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TERRORISM RISK INSURANCE ACT OF 2002
[[Page 116 STAT. 2322]]
Public Law 107-297
107th Congress
An Act
To ensure the continued financial capacity of insurers to provide
coverage for risks from terrorism. <<NOTE: Nov. 26, 2002 - [H.R.
3210]>>
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress <<NOTE: Terrorism Risk Insurance
Act of 2002.>> assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short <<NOTE: 15 USC 6701 note.>> 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 <<NOTE: 15 USC 6701 note.>> 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
[[Page 116 STAT. 2323]]
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;
[[Page 116 STAT. 2324]]
(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--
[[Page 116 STAT. 2325]]
(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.
[[Page 116 STAT. 2326]]
(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;
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