IB
Union Calendar No. 181
107TH CONGRESS
1ST SESSION
H. R. 3210
[Report No. 107–300, Parts I and II]
To ensure the continued financial capacity of insurers to provide coverage
for risks from terrorism.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 1, 2001
Mr. OXLEY (for himself, Mr. BAKER, Mrs. ROUKEMA, Mr. BACHUS, Mrs.
KELLY, Mr. BENTSEN, Mr. ROYCE, Mr. MALONEY of Connecticut, Mr.
LUCAS of Oklahoma, Mr. POMEROY, Mr. NEY, Mr. BARR of Georgia, Mr.
GILLMOR, Mr. WELDON of Florida, Mr. RYUN of Kansas, Mr. RILEY, Mr.
JONES of North Carolina, Mr. OSE, Mrs. BIGGERT, Mr. GREEN of Wis-
consin, Mr. SHAYS, Mr. SHADEGG, Mr. FOSSELLA, Mr. GARY G. MILLER
of California, Mr. CANTOR, Mr. GRUCCI, Mr. FERGUSON, Mr. ROGERS
of Michigan, Mr. TIBERI, Mr. FOLEY, and Mr. ISSA) introduced the fol-
lowing bill; which was referred to the Committee on Financial Services,
and in addition to the Committees on Ways and Means, and the Budget,
for a period to be subsequently determined by the Speaker, in each case
for consideration of such provisions as fall within the jurisdiction of the
committee concerned
NOVEMBER 19, 2001
Reported from the Committee on Financial Services with an amendment
[Strike out all after the enacting clause and insert the part printed in italic]
NOVEMBER 19, 2001
Referral to the Committee on the Budget extended for a period ending not
later than November 26, 2001
NOVEMBER 19, 2001
Referred to the Committee on the Judiciary for a period ending not later than
November 26, 2001, for consideration of such provisions of the bill and
amendment as fall within the jurisdiction of that committee pursuant to
clause 1(k), rule X
NOVEMBER 19, 2001
Reported from the Committee on Ways and Means with an amendment
[Strike out all after the enacting clause and insert the part printed in boldface roman]
NOVEMBER 26, 2001
Additional sponsors: Mr. LEACH, Ms. HART, Mr. BEREUTER, Mr.
LATOURETTE, and Ms. PRYCE of Ohio
NOVEMBER 26, 2001
Committees on the Budget and the Judiciary discharged; committed to the
Committee of the Whole House on the State of the Union and ordered
to be printed
[For text of introduced bill, see copy of bill as introduced on November 1, 2001]
A BILL
To ensure the continued financial capacity of insurers to
provide coverage for risks from terrorism.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the ‘‘Ter-
rorism Risk Protection Act’’.
(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title and table of contents.
Sec. 2. Congressional findings.
Sec. 3. Authority of Secretary of the Treasury.
Sec. 4. Submission of premium information to Secretary.
Sec. 5. Triggering determination and covered period.
Sec. 6. Federal cost-sharing for commercial insurers.
Sec. 7. Assessments.
Sec. 8. Terrorism loss repayment surcharge.
Sec. 9. Administration of assessments and surcharges.
Sec. 10. Application to self-insurance arrangements and offshore insurers and re-
insurers.
Sec. 11. Reserve for terrorism coverage under commercial lines of business.
Sec. 12. State preemption.
Sec. 13. Consistent State guidelines for coverage for acts of terrorism.
Sec. 14. Consultation with State insurance regulators and NAIC.
Sec. 15. Sovereign immunity protections.
Sec. 16. Study of potential effects of terrorism on life insurance industry.
Sec. 17. Railroad insurance study.
Sec. 18. Study of reinsurance pool system for future acts of terrorism.
Sec. 19. Definitions.
Sec. 20. Extension of program.
Sec. 21. Regulations.
SEC. 2. CONGRESSIONAL FINDINGS.
