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PURPOSE AND SUMMARY

H.R. 2761, the Terrorism Risk Insurance Revision and Extension Act of 2007, is intended to extend the Terrorism Risk Insurance Act of 2002 (TRIA) for a second time to ensure the continued availability of terrorism insurance coverage, limit market disruptions, encourage economic development and growth, and maintain the economic security of the United States.

In the aftermath of the terrorist attacks on September 11, 2001, TRIA initially was designed as a three-year program to provide a Federal backstop to the insurance industry through a system of shared public and private compensation for insured losses resulting from acts of terrorism. However, the developing private marketplace for terrorism insurance coverage was not sufficiently robust to obviate the need for TRIA. Congress therefore acted in late 2005 to pass the Terrorism Risk Insurance Extension Act (TRIEA), which extended TRIA for an additional two years until December 31, 2007.

H.R. 2761, as reported, would further extend TRIA beyond its current expiration date of December 31, 2007 for an additional 15-year period. H.R. 2761 would also make several revisions to the existing program, such as expanding the availability of terrorism insurance to protect against nuclear, biological, chemical, or radiological (NBCR) events; adding group life insurance as a line covered by the program; and covering domestic terrorism events.

BACKGROUND AND NEED FOR LEGISLATION

Prior to the events of September 11, 2001, insurers generally did not exclude terrorism losses from their insurance policies. After the 2001 attacks that caused more than $35 billion of insured losses, however, reinsurers and insurers reassessed their terrorism exposure as a result of depleted surpluses and uncertainty over the likelihood and severity of future terrorist attacks. Many of them withdrew outright from the marketplace and placed developers and those with mortgages in a difficult position. To avoid technical default on their loan contracts, borrowers needed insurance against terrorism, but the private market for terrorism insurance coverage was initially extremely limited.

Congress enacted TRIA to make terrorism insurance coverage more widely available, with the Federal government sharing the risk of loss from future terrorist attacks with the insurance industry for a fixed period of time while the market readjusted and transitioned towards providing additional coverage. TRIA mandated insurer participation in the Terrorism Insurance Program and required that insurers make available terrorism coverage in all covered commercial property and casualty insurance policies.

While the initial TRIA did help address an economic need, the private marketplace did not recover as quickly as many had hoped. As a result, Congress enacted TRIEA in late 2005 to extend TRIA for an additional two years until December 31, 2007. This extension left much of the original TRIA program intact, but raised industry retention and insurer deductible levels, increased the event `trigger' of losses before requiring Federal involvement, and pared back the insurance lines covered by the program.

Despite the two-year extension by TRIEA, the terrorism insurance marketplace remains tenuous, according to many experts, and there remains a strong need for TRIA. At a June 21, 2007 hearing before the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises (`Capital Markets Subcommittee'), a number of witnesses testified in support of a long-term or permanent extension of TRIA. At the same hearing, the Superintendent of the New York Insurance Department testified that the private sector will not offer terrorism insurance without TRIA. Also, a witness testifying on behalf of Independent Insurance Agents & Brokers of America expressed concern that insurance companies, particularly small and monoline insurers, may not continue to write terrorism risk insurance if the Federal backstop expires. Moreover, rating agencies that evaluate the solvency of insurers have already begun to ask what steps the companies will take to mitigate their potential exposures if the Program expires. While insurers and reinsurers have worked to improve their modeling and pricing systems, they remain uncertain with regard to their ability to reliably price the coverage for traditional terrorism events like bombing a building using conventional means.

Furthermore, terrorism insurance remains in short supply in places like lower Manhattan, as the developers of the new World Trade Center noted at a hearing before the Capital Markets Subcommittee on March 5, 2007. Insurers also report having limited capital available to cover terrorism losses. While the President's Working Group on Financial Markets (PWG) observed in its September 2006 report that the availability and affordability of terrorism risk insurance has improved, it also noted that any prediction of the potential degree of long-term development of the terrorism risk insurance market is difficult.

Additional factors call for an extension of TRIA. From an economic perspective, terrorism insurance is a sector likely to experience market failure. Participants in the terrorism insurance marketplace have access to imperfect information, which hampers their decisions about whether to buy the product and how to price the product. The government's classification of information related to terrorism for national security purposes further contributes to the difficulties that insurers and insureds face when assessing risk. Other factors contributing to market failure include a limited number of terrorism reinsurance providers and the virtual inability of insurers to alter a contract's terms or cancel a policy. TRIA and TRIEA have helped to overcome some of these economic difficulties, but the private marketplace in the United States is not yet mature enough to handle the risk without some type of assistance. Finally, the private marketplace cannot prevent or defend against acts of terrorism, and the private marketplace should not be expected to provide for recovery from acts of terrorism by itself. Providing economic security against acts of terrorism is a matter of national defense and national security, which is a uniquely governmental function. There is thus a strong need to extend TRIA.

Moreover, in the period since TRIA's enactment, the insurance markets and the economy have continued to grow. Aggregate industry

direct earned premiums for TRIA-covered lines in 2002 were approximately $130 billion and in 2006 were approximately $170 billion for those same TRIA-covered lines. As a result, there is a corresponding need to modestly grow the program beyond its current cap of $100 billion in aggregate insured losses.

Also, while TRIA only covers acts of terrorism committed on behalf of a foreign person or foreign interest, experience has shown that the distinction between foreign and domestic terrorism may be artificial. Witnesses at hearings before the Subcommittee have noted that post-TRIA events such as the London Underground bombing and the thwarted attack on John F. Kennedy Airport have demonstrated both the meaninglessness and the practical difficulty of making this distinction.

TRIA to date has not applied to group life insurance. After the 2005 extension of TRIA, the PWG analyzed the group life marketplace and found that `group life insurance still appears to be widely available in the private market and there has not been any impact on cost to policyholders.' Indeed, the group life industry has maintained capacity. However, group life carriers face potential insolvency should a terrorist event affect a large group of insureds. Group life insurance is not written and priced with anticipation that an entire group would file claims in the same year. Moreover, terrorism reinsurance availability has greatly decreased since the events of September 11, 2001, and now has higher deductibles, more exclusions, and smaller overall coverage limits. It is important to the economic security of America's workers and their families that group life carriers remain solvent and capable of paying claims after a terrorist event.

