Order Code RS21211
Updated December 9, 2002
CRS Report for Congress
Received through the CRS Web
Terrorism Insurance – Comparison of
H.R. 3210, S. 2600, and Conference Report

S. Roy Woodall, Jr.
Insurance Consultant
Government and Finance Division
Summary
The terrorist attacks of September 11 resulted in the largest insured catastrophic
loss in history, estimated to total $40 billion. Even though the insurance industry
committed to pay losses resulting from the attacks, industry spokesmen asserted that
insurers might not be able to cover major future terrorism losses without a federal
backstop. The 107th Congress considered how to provide such a backstop.
On November 29, 2001, the House of Representatives passed H.R. 3210, the
Terrorism Risk Protection Act, providing for a temporary federal backstop. In the
Senate, four similar measures were introduced in 2001, but no action was taken during
the first session of the 107th Congress. On June 7, 2002, Senators Dodd, Sarbanes,
Schumer, and Reid introduced a compromise proposal, S. 2600, which was passed by
the Senate on June 18, 2002. On October 17, 2002, leaders of the House-Senate
conference committee and the White House tentatively agreed in principle upon a
proposed compromise version of the legislation, which was circulated to all conferees
for signatures. The conferees approved the conference report, which was filed
November 13. The House agreed to the report by voice vote on November 14, and the
Senate by vote of 86-11, on November 19. The President signed the bill, which became
P.L. 107-297, the Terrorism Risk Insurance Act, on November 26, 2002.
This report records the legislative development of H.R. 3210, S. 2600, and the
conference report language enacted as P.L. 107-297. It will not be updated further. For
further information, please call Rawle King (707-5975), or Barbara Miles (707-7804).
Background
The terrorist attacks of September 11, 2001 resulted in the largest insured
catastrophic loss in history, estimated to total $40 billion. At the time, the insurance
industry committed to pay losses resulting from the attacks and not invoke “act of war”
clauses, even though there had been considerable discussion that such an invocation might
be appropriate. Despite the magnitude of the projected losses, the solvency of the
insurance industry and most insurance firms was not seriously threatened, in part because
Congressional Research Service ˜ The Library of Congress

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of the spreading of losses among many secondary insurers through the industry practice
of “reinsurance.”
In light of the huge “9/11” losses and because of the lack of any actuarial basis for
determining loss exposures, however, many reinsurers indicated an unwillingness to
accept the risk of loss from terrorism in the future. In turn, industry spokesmen asserted
that in view of the impending difficulty in obtaining reinsurance for the risk of future
terrorist attacks, primary insurers would not be able to cover future terrorism losses
without some form of federal backstop. There were anecdotal accounts of dramatically
increased premiums or outright inability of some businesses and major real estate
landmarks to get insurance that included coverage for acts of terrorism. Several proposals
for a federal backstop were introduced in Congress in 2001, and one – H.R. 3210 – passed
the House on November 29, 2001. On April 24, 2002, a unanimous consent agreement
was proposed to bring H.R. 3210 to the Senate floor and amend it by substituting the
language of the compromise agreed to by Banking Committee members, Senators Dodd,
Sarbanes, and Gramm. Efforts to reach agreement were not successful, and on June 7,
2002, Senators Dodd, Sarbanes, Schumer, and Reid introduced the compromise proposal
as a separate bill (S. 2600), which was passed by the Senate on June 18, 2002. On
October 17, 2002, leaders of the House-Senate conference committee and White House
officials agreed in principle upon a proposed version of the legislation, which was
circulated to all conferees for signatures. The conferees approved and filed the conference
report on November 13, and its language was subsequently passed by the House on
November 14, and the Senate (86-11) November 19. On November 26, the bill was
signed by the President and enacted as P.L.107-297.
Comparison of H.R. 3210, S. 2600, and Conference Report (P.L.
107-297)
The House, Senate, and conference report language were similar in several aspects,
such as by establishing a temporary backstop program, providing for oversight by the U.S.
Treasury, setting triggers (losses sufficient to bring the federal backstop into play), setting
definitions of what constitutes a terrorism event, and preempting state laws. They differed
with respect to whether or not assistance must be repaid, the nature of legal modifications
and limitations, and other specific details.
Key provisions, similarities, and differences are set out in the following chart.
Provision
H.R. 3210
S. 2600
Conference Report
Name
Terrorism Risk
Terrorism Risk
Terrorism Risk
Protection Act
Insurance Act
Insurance Act
Purpose
Provides a
Provides a
Combines payback
temporary
temporary
program with loss
government loan
government/industry
sharing program
program
program for sharing
losses

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CRS-3
Provision
H.R. 3210
S. 2600
Conference Report
Governance
Oversight by
Secretary of the
Follows both bills
Secretary of the
Treasury has
Treasury – may
authority to establish
issue regulations
regulations and
procedures to
implement Program
Length of
One year, but may
One year, but may
Three years, plus
Program
be extended two
be extended for one
“transition year” for
additional years
additional year
balance of 2002
Trigger
Losses exceed $1
Losses exceed $5
Losses exceed $10
(Industry-
billion
million, then two
billion in first year,
wide)
levels of shared
$12.5 billion in
losses: up to $10
second year, or $15
billion, and over $10
billion if extended to
billion (increases to
third year
$15 billion if
extended to second
year)
Trigger
Industry-wide losses
Trigger is a
Trigger or deductible
(Individual
exceed $100 million
retention amount
is the greater of $5
Insurer)
and individual
referred to as
million or losses in
insurer’s losses
“deductible” at first
excess of 1% of direct
exceed 10% of
level, based on
earned premiums in
capital surplus and
insurer’s market
2002, 7% in 2003,
10% of net
share times $10
10% in 2004, and
premiums
billion ($15 billion
15% in 2005
in second year)
Post Trigger
90% loan with
80% cost sharing for
90% cost sharing over
Federal
payback, but if
amounts over
individual insurer
Assistance
trigger is industry-
individual insurers’
trigger/deductibles,
wide, then subject to
market share
and over industry-
a $5 million
“deductible” (net of
wide trigger
deductible per
reinsurance) up to
insurer
$10 billion, then
90% over $10
billion
Cap on
$100 billion
$100 billion per year
Follows Senate bill,
Assistance
(also effectively
with transition year
caps industry share)
combined with 2003