The Congress finds that—
(1) the terrorist attacks on the World Trade Cen-
ter and the Pentagon of September 11, 2001, resulted
in a large number of deaths and injuries, the destruc-
tion and damage to buildings, and interruption of
business operations;
(2) the attacks have inflicted possibly the largest
losses ever incurred by insurers and reinsurers in a
single day;
(3) while the insurance and reinsurance indus-
tries have committed to pay the losses arising from
the September 11 attacks, the resulting disruption has
created widespread market uncertainties with regard
to the risk of losses arising from possible future ter-
rorist attacks;
(4) such uncertainty threatens the continued
availability of United States commercial property
and casualty insurance for terrorism risk at mean-
ingful coverage levels;
(5) the unavailability of affordable commercial
property and casualty insurance for terrorist acts
threatens the growth and stability of the United
States economy, including impeding the ability of fi-
nancial services providers to finance commercial
property acquisitions and new construction;
(6) in the past, the private insurance markets
have shown a remarkable resiliency in adapting to
changed circumstances;
(7) given time, the private markets will diversify
and develop risk spreading mechanisms to increase
capacity and guard against possible future losses in-
curred by terrorist attacks;
(8) it is necessary to create a temporary indus-
try risk sharing program to ensure the continued
availability of commercial property and casualty in-
surance and reinsurance for terrorism-related risks;
(9) such action is necessary to limit immediate
market disruptions, encourage economic stabilization,
and facilitate a transition to a viable market for pri-
vate terrorism risk insurance; and
(10) in addition, it is necessary to repeal por-
tions of the tax law which discourage the insurance
market from developing the necessary reserves to han-
dle possible future losses due to acts of terrorism.
SEC. 3. AUTHORITY OF SECRETARY OF THE TREASURY.
The Secretary of the Treasury shall be responsible for
carrying out a program for financial assistance for com-
mercial property and casualty insurers, as provided in this
Act.
SEC. 4. SUBMISSION OF PREMIUM INFORMATION TO SEC-
RETARY.
To the extent such information is not otherwise avail-
able to the Secretary, the Secretary may require each in-
surer to submit, to the Secretary or to the NAIC, a state-
ment specifying the net premium amount of coverage writ-
ten by such insurer for properties and persons in the United
States under each line of commercial property and casualty
insurance sold by such insurer during such periods as the
Secretary may provide.
SEC. 5. TRIGGERING DETERMINATION AND COVERED PE-
RIOD.
(a) IN GENERAL.—For purposes of this Act, a ‘‘trig-
gering determination’’ is a determination by the Secretary
that the insured losses resulting from the occurrence of an
act of terrorism during the covered period (as such term
is defined in subsection (b)), or the aggregate insured losses
resulting from multiple occurrences of acts of terrorism all
occurring during the covered period, meet the requirements
under either of the following paragraphs:
(1) INDUSTRY-WIDE TRIGGER.—Such industry-
wide losses exceed $1,000,000,000.
(2) INDIVIDUAL
INSURER
TRIGGER.—Such in-
dustry-wide losses exceed $100,000,000 and some por-
tion of such losses for any single commercial insurer
exceed—
(A) 10 percent of the capital surplus of such
commercial insurer (as such term is defined by
the Secretary); and
(B) 10 percent of the net commercial prop-
erty and casualty premiums written by such
commercial insurer;
except that this paragraph shall not apply to any
commercial insurer that was not providing commer-
cial property and casualty insurance coverage prior
to September 11, 2001.
(b) COVERED PERIOD.—For purposes of this Act, the
‘‘covered period’’ is the period beginning on the date of the
enactment of this Act and ending on January 1, 2003.
(c) DETERMINATIONS REGARDING OCCURRENCES.—
For purposes of subsection (a), the Secretary shall have the
sole authority, which may not be delegated or designated
to any other officer, employee, or position, for determining
whether—
(1) an occurrence was caused by an act of ter-
rorism;
(2) insured losses from acts of terrorism were
caused by one or multiple occurrences; and
(3) an act of terrorism occurred during the cov-
ered period.