Additionally, the metric used for the inclusion of group life in TRIA should be economically fair to group life insurers and their policyholders. If group life recoupment were based on premium, individuals with smaller policies and policies with higher work-related risks (e.g., roofers) will be assessed the most even though they are not necessarily at higher risk. Arguably, they may be at a slightly lower risk, since terrorists are more likely to select `white collar' targets. Moreover, group life premiums are not consistent across product lines. Therefore, if deductibles were based on premiums, group life insurers will meet their deductible at different levels depending on their mix of business.

In addition, many now fear NBCR terrorist attacks. For instance, according to testimony at a hearing before the Capital Markets Subcommittee on June 21, 2007, a 2005 survey of 85 non-proliferation and national security experts led by Senator Richard Lugar put the likelihood of a nuclear attack somewhere in the world within the next ten years at 20% and the likelihood of a radiological attack at 40%. The same testimony noted that the national terrorism insurance programs in France and the United Kingdom provide NBCR coverage.

The insurance market for NBCR terrorism coverage in the United States, however, is virtually non-existent. In fact, witnesses before the Subcommittee testified that NBCR terrorism exposures are essentially uninsurable without a Federal government program. These NBCR threats are distinctly different from those hazards that are predictable, measurable in dollar terms, and unlikely to result in catastrophic losses. As currently structured, TRIA only covers NBCR losses to the extent that insurers provide the coverage, such as in the case of workers' compensation. Difficulties in modeling and pricing, however, have resulted in most insurers generally not offering coverage to protect against NBCR terrorism. Some have referred to this gap in the nation's economic security plan as an Achilles' heel.

Moreover, the risk of an NBCR terrorism event is essentially uninsurable absent a Federal government program. A September 2006 Government Accountability Office report entitled `Terrorism Insurance: Measuring and Predicting Losses from Unconventional Weapons Is Difficult, but Some Industry Exposure Exists' found that `any purely market-driven expansion of coverage' for NBCR terrorism risk is `highly unlikely in the foreseeable future.' Similarly, the 2006 PWG report also noted that reinsurance for NBCR terrorism events is virtually unavailable and observed that `[g]iven the general reluctance of insurance companies to provide coverage for these types of risks, there may be little potential for future market development.'

Although the United States has avoided major terrorist attacks since 2001, recent attacks in London, Madrid, and Glasgow make it clear that the threat of terrorism will remain a national concern for the foreseeable future. As such, there is a need to extend the Federal backstop before the expiration of TRIEA at the end of 2007 to ensure continued availability of terrorism insurance coverage, address the gap in NBCR coverage, and remove the artificial distinction between foreign and domestic acts of terrorism. These actions, among others, would allow commercial property owners, developers, and lenders to obtain the insurance needed to protect their property, comply with mortgage covenants, and acquire project financing. They would also promote economic growth and stability as our nation maintains vigilance against the threat of future terrorist attacks at home.

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CONGRESSIONAL BUDGET OFFICE REPORT

H.R. 2761--Terrorism Risk Insurance Revision and Extension Act of 2007

Summary: H.R. 2761 would extend the Terrorism Risk Insurance Act (TRIA) for 15 years--through calendar year 2022. The bill also would add group life insurance to the lines of coverage included under the program and would require insurers to make coverage available to property and casualty and group life insurance policyholders for losses resulting from domestic terrorism and, after January 1, 2009, terrorism involving nuclear, biological, chemical, and radioactive (NBCR) materials.

Enacted in 2002, TRIA requires insurance firms that sell commercial property and casualty insurance to offer clients insurance coverage for damages caused by foreign terrorist attacks. Under TRIA, the federal government would help insurers cover losses in the event of a terrorist attack under certain conditions, and would also impose assessments on the insurance industry to recover all or a portion of the federal payments. The program is set to expire at the end of calendar year 2007.

There is no reliable way to predict how much insured damage terrorists might cause in any specific year. Rather, CBO's estimate of the cost of financial assistance provided under H.R. 2761 represents an expected value of payments from the program--a weighted average that reflects industry experts' opinions of various outcomes ranging from zero damages up to very large damages resulting from possible future terrorist attacks. The expected value can be thought of as the amount of an insurance premium that would be necessary to just offset the government's losses from providing this insurance, although firms do not pay any premium for the federal assistance offered by TRIA.

Under H.R. 2761, the Department of the Treasury would be directed to recoup some or all of the costs of providing financial assistance through taxes imposed on insurance firms (surcharges). Over many years, CBO expects that an increase in spending for financial assistance would be largely offset (on a cash basis) by a corresponding increase in governmental receipts (i.e., revenues) depending on the amount of insured losses. We assume, however, that the Secretary of the Treasury would not impose any surcharges until two years after federal assistance is provided and that those amounts would be collected over many years. Thus, CBO estimates that enacting the recoupment provision of H.R. 2761 would increase governmental receipts by about $100 million over the 2008-2012 period and by $2.0 billion over the 2008-2017 period, net of income and payroll tax offsets.

Considering both the direct spending and revenue impacts of the bill, CBO estimates that enacting H.R. 2761 would increase budget deficits or decrease surpluses by $200 million in 2008, $3.5 billion over the 2008-2012 period, and $8.4 billion over the 2008-2017 period.

H.R. 2761 would extend and impose intergovernmental and private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA). CBO estimates that the aggregate costs of complying with those mandates would not exceed the annual thresholds established by UMRA ($66 million for intergovernmental mandates and $131 million for private-sector mandates in 2007, adjusted annually for inflation).

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 2761 is shown in Table 1. The costs of this legislation fall within budget function 370 (commerce and housing credit).

Basis of estimate: For this estimate, CBO assumes that H.R. 2761 will be enacted before the end of calendar year 2007. We estimate that enacting H.R. 2761 would increase direct spending by $10.4 billion and would increase governmental revenues by $2.0 billion over the 2008-2017 period. While this estimate reflects CBO's best judgment on the basis of available information, the cost of this federal program is a function of inherently unpredictable future terrorist attacks. As such, actual costs are likely to vary significantly from the estimated amounts. Such costs could be either higher or lower than the expected-value estimates provided for each year.