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Provision
H.R. 3210
S. 2600
Conference Report
Covered
Commercial
Commercial –
Follows House bill,
Lines
mandatory
plus war coverage for
Personal – optional
workers’
compensation;
excludes reinsurance;
Secretary of Treasury
has discretion to add
group life insurance
Mandatory
No, but appears as
Yes. Participating
Follows Senate bill
Terrorism
though insurer not
insurers must offer
for first two years;
Coverage
writing terrorism
terrorism insurance
Secretary of Treasury
policies still subject
in all commercial
has discretion to
to assessments
policies (assumes
extend requirement to
opt-out by
third year
policyholder)
Payback
Yes, through
No
Yes, through
assessments on
surcharges of up to
insurers for first $20
3% of annual
billion, and
premiums on all
surcharges on
policyholders with
policyholders for
mandatory
amounts from $20-
recoupment for
$100 billion, with
amounts under the
civil monetary
annual industry-wide
penalties for failure
trigger ($10 billion
to pay
for 2002-2003, $12.5
billion for 2004, and
$15 billion for 2005);
no mandatory
recoupment if
uncompensated losses
exceed insurance
marketplace
retention; Secretary
of Treasury has
discretion to recoup
additional amounts
Application
Yes, if Secretary of
Yes. Secretary of
Follows House bill as
to Self-
Treasury, in
Treasury, in
to self-insureds,
insureds and
consultation with
consultation with
captives, plus state
Offshore
NAIC, so
NAIC may establish
residual market pools,
Insurers
determines
procedures for
surplus lines carriers
municipalities and
and state workers’
other entities in
compensation funds
existence on 9/11

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CRS-5
Provision
H.R. 3210
S. 2600
Conference Report
Definition
Yes, to be developed
Yes, as certified by
Follows Senate bill
of Terrorism
by Secretary of
Secretary of
Treasury and NAIC
Treasury, in
consistent with the
concurrence with
requirements of the
Secretary of State
Act
and Attorney
General – based on
requirements in the
Act (losses exceed
$5 million)
Cost
Yes. Sense of
Yes, as a condition
Yes. Must disclose
Disclosure
Congress that states
for federal payment
terrorism insurance
of Terrorism
require separate
premiums and the
Coverage
disclosure of cost of
existence of the
terrorism coverage
federal backstop
Consultation
Yes, as to
Yes, as to life
Yes, as the Secretary
with State
assessments,
insurance study and
determines
Insurance
surcharges, claims
non-insurer entities
appropriate,
Regulators
investigation, and
to be covered
concerning the
(NAIC)
covered perils
program
State
Yes, as to
No
Follows Senate bill
Regulation
“terrorism”
Uniformity
definitions and
underwriting
standards
Civil
Federal cause of
General federal
Follows House bill
Actions and
action in district
cause of action (no
Litigation
court(s) designated
designation by
by Judicial Panel on
Judicial Panel on
Multidistrict
Multidistrict
Litigation
Litigation)
Legal
Punitive damages
Punitive damages do
Follows Senate bill
Modifica-
prohibited. Non-
not constitute
tions and
economic damages
“insured losses” and
Limitations
proportional as to
thus no federal
fault. U.S. right of
participation. U.S.
subrogation. 20%
right of subrogation
cap on attorneys’
fees

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CRS-6
Provision
H.R. 3210
S. 2600
Conference Report
Studies
Life insurance,
Life insurance and
Life/group life
railroad and trucking
other lines of
insurance, and other
insurance, and
insurance
facets of affected
reinsurance pool
insurance markets,
system for future
including personal
acts of terrorism
lines, railroads and
public transit
Reports
None required,
Only as to claims
Follows House bill,
from
except for data not
(premium rates
but burden of
Insurers
available to NAIC
reported to NAIC)
compiling premium
data placed on the
Secretary of Treasury
State
Yes, of impediments
Yes, as to
Follows Senate bill,
Preemption
to increasing
“terrorism”
plus nullifies existing
premiums to recover
definition and state
terrorism exclusions,
assessments, but not
prior approval rating
with provisions for
as to filings or
statutes. Access to
reinstatement under
subsequent review
books/records by
certain conditions
of rates
Secretary of
Treasury guaranteed
Civil
Yes, $1 million
Yes, to be assessed
Follows House bill
Monetary
against insurers for
by Secretary of
Penalties
failing to pay
Treasury for
assessments or
violations of Act or
surcharges,
of any rule,
erroneous data, or
regulation or order
violation of
regulations
Report to
Yes. If Secretary
Yes, not later than
Yes, not later than
Congress
extends the term of
nine months after
June 30, 2005,
the program, must
the date of
covering required
state reasons
enactment, covering
items, in consultation
required items, plus
with NAIC, insurance
joint report 12
industry and other
months later with
experts
Comptroller General
as to NAIC, FTC,
and GAO reports
Satisfaction
Yes
Yes
Yes
of
Judgments
from Assets
of Terrorists

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