SEC. 6. FEDERAL COST-SHARING FOR COMMERCIAL INSUR-
ERS.
(a) IN GENERAL.—Pursuant to a triggering deter-
mination, the Secretary shall provide financial assistance
to commercial insurers in accordance with this section to
cover insured losses resulting from acts of terrorism, which
shall be repaid in accordance with subsection (e).
(b) AMOUNT.—
(1) INDUSTRY-WIDE TRIGGER.—Subject to sub-
section (c), with respect to a triggering determination
under section 5(a)(1), financial assistance shall be
made available under this section to each commercial
insurer in an amount equal to 90 percent of the
amount of the insured losses of the insurer as a result
of the triggering event involved.
(2) INDIVIDUAL INSURER TRIGGER.—Subject to
subsection (c), with respect to a triggering determina-
tion under section 5(a)(2), financial assistance shall
be made available under this section, to each commer-
cial insurer incurring insured losses as a result of the
triggering event involved that exceed the amounts
under subparagraphs (A) and (B) of such section, in
an amount equal to the difference between—
(A) 90 percent of the amount of the insured
losses of the insurer as a result of such triggering
event; and
(B) the amount under subparagraph (B) of
section 5(a)(2).
(c) AGGREGATE LIMITATION.—The aggregate amount
of financial assistance provided pursuant to this section
may not exceed $100,000,000,000.
(d) LIMITATIONS.—The Secretary may establish such
limitations as may be necessary to ensure that payments
under this section in connection with a triggering deter-
mination are made only to commercial insurers that are
not in default of any obligation under section 7 to pay as-
sessments or under section 8 to collect surcharges.
(e) REPAYMENT.—Financial assistance made available
under this section shall be repaid through assessments under
section 7 collected by the Secretary and surcharges remitted
to the Secretary under section 8. Any such amounts col-
lected or remitted shall be deposited into the general fund
of the Treasury.
(f) EMERGENCY DESIGNATION.—Congress designates
the amount of new budget authority and outlays in all fis-
cal years resulting from this section as an emergency re-
quirement pursuant to section 252(e) of the Balanced Budg-
et and Emergency Deficit Control Act of 1985 (2 U.S.C.
901(e)). Such amount shall be available only to the extent
that a request, that includes designation of such amount
as an emergency requirement as defined in such Act, is
transmitted by the President to Congress.
SEC. 7. ASSESSMENTS.
(a) IN GENERAL.—In the case of a triggering deter-
mination, each commercial insurer shall be subject to as-
sessments under this section for the purpose of repaying fi-
nancial assistance made available under section 6 in con-
nection with such determination.
(b) AGGREGATE ASSESSMENT.—Pursuant to a trig-
gering determination, the Secretary shall determine the ag-
gregate amount to be assessed among all commercial insur-
ers, which shall be equal to the lesser of—
(1) $20,000,000,000; and
(2) the amount of financial assistance paid
under section 6 in connection with the triggering de-
termination.
(c) ALLOCATION OF ASSESSMENT.—
(1) IN GENERAL.—The Secretary shall allocate
the aggregate assessment amount determined under
subsection (b) among all commercial insurers. The
portion of the aggregate assessment amount that is al-
located as an assessment on each commercial insurer
shall be based on the percentage, written by that in-
surer, of the aggregate written premium for all com-
mercial insurers, for the calendar year preceding the
assessment.
(2) PAYMENT REQUIREMENT.—Upon notification
by the Secretary of an assessment under this section,
each commercial insurer shall be required to pay to
the Secretary, in the manner provided under section
9 by the Secretary, the amount equal to the assess-
ment on such commercial insurer (subject to the limi-
tation under paragraph (3)).
(3) ANNUAL LIMITATION ON AMOUNT ALLOCATED
TO EACH COMMERCIAL INSURER.—
(A) IN
GENERAL.—Of any assessments
under this section on a commercial insurer, the
portion required to be paid by any commercial
insurer during a calendar year shall not exceed
the amount that is equal to 3 percent of the net
written premium for such insurer for the pre-
ceding calendar year.
(B) MULTIPLE PAYMENTS.—If any amounts
required to be repaid under this section for a cal-
endar year are limited by operation of subpara-
graph (A), the Secretary shall provide that all
such remaining amounts shall be reallocated
among all commercial insurers (in the manner
provided in paragraph (1)) over such imme-
diately succeeding calendar years, and repaid
over such years, as may be necessary to provide
for full payment of such remaining amounts, ex-
cept that the limitation under subparagraph (A)
shall apply to the amounts paid in any such
successive calendar years.
(4) ADMINISTRATIVE FLEXIBILITY.—
(A) TIMING OF ASSESSMENTS.—Assessments
under this section in connection with a trig-
gering determination shall be made, to the extent
that the Secretary considers practicable and ap-
propriate, at the beginning of the calendar year
immediately following the triggering determina-
tion.
(B) ESTIMATES AND CORRECTIONS.—If the
Secretary makes an assessment at a time other
than provided under subparagraph (A), the Sec-
retary may—
(i) require commercial insurers to esti-
mate their net premium written for the year
in which the assessment is made; and
(ii) make a subsequent refund or re-
quire additional payments to correct such
estimation at the end of the calendar year.
(5) DEFERRAL
OF
CONTRIBUTIONS.—The Sec-
retary may defer the payment of part or all of the as-
sessment required under paragraph (2) to be paid by
a commercial insurer, but only to the extent that the
Secretary determines that such deferral is necessary to
avoid the likely insolvency of the commercial insurer.
SEC. 8. TERRORISM LOSS REPAYMENT SURCHARGE.
(a) DETERMINATION
OF IMPOSITION
AND COLLEC-
TION.—
(1) IN GENERAL.—If, pursuant to a triggering
determination, the Secretary determines that the ag-
gregate amount of financial assistance provided pur-
suant to section 6 exceeds $20,000,000,000, the Sec-
retary shall consider and weigh the factors under
paragraph (2) to determine the extent to which a sur-
charge under this section should be established.
(2) FACTORS.—The factors under this paragraph
are—
(A) the ultimate costs to taxpayers if a sur-
charge under this section is not established;
(B) the economic conditions in the commer-
cial marketplace;
(C) the affordability of commercial insur-
ance for small- and medium-sized business; and
(D) such other factors as the Secretary con-
siders appropriate.
(3) POLICYHOLDER PREMIUM.—The amount es-
tablished by the Secretary as a surcharge under this
section shall be established and imposed as a policy-
holder premium surcharge on commercial property
and casualty insurance written after such determina-
tion, for the purpose of repaying financial assistance
made available under section 6 in connection with
such triggering determination.
(4) COLLECTION.—The Secretary shall provide
for commercial insurers to collect surcharge amounts
established under this section and remit such amounts
collected to the Secretary.
(b) AMOUNT AND DURATION.—Subject to subsection
(c), the surcharge under this section shall be established in
such amount, and shall apply to commercial property and
casualty insurance written during such period, as the Sec-
retary determines is necessary to recover the aggregate
amount of financial assistance provided under section 6 to
cover insured losses resulting from the triggering event that
exceed $20,000,000,000.
(c) PERCENTAGE LIMITATION.—The surcharge under
this section applicable to commercial property and casualty
insurance coverage may not exceed, on an annual basis, the
amount equal to 3 percent of the premium charged for such
coverage.
(d) OTHER TERMS.—The surcharge under this section
shall—
(1) be based on a percentage of the amount of
commercial property and casualty insurance coverage
that a policy provides; and
(2) be imposed with respect to all commercial
property and casualty insurance coverage written
during the period referred to in subsection (b).
(e) EXCLUSIONS.—For purposes of this section, com-
mercial property and casualty insurance does not include
any reinsurance provided to primary insurance companies.
SEC. 9. ADMINISTRATION OF ASSESSMENTS AND SUR-
CHARGES.
(a) MANNER AND METHOD.—
(1) IN GENERAL.—The Secretary shall provide
for the manner and method of carrying out assess-
ments under section 7 and surcharges under section
8, including the timing and procedures of making as-
sessments and surcharges, notifying commercial in-
surers of assessments or surcharge requirements, col-
lecting payments from and surcharges through com-
mercial insurers, and refunding of any excess
amounts paid or crediting such amounts against fu-
ture assessments.
(2) EFFECT OF ASSESSMENTS AND SURCHARGES
ON URBAN COMMERCIAL CENTERS.—In determining
the method and manner of imposing assessments
under section 7 and surcharges under section 8, in-
cluding the amount of such assessments and sur-
charges, the Secretary shall take into consideration
the economic impact of any such assessments and sur-
charges on commercial centers of urban areas, includ-
ing the effect on commercial rents and commercial in-
surance premiums, particularly rents and premiums
charged to small businesses, and the availability of
lease space and commercial insurance within urban
areas.
(b) TIMING OF COVERAGES AND ASSESSMENTS.—The
Secretary may adjust the timing of coverages and assess-
ments provided under this Act to provide for equivalent ap-
plication of the provisions of this Act to commercial insur-
ers and policies that are not based on a calendar year.
(c) ADJUSTMENT.—The Secretary may adjust the as-
sessments charged under section 7 or the percentage imposed
under the surcharge under section 8 at any time, as the
Secretary considers appropriate to protect the national in-
terest, which may include avoiding unreasonable economic
disruption or excessive market instability and avoiding
undue burdens on small businesses.
SEC. 10. APPLICATION TO SELF-INSURANCE ARRANGE-
MENTS AND OFFSHORE INSURERS AND REIN-
SURERS.
(a) SELF-INSURANCE
ARRANGEMENTS.—The Sec-
retary may, in consultation with the NAIC, apply the pro-
visions of this Act, as appropriate, to self-insurance ar-
rangements by municipalities and other entities, but only
if such application is determined before the occurrence of
a triggering event and all of the provisions of this Act are
applied uniformly to such entities.
(b) OFFSHORE INSURERS
AND REINSURERS.—The
Secretary shall ensure that the provisions of this Act are
applied as appropriate to any offshore or non-admitted en-
tities that provide commercial property and casualty insur-
ance.
SEC. 11. RESERVE FOR TERRORISM COVERAGE UNDER
COMMERCIAL LINES OF BUSINESS.
(a) IN GENERAL.—Section 832 of the Internal Revenue
Code of 1986 (relating to insurance company taxable in-
come) is amended by adding at the end the following new
subsection:
‘‘(h) TERRORISM RESERVE FOR COMMERCIAL LINES
OF BUSINESS.—In the case of an insurance company sub-
ject to tax under section 831(a)—
‘‘(1) INCLUSION FOR DECREASES, AND DEDUC-
TION FOR INCREASES, IN BALANCE OF RESERVE.—
‘‘(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 DEDUCTION.—
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 iden-
tifiable arrangement or joint pooled 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 opening
balance of such reserve for such following
taxable year shall be determined without re-
gard 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 al-
locable share of the national limit for
any calendar year is the amount which
bears the same ratio to the national
limit for such year as the company’s
net premium for insurance for com-
mercial lines of business which does
not exclude coverage for acts of ter-
rorism bears to the aggregate written
premium for insurance (without re-
gard to terrorism coverage) for all com-
panies for commercial lines of business.
‘‘(II) DETERMINATION
OF
NET
WRITTEN PREMIUMS.—Except as other-
wise provided in this section, all deter-
minations 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 
Commis-
sioners.
‘‘(III) AGGREGATE WRITTEN PRE-
MIUMS AND NET PREMIUMS.—For pur-
poses of this clause, the terms ‘aggre-
gate written premium’ and ‘net pre-
mium’ have the meanings given such
terms in section 19 of the Terrorism
Risk Protection Act.
‘‘(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