, the Commonwealth of Puerto Rico, the Com-
monwealth of the Northern Mariana Islands, Guam,
the Virgin Islands, American Samoa, and any other
territory or possession of the United States.
(16) STATE
INSURANCE
REGULATOR.—The
term ‘‘State insurance regulator’’ means, with re-
spect to a State, the principal insurance regulatory
authority of the State.
(17) TRIGGERING DETERMINATION.—The term
‘‘triggering determination’’ has the meaning given
such term in section 5(a).
(18) TRIGGERING
EVENT.—The term ‘‘trig-
gering event’’ means, with respect to a triggering de-
termination, the event of an act of terrorism, or the
events of such acts, that caused the insured losses
resulting in such triggering determination.
(19) UNITED
STATES.—The term ‘‘United
States’’ means, collectively, the States (as such term
is defined in this section).
SEC. 17. EXTENSION OF PROGRAM.
(a) AUTHORITY.—If the appropriate Administrator
determines that action under this section is necessary to
ensure the adequate availability in the United States of
commercial property and casualty insurance coverage for
acts of terrorism, the appropriate Administrator may pro-
vide that the provisions of this Act shall continue to apply
with respect to a period or periods, as established by the
Administrator, that begin after the expiration of the cov-
ered period specified in section 5(b) and end before Janu-
ary 1, 2005.
(b) COVERED PERIOD.—If the appropriate Adminis-
trator exercises the authority under subsection (a), not-
withstanding section 5(b) and section 16(9), the period or
periods established by the appropriate Administrator shall
be considered to be the covered period for purposes of this
Act.
SEC. 18. REGULATIONS.
The appropriate Administrators shall issue any regu-
lations necessary to carry out this Act.
Æ