Terrorism Risk Insurance Act under current law

Enacted in 2002 and reauthorized in 2005, the Terrorism Risk Insurance Act provides financial assistance to commercial property and casualty insurers for losses above certain thresholds caused by terrorist attacks by individuals acting on behalf of foreign interests. For such assistance to be provided, the Secretary of the Treasury must certify that a terrorist attack has occurred in the United States or other specified locations. TRIA is currently set to expire on December 31, 2007.

TRIA does not require commercial property and casualty insurance policies to cover losses from terrorist attacks committed by a domestic interest or those involving nuclear, biological, chemical, or radioactive materials. If an insurer and a policyholder choose to include losses from terrorist attacks involving NBCR materials in a policy, TRIA would cover a portion of the losses resulting from those risks.

For the Secretary of the Treasury to certify a terrorist attack, insured damages resulting from the attack must exceed $5 million. Financial assistance becomes available to insurers suffering losses from a certified attack once the industry's aggregate insured losses from that attack exceed $100 million (in 2007). Once that $100 million threshold is exceeded, participating insurance companies that suffer losses are responsible for paying claims up to a deductible amount based on the premiums they collected for covered lines in the calendar year preceding a certified attack. In 2007, the deductible is 20 percent of such premiums.

After meeting their individual deductibles for damage claims, insurers and the federal government would each pay a portion of the loss above the deductible (the federal government would pay 85 percent of insured losses in 2007, individual insurers, 15 percent) up to total losses of $100 billion. The law does not address about how losses above the $100 billion cap would be handled.

The Secretary of the Treasury is authorized to recover payments made by the federal government through taxes in the form of surcharges paid by the insurance industry and purchasers of commercial property and casualty insurance. The Secretary is required to recoup federal payments to the extent that the total amount paid by the insurance industry including the deductible is less than the industry `retention amount' specified in law, which represents the total liability of the property and casualty insurance industry in the event of a certified attack. In 2007, that amount is $27.5 billion.

Modifications to TRIA under H.R. 2761

H.R. 2761 would extend TRIA for 15 years, through December 31, 2022. The bill also would add group life insurance to the lines of insurance covered by the program and would eliminate the distinction between foreign and domestic terrorist attacks. TRIA would now cover attacks by either foreign or domestic interests. Further, both commercial property and casualty insurance policies and group life insurance policies would be required to offer coverage for losses from terrorist attacks involving NBCR materials. Currently, such coverage is typically excluded from property and casualty insurance policies, other than workers' compensation policies, but is generally covered by group life insurance policies.

H.R. 2761 would lower the threshold for financial assistance from $100 million in insured damages from a certified attack to $50 million; further, if a certified attack caused insured damages to exceed $1 billion, the threshold would be set at $5 million in subsequent years.

As in current law, an insurer suffering losses as a result of an attack would pay claims up to a specified deductible. For losses incurred by property and casualty insurers, H.R. 2761 would set different deductible limits based on the cause of the loss (conventional vs. NBCR attack) based on the premiums collected by each insurer in the calendar year preceding an attack. For insurers providing group life coverage, deductibles under H.R. 2761 would be based on the insurer's amount at risk--that is, the face value of life insurance policies not including any additional cash value--and also on the cause of the loss.

Likewise, H.R. 2761 would continue the payment-sharing process that exists under current law. Insurers and the federal government would each pay a portion of the loss over the deductible. For most types of attacks, the federal government's portion would remain 85 percent of insured losses up to the $100 billion limit for each year of the 15-year extension. In the case of losses caused by an attack using NBCR materials, however, the federal share would be based on the amount of total losses, starting at 85 percent and rising to as high as 95 percent, up to the $100 billion limit. Table 2 shows a breakdown of the industry deductible and federal cost-sharing limits.

Direct spending

By extending financial assistance to certain commercial insurers for future acts of terrorism against insured private property, enacting H.R. 2761 would expose the federal government to potentially large liabilities for 15 more years (2008 through 2022). For any particular year, the amount of insured damage caused by terrorists could range from zero to many billions of dollars. CBO's estimate of the cost of this program reflects how much, on average, the government could be expected to pay to insurers and recover from the industry over the 2008-2017 period.

Estimating the Expected Cost of Federal Assistance. For this estimate, CBO discussed the concepts involved in estimating insured losses with industry actuaries and reviewed models used by firms to set premiums for the terrorism component of property and casualty insurance and group life insurance that they offer. State insurance regulators generally require such premiums to be grounded in a widely accepted model of expected losses from covered events. After the terrorist attacks on September 11, 2001, the insurance industry began efforts to set premiums for insurance coverage for terrorist events using such models.

Although estimating losses associated with terrorist events is difficult because of the lack of meaningful historical data, the insurance industry has experience setting premiums for catastrophic events--namely, natural disasters. Setting premiums for hurricanes and earthquakes, for example, involves determining areas that could sustain damage, the value of the losses that could result from various types of events with different levels of severity, and the frequency of such events.

Similarly, estimating premiums for losses resulting from terrorist attacks involves judgments regarding potential targets and the frequency of such attacks. Because there is a very limited history of terrorist attacks in the United States, many of the parameters needed by the insurance industry to set premiums are based on expert opinion regarding terrorist activities and capabilities rather than on historical data.

Estimating potential insured losses. Based on discussions with insurers and information provided by the insurance industry, CBO estimates that the expected or average annual loss subject to TRIA coverage under H.R. 2761 would be about $2.6 billion (in 2007 dollars). This estimate incorporates industry expectations of the probabilities of terrorist attacks, encompassing the possibility of attacks that result in enormous loss of life and property damage, as well as a significant likelihood that no such attacks would occur in any given year. This estimate also reflects our expectation that some portion of losses from terrorism would not be covered by TRIA because some policyholders would choose not to purchase insurance coverage for terrorism risks.

Our estimate of expected annual losses covered by TRIA under H.R. 2761 includes less than $100 million for the inclusion of group life insurance policies and around $200 million for the inclusion of coverage for domestic terrorism.

The estimate also includes about $1 billion in additional expected losses resulting from a provision in the bill that would require insurance policies to include coverage for losses resulting from terrorist attacks involving NBCR materials. Under current law, insurers are not required to offer this coverage, although if an insurer and a policyholder voluntarily agree to include this coverage in a policy, TRIA would cover some of those losses.

Based on information provided by the industry, it appears that only a small amount of coverage is currently in place for losses resulting from terrorist attacks involving NBCR materials as compared to coverage for losses involving conventional weapons. Thus, under current law the government's exposure to losses resulting from terrorist attacks involving NBCR materials is relatively small, except in the workers' compensation line, where no exclusions are allowed.

Enacting the legislation could potentially expose firms offering NBCR coverage and the federal government to much higher losses than under current law. Our estimate of losses assumes that the coverage for terrorism losses caused by attacks using NBCR materials would increase three-fold over current coverage levels. However, we expect that coverage for such losses will remain far lower than coverage for losses resulting from more conventional methods.

CBO's estimate assumes that, in most years, losses from terrorist attacks covered by TRIA would cost less than $2.6 billion. We expect that there is a significant chance that no terrorist attacks that would be covered by TRIA would occur in a given year. Since enactment of TRIA, no covered events have occurred; it is unclear whether no such attacks were planned or attempted, or whether some were prevented by law enforcement and other security measures. Although the risk of a terrorist attack with many lives lost and substantial property damage still remains, based on industry models, CBO assumes for this estimate that attacks causing losses similar in scale to those sustained on September 11, 2001, in New York City are likely to occur very rarely. 1

[Footnote]

[Footnote 1: Industry losses on September 11, 2001, are estimated to be about $36 billion (in 2006 dollars), including about $30 billion in losses in New York City that would have qualified for coverage under TRIA had the law been in effect on that date.]

Determining the federal share of insured losses. Federal payments under TRIA would be lower than expected losses from terrorist attacks because TRIA places limits on eligibility for federal assistance and requires that insurers pay a share of covered losses. CBO took account of these requirements to calculate federal spending for any given amount of insured losses from future terrorist attacks.

First, because federal payments under TRIA would be capped at $100 billion per event, we excluded costs for potential losses above that level. In addition, H.R. 2761 would set the minimum losses that would trigger federal payments under TRIA at $50 million.

Second, we accounted for the share of losses that would be paid by affected insurers in the event of a covered attack. Before the federal government would make any payments under TRIA, an insurer incurring losses would first pay claims up to a deductible amount. The bill would set different deductible levels for property and casualty insurers and for group life insurers.

The total amount of claims paid by insurers below the deductible amount could range from a few million dollars to several billion dollars, depending on how many insurers provide coverage for losses resulting from a particular terrorist attack. In addition, the value of each individual insurer's deductibles would vary greatly across the industry. For this estimate, CBO considered a range of possibilities regarding the share of federal assistance, based on industry data regarding estimated insurers' deductibles under H.R. 2167. The range encompasses the possibility that an attack would affect only a few insurers with relatively small deductibles or several insurers with relatively large deductibles. CBO expects that insured losses below a few hundred million dollars would most likely be covered by insurers' deductibles and therefore would not result in a significant increase in federal spending.

Finally, once affected insurers have paid claims up to their deductibles, the federal government would share a portion of the losses above the deductible with each insurer.

Under H.R. 2761, for losses sustained by both property and casualty and group life insurers, the federal government's share of claims above the deductible would be at least 85 percent of total losses up to the $100 billion limit covered by the program. In the case of losses resulting from an attack using NBCR materials, the federal government's share would increase, based on total losses, to as much as 95 percent of losses above the deductible.

After taking into account maximum limits, deductibles, and the insurers' share of payments above the deductible, CBO estimates that enacting H.R. 2761 would increase direct spending by about $24 billion over the full life of the program before taking into account any revenues from surcharges on policyholders. Actual spending would be spread out over many years and most such costs would eventually be recovered through surcharges imposed on policyholders.

Taken another way, if the Secretary of the Treasury were authorized to collect premiums for the program, CBO estimates that the Secretary would need to charge, on average, about $1.6 billion per year to fully compensate the government for the projected average annual loss due to terrorist attacks under H.R. 2761. The bill, however, would not authorize any charges prior to a certified attack. Similarly, the bill does not contain an explicit requirement for the Secretary to recoup interest that would accrue on amounts outstanding.

Timing of Federal Spending. To estimate federal spending for this program on a cash basis, CBO used information from insurance experts on historical rates of payment for property and casualty claims following catastrophic events. Based on such information, CBO estimates that outlays under H.R. 2761 would total about $3.7 billion over the 2008-2012 period, an additional $6.7 billion over the 2013-2017 period, and about $13.7 billion after 2017. In general, following a catastrophic loss, it takes many years to complete insurance payments because of disputes over the value of covered losses by property and business owners. For this estimate, we assumed that financial assistance to insurers would be paid over several years, with most of the spending occurring within the first five years following an insurable event.

Revenues

Enacting H.R. 2761 would affect federal receipts by authorizing the Secretary of the Treasury to impose taxes in the form of surcharges on policyholders to recover the amount of federal payments made under the program, with certain limitations. CBO estimates that this provision would increase revenues by about $100 million over the 2008-2012 period and $2.0 billion over the 2008-2017 period. Surcharges could continue for many years beyond 2017.

In addition, another provision of the bill would allow insurers to set aside a portion of premiums charged for terrorism coverage in a reserve fund set up in the Department of the Treasury. Amounts held in the reserve fund would be used by the Secretary of the Treasury, in the event of a certified attack, to pay certain deductible and copayment liabilities of the insurers incurring losses that had allocated premiums to the reserve fund.

Surcharges. If a terrorist attack were to require the government to provide financial assistance, H.R. 2761 would require the Secretary of the Treasury to recoup some or all of that cost through taxes paid by the insurance industry and purchasers of commercial property and casualty and group life insurance. The Secretary would be required to recover the difference between the total amount paid by the insurance industry for deductibles and the industry's share of payments over the deductible and the industry retention amount (the maximum aggregate loss to be paid by the insurance industry), which would be set at $27.5 billion for property and casualty insurers and $5 billion for group life insurers.

The Secretary would have discretion in determining whether to recover the full amount of financial assistance provided under the program. Should the Secretary determine that amounts above the industry retention amount cannot be recovered, the Congress would be notified as to the determination and provided with an analysis of the effect of that determination on taxpayers, the economy, and the burdens on small- and medium-sized businesses. For this estimate, CBO assumes that the Secretary would not seek to recover financial assistance provided above the industry retention amount and would not collect interest on outstanding amounts.

Under TRIA, the recoupment of financial assistance would be accomplished by assessing each insurer based on its portion of aggregate property and casualty premiums or the amount at risk for group life insurance policies for the preceding calendar year. Surcharges would apply to insurance sold following a terrorist attack that necessitated federal assistance; each property and casualty insurance company's surcharge would be limited to 3 percent of its aggregate premiums, and each group life insurance company's surcharge would be limited to 0.0053 percent of its amount at risk. H.R. 2761 would direct the Secretary to impose surcharges for as long as necessary to recover the financial assistance provided by the federal government (at least up to the industry retention amount). Thus, the government could collect surcharges for many years, depending on the amount of financial assistance. CBO estimates that surcharges resulting from a 15-year extension of TRIA would total $23.6 billion--but that recovery would extend well past 2017.

Timing and Tax Offset. The bill would allow the Secretary to reduce annual charges after considering the effect on taxpayers, the economy, or burdens on small- and medium-sized businesses. Therefore, if annual losses were very high, we expect that the Secretary would limit annual collections by spreading them over many years. CBO assumes that the Secretary would not impose surcharges until two years after federal assistance is provided and that it would take more than 10 years to recover the costs of any financial assistance provided under H.R. 2761. Thus, we estimate that surcharges would total $2.6 billion over the next 10 years and that an additional $21.0 billion would be collected after 2017.

Those gross collections would be partially offset by a loss of receipts from income and payroll taxes. Consistent with standard procedures for estimating the revenue impact of indirect business taxes, CBO reduced the gross revenue impact of the insurance surcharges by 25 percent to reflect offsetting effects on income and payroll tax receipts. On balance, CBO estimates that H.R. 2167 would increase revenues by a total of $2.0 billion over the next 10 years and that an additional $15.7 billion will be collected after 2017, net of income and payroll tax offsets.

Terrorism Buy-Down Fund. Section 4 of H.R. 2761 would establish a Terrorism Buy-Down Fund into which a property and casualty insurer could elect to contribute premiums it collects for terrorism insurance. The premiums deposited in the fund in the Treasury would be available to the Secretary of the Treasury, in the event of a certified terrorist attack, to satisfy the insurer's deductible amounts as well as the portion of the insurer's losses that exceed the deductible but are not included in the federal share.

Because the tax implications of the fund are unclear, the Joint Committee on Taxation has not yet prepared an estimate of its potential revenue impact.

Intergovernmental and private-sector impact: H.R. 2761 would extend and expand mandates contained in the Terrorism Risk Insurance Act. Those mandates would:

Require that certain insurers offer terrorism insurance, including insurance for nuclear, biological, chemical, and radiological attacks;

Require that certain insurers and their policyholders repay the federal government for the cost of assistance (in the form of assessments and surcharges); and

Preempt state laws regulating insurance.

CBO estimates that the aggregate costs of complying with those mandates would not exceed the annual thresholds established by UMRA ($66 million for intergovernmental mandates and $131 million for private-sector mandates in 2007, adjusted annually for inflation).

REQUIREMENT TO OFFER INSURANCE

Current law requires that through calendar year 2007, certain insurance companies offer terrorism insurance as part of a property and casualty insurance policy. H.R. 2761 would extend that requirement to offer terrorism insurance through calendar year 2022. The bill also would add group life insurance to the lines of coverage included under the program and would require insurers to make coverage available to property, casualty, and group life insurance policyholders for losses resulting from domestic terrorism and, after January 1, 2009, terrorism involving NBCR materials. Also, in some cases, the bill would restrict insurers' ability to underwrite policies based on lawful international travel. According to industry representatives, the direct cost to continue making terrorism insurance available under property, casualty, and group life insurance policies would be minimal. Furthermore, the bill would require only that firms offer terrorism insurance, including NBCR terrorism insurance; they would set their own premium rates and policyholders could choose whether or not to purchase such insurance. In the event of a certified attack with costs that exceeded deductible requirements, insurers who offer such terrorism insurance would receive federal payments that would help finance claims payments.

REPAYMENT OF ASSISTANCE

The bill would require the Secretary of the Treasury to recoup the costs of financial assistance provided to certain insurers through assessments paid by the insurance industry and surcharges paid by purchasers of commercial property, casualty and group life insurance. This requirement to repay the federal government for financial assistance received would be both an intergovernmental and private-sector mandate under UMRA because both state and local governments and private entities are providers and purchasers of insurance.

Specifically, the bill would require commercial property, casualty, and group life insurers, as well as self-insured risk pools, to pay back through assessments a portion of the financial assistance provided by the federal government. Taken individually, some insurers might benefit from the financial assistance while others might face only the cost of the assessment. CBO cannot predict how these costs and benefits would be distributed among private and public insurers. However, for that group as a whole, the cost of the assessment would be no greater than the financial assistance received, so the net cost of this mandate would be zero.

In addition, the bill would require purchasers of commercial property, casualty, and group life insurance to repay, in the form of a surcharge, federal assistance provided to certain insurers. CBO estimates that the expected value of the surcharges paid by policyholders would total about $200 million over the next five years. The surcharge would be a mandate on both private-sector purchasers and state and local governments (in their capacity as purchasers of insurance). For purchasers as a group, the cost of the surcharges would be no greater than the financial assistance received. However, some purchasers would receive a direct benefit under the bill that would at least partially offset those costs, while other purchasers would not.

PREEMPTION OF STATE LAW

The bill also would preempt some state laws that regulate insurance. Based on information from state insurance regulators, CBO estimates that the cost to states of extending these preemptions would be minimal.

Estimate prepared by: Federal Costs: Susan Willie; Impact on State, Local, and Tribal Governments: Elizabeth Cove; Impact on the Private Sector: Paige Piper/Bach.

Estimate approved by: Peter H. Fontaine, Assistant Director for Budget Analysis.

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SECTION BY SECTION ANALYSIS

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

This section establishes the short title of the bill as the `Terrorism Risk Insurance Revision and Extension Act of 2007' (TRIREA).

Section 2. Termination of program

This section extends the Terrorism Risk Insurance Act of 2002 (TRIA) until December 31, 2022.

Section 3. Revision of Terrorism Insurance Program

This section amends TRIA to extend and revise the Terrorism Insurance Program (the Program), replacing sections 101, 102, and 103.

TRIA Section 101. Congressional findings and purpose

This section amends the findings and purposes of TRIA to reflect the inclusion of group life insurance and enhanced coverage of NBCR terrorism risk in the Program and to clarify that the Program provides finite liability limits for insurers and the Federal government.

TRIA Section 102. Definitions

This section establishes definitions for the following terms: `act of terrorism,' `affiliate,' `amount at risk,' `control,' `covered lines,' `direct earned premium,' `excess insured loss,' `group life insurance,' `insured loss,' `insurer,' `insurer deductible,' `NAIC,' `NBCR terrorism,' `person,' `program,' `program years,' `property and casualty insurance,' `Secretary,' `State,' and `United States.'

In particular, TRIREA revises the definition of an `act of terrorism' to eliminate the requirement that such act be committed by individuals acting on behalf of foreign interests, thus covering acts of domestic terrorism. The definition of `control' is also revised to conform to the definition in the Bank Holding Company Act. Group life insurance is added as a covered line. Farm owners multiple peril insurance is no longer excluded from the definition of property and casualty insurance. A new definition is added for NBCR terrorism and the definition of `act of terrorism' is revised to include certification by the Secretary of Treasury (Secretary) of acts of NBCR terrorism. The concurrence of the Secretary of Homeland Security, in addition to the Secretary of State and the Attorney General, is required to certify an act of terrorism or an act of NBCR terrorism. However, nothing in this Act generally or in the Secretary's certification authority specifically shall be interpreted to affect or change in any way an insurer's contractual obligations to a policyholder under a lawful insurance contract. Certification of an act of terrorism as an act of NBCR terrorism does not mean that all insured losses are NBCR losses. Policyholders that do not have NBCR coverage may still be covered under their insurance contracts in these instances.

The `insurer deductible' definition is amended to fix the deductible for acts of conventional terrorism at 20% of an insurer's direct earned premiums for property and casualty insurance and at 0.0351% of an insurer's amount at risk for group life insurance. For acts of NBCR terrorism, the insurer deductible starts at 3.5% in the second additional Program Year and increases by 50 basis points each succeeding Program Year for property and casualty insurance, and starts at 0.00614% in the second additional Program Year and increases by 0.088 basis point each succeeding Program Year for group life insurance.

For an act of terrorism resulting in aggregate industry insured losses exceeding $1 billion, the deductible for property and casualty insurance that would apply to insurers affected by that particular $1 billion or greater act of terrorism decreases to the following percentage: 5% if such act occurs in first additional Program Year, and increasing by 50 basis points each additional Program Year (i.e., 5.5% if such act occurs in the second additional Program Year and 6% if such act occurs in the third additional Program Year). However, such percentage will reset to 5% in the additional Program Year immediately following a $1 billion or greater act of terrorism, and starts increasing again by 50 basis points each additional Program Year. The Secretary may combine multiple acts of terrorism in the same Program Year in the same geographic area for determining whether the $1 billion threshold has been exceeded. For purposes of section 102(11)(J), regardless of the different deductibles that may apply to an insurer from multiple acts of terrorism in a given Program Year, an insurer's total payment obligation with respect to its deductible in a given Program Year is not intended to exceed 20% of its direct earned premiums from the previous calendar year.

TRIA Section 103. Terrorism Insurance Program

This section continues the Program in the Treasury Department and makes a number of improvements to the terrorism backstop. Insurers are required to offer coverage for losses resulting from acts of terrorism that does not differ materially from the terms, amounts, and other coverage limitations applicable to losses arising from events other than acts of terrorism, and offer coverage for losses resulting from acts of NBCR terrorism in a similar manner after a short transition period. This section further provides exceptions to pollution and nuclear hazard exclusions for losses from acts of NBCR terrorism if NBCR coverage is purchased. If a person elects not to purchase an insurance policy providing such coverage, an insurer may exclude coverage for all losses from acts of terrorism (including acts of NBCR terrorism), except for workers' compensation and other compulsory insurance law prohibiting such exclusions, or may offer other options for coverage that differ materially from the terms, amounts, and other coverage limitations applicable to losses arising from events other than acts of terrorism Section 103(c)(1)(B) extends the `make available' requirement for policyholders that have been provided coverage under subparagraph (A) to include the availability of exceptions to pollution and nuclear hazard exclusions that would negate those exclusions only as to losses from acts of NBCR terrorism. Section 103(c)(1)(B) provides certainty to both parties to an insurance contract and is intended to require insurers that have policies of insurance with pollution and nuclear hazard exclusions to make available a clear exception to those exclusions for acts of NBCR terrorism upon the payment of an appropriate premium, and is intended to confirm to policyholders that do not purchase the available exceptions to those exclusions that the exclusions continue to apply as written to acts of NBCR terrorism and that the policies of insurance do not cover losses arising out of acts of NBCR terrorism unless the policyholder and insurer otherwise agree to cover such losses. The requirement to make available coverage for acts of NBCR terrorism applies beginning on January 1, 2009.

Insurers offering life insurance are required to offer coverage that neither considers past nor precludes future lawful foreign travel and are prohibited from declining such coverage based on past or future lawful foreign travel or charging a premium that is excessive and not based on a good faith actuarial analysis, except an insurer may decline or limit coverage based on plans to engage in future lawful foreign travel within 12 months under certain enumerated circumstances.

The Secretary, in consultation with the National Association of Insurance Commissioners (NAIC), may exempt insurers with less than $50 million in direct earned premiums for TRIA-covered lines from complying with the requirement to make NBCR coverage available if such insurers demonstrate they would become insolvent in the event of certain acts of NBCR terrorism. The exemption would be for 2 years, and insurers may apply for additional 2-year extensions.

For acts of conventional terrorism, the total Federal share of insured loss compensation is 85% of the aggregate industry insured losses that exceed the applicable insurer deductibles but do not exceed $100 billion during a Program Year, plus 100% of the aggregate industry insured losses that exceed $100 billion, but only up to the $100 billion cap on total Federal compensation. The Secretary will determine the pro rata share of insured losses to be paid by each insurer that incurs insured losses under the Program.

For acts of NBCR terrorism, the total Federal share of insured loss compensation is 85% of the aggregate industry qualified NBCR losses of less than $10 billion, 87.5% of the aggregate industry qualified NBCR losses between $10 billion and $20 billion, 90% of the aggregate industry qualified NBCR losses between $20 billion and $40 billion, 92.5% of the aggregate industry qualified NBCR losses between $40 billion and $60 billion, and 95% of the aggregate industry qualified NBCR losses above $60 billion. The Federal share will be prorated per insurer based on each insurer's percentage of the aggregate industry qualified NBCR losses for each additional Program Year.

The minimum size of a terrorist event required to trigger any potential Federal assistance is set at $50 million, except the trigger will decrease to $5 million if a certified act of terrorism occurs for which resulting aggregate industry insured losses exceed $1 billion. The Federal share of insured loss compensation for any single certificate holder under any group life insurance coverage may not exceed $1 million.

The cap on the annual liability of the Federal government is set at $100 billion; that is, the aggregate amount of the Federal share of compensation to be paid to all insurers will not exceed $100 billion. In addition, an insurer that has met its insurer deductible will not be liable for the payment of any portion of the aggregate insured losses in a year that exceed $100 billion.

If the Secretary determines that estimated or actual aggregate Federal compensation equals or exceeds $80 billion, the Secretary must promptly provide notification to Congress and insurers. The Secretary must also give notice when estimated or actual aggregate Federal compensation equals or exceeds $100 billion and within ten days of an act of terrorism that is likely to pierce the $100 billion cap on Federal compensation. The Secretary will reimburse insurers for: (1) any payment for portions of aggregate insured losses that exceed $100 billion made before the Secretary provides notice at $80 billion in Federal compensation; and (2) any payment for portions of aggregate insured losses that exceed $100 billion made after such notice, but only to the extent that such payment is ordered by a court, such payment does not include punitive damages or litigation or other costs, and the insurer made a good-faith effort to defend against any claims for such payment. The Secretary has the right to intervene in any legal proceedings related to such claims.

Federal courts will have original and exclusive jurisdiction over claims relating to or arising out of the limitation on an insurer's financial responsibility for insured losses from acts of terrorism set forth in paragraph 103(e)(3), if the Secretary certifies that the $100 billion cap on Federal compensation has been or is likely to have been exceeded, and the insurer has paid, or is likely to pay, its deductible and pro rata share of insured losses. In the event of such certification, all pending State court actions relating to or arising out of such limitation on an insurer's financial responsibility set forth in paragraph 103(e)(3) will be removed to the Federal district court, or courts, chosen by the Judicial Panel on Multidistrict Litigation.

The insurance marketplace aggregate retention amount is set at the lesser of $27.5 billion and the aggregate amount of property and casualty insured losses for property and casualty insurance, and the lesser of $5 billion and the aggregate amount of group life insured losses for group life insurance. The Secretary is granted emergency rulemaking powers during the 90-day period beginning upon the certification of any act of terrorism. The Secretary will adjust each year, based on the percentage change in an appropriate index, certain enumerated dollar amounts in TRIA, including the trigger and the Program cap. It is intended that the dollar amounts be indexed to inflation.

Between the enactment of TRIREA and December 31, 2008, the rates and forms for coverage of acts of conventional terrorism will not be subject to prior approval or waiting period requirement under State law, except that a State may invalidate a rate as excessive, inadequate, or unfairly discriminatory and a State that had prior approval authority over forms may conduct subsequent review of such forms. Between the enactment of TRIREA and December 31, 2009, forms for coverage of acts of NBCR terrorism (to the extent of the addition of

such coverage and where such coverage was not previously required) will not be subject to prior approval or waiting period requirement under State law. Between the enactment of TRIREA and December 31, 2010, rates for coverage of acts of NBCR terrorism (to the extent of the addition of such coverage and where such coverage was not previously required) will not be subject to prior approval or waiting period requirement under State law, except a State may invalidate a rate as inadequate or unfairly discriminatory.

An insurer is not prohibited, restricted, or otherwise limited from entering into an arrangement with another insurer to make available coverage for any portion of insured losses to fulfill the mandatory make-available requirements under section 103(c). It is not intended, however, that an insurer could fulfill all of its requirements under section 103(c) solely by entering into an arrangement to have another insurer make available coverage that would otherwise only fulfill part of such requirements. For example, an insurer may not consider its requirement under section 103(c)(1)(B) (NBCR coverage) fulfilled by simply arranging to have another insurer make available coverage for acts of conventional terrorism pursuant to section 103(c)(1)(A).

Section 4. Terrorism Buy-Down Fund

This section directs the Secretary to establish a Terrorism Buy-Down Fund (the Fund) that allows insurers to voluntarily reserve with the Federal government for their insured losses. An insurer may purchase deductible, co-share, or pre-trigger buy-down coverage by making an advance election to treat some or all of the premiums it has disclosed under the Program as fee charges imposed by the Secretary and remitting such amounts to the Fund. Such buy-down coverage does not reduce the Federal co-share. However, an insurer may not purchase coverage in an amount greater than the lesser of (a) the program trigger or (b) the insurer's one-in-one-hundred-year risk exposure to acts of terrorism.

An insurer may sell its rights to buy-down coverage from the Fund to another insurer as part of or to avoid insolvency or as part of a sale, merger, or major reorganization. The Secretary may borrow funds from the Fund to offset the Federal share of compensation provided to all insurers under the Program. The Secretary shall establish voluntary risk-sharing mechanisms for insurers participating in the Fund to pool their reinsurance purchases and share terrorism risk. Upon termination of the Program, the Fund shall become a privately-operated mutual terrorism reinsurance company owned by the insurers that submitted buy-down coverage premiums.

Section 5. Analysis and Study

This section requires the Secretary, in consultation with the NAIC, representatives of the insurance industry, representatives of the securities industry, and representatives of policyholders, to analyze the long-term availability and affordability of private terrorism risk insurance. The Secretary will submit biennial reports to and, upon submission of each such report, testify before Congress. The Secretary will submit the first such report within two years of enactment of TRIREA.

This section also establishes a Commission on Terrorism Risk Insurance. The 21-member Commission will consist of the Secretary or the Secretary's designee; a State insurance commissioner designated by the NAIC; 15 members appointed by the President, including a representative of group life insurers, property and casualty insurers with direct earned premium of $1 billion or less, property and casualty insurers with direct earned premium of more than $1 billion, multi-line insurers, independent insurance agents, insurance brokers, policyholders, the survivors of the victims of the September 11, 2001 terrorist attacks, the reinsurance industry, workers' compensation insurers, the commercial mortgage-backed securities industry, a nationally recognized statistical rating organization, a real estate developer, workers' compensation insurers created by State legislatures, and the commercial real estate brokerage industry or the commercial property management industry; and four members who will serve as liaisons to Congress, two of whom shall be jointly selected by the Chairman and Ranking Member of the Committee and two jointly selected by the Chairman and Ranking Member of the Committee on Banking, Housing, and Urban Affairs of the Senate.

The Commission will make recommendations to encourage the private insurance industry to provide affordable terrorism insurance in the United States and significantly reduce the Federal role in covering losses resulting from acts of terrorism. The Commission will specifically evaluate the utility and viability of proposals aimed at improving the availability of terrorism insurance in the private marketplace. The Commission will submit two reports to Congress that evaluate and make recommendations regarding the need for a Federal terrorism risk insurance program and include the Commission's recommendations for encouraging the growth of private marketplace for terrorism insurance and reducing the Federal role. The Commission will submit the first report within five years of enactment of TRIREA and the second report within eight years of TRIREA enactment.

Section 6. Applicability

This section provides that the provisions of TRIA, as amended, will continue to apply through the end of December 31, 2007, and the amendments made by TRIREA will apply beginning on January 1, 2008.

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COMMITTEE VOTES

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on August 1, 2007, and ordered H.R. 2761, Terrorism Risk Insurance Revision and Extension Act of 2007, as amended, favorably reported to the House by a record vote of 49 yeas and 20 nays. Previously, the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises met in open session on July 24, 2007, and ordered H.R. 2761, as amended, forwarded to the Full Committee with a favorable recommendation by a record vote of 26 yeas and 17 nays.

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion to report legislation and amendments thereto. A motion by Mr. Frank to report the bill, as amended, to the House with a favorable recommendation was agreed to by a record vote of 49 yeas and 20 nays (Record vote No. FC-66). The names of Members voting for and against follow:

RECORD VOTE NO. FC-66

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Representative   Aye Nay Present   Representative Aye Nay Present

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Mr. Frank        X                     Mr. Bachus       X

Mr. Kanjorski    X                      Mr. Baker       X

Ms. Waters       X                 Ms. Pryce (OH)   X

Mrs. Maloney     X                     Mr. Castle       X

Mr. Gutierrez    X                  Mr. King (NY)   X

Ms. Velazquez    X                      Mr. Royce       X

Mr. Watt         X                      Mr. Lucas       X

Mr. Ackerman     X                       Mr. Paul       X

Ms. Carson       X                    Mr. Gillmor   X

Mr. Sherman      X                 Mr. LaTourette   X

Mr. Meeks        X                   Mr. Manzullo       X

Mr. Moore (KS)   X                      Mr. Jones   X

Mr. Capuano      X                   Mrs. Biggert       X

Mr. Hinojosa     X                      Mr. Shays   X

Mr. Clay         X                Mr. Miller (CA)   X

Mrs. McCarthy    X                    Mrs. Capito   X

Mr. Baca                               Mr. Feeney       X

Mr. Lynch        X                 Mr. Hensarling       X

Mr. Miller (NC)  X               Mr. Garrett (NJ)       X

Mr. Scott        X                Ms. Brown-Waite   X

Mr. Green        X               Mr. Barrett (SC)       X

Mr. Cleaver      X                    Mr. Gerlach   X

Ms. Bean         X                     Mr. Pearce       X

Ms. Moore (WI)   X                 Mr. Neugebauer   X

Mr. Davis (TN)   X                 Mr. Price (GA)       X

Mr. Sires        X                 Mr. Davis (KY)   X

Mr. Hodes        X                    Mr. McHenry   X

Mr. Ellison      X                   Mr. Campbell       X

Mr. Klein        X                     Mr. Putnam   X

Mr. Mahoney (FL) X                  Mrs. Bachmann       X

Mr. Wilson       X                     Mr. Roskam       X

Mr. Perlmutter   X                   Mr. Marchant       X

Mr. Murphy       X                   Mr. McCotter       X

Mr. Donnelly     X

Mr. Wexler       X

Mr. Marshall           X

Mr. Boren        X

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The following amendments to the amendment in the nature of a substitute recommended by the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises were decided by record votes. The names of Members voting for and against follow:

An amendment by Mr. Putnam, No. 5, inserting an 8+2 year extension of the program, was not agreed to by a record vote of 26 yeas and 39 nays (Record vote No. FC-63):

RECORD VOTE NO. FC-63

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Representative   Aye Nay Present       Representative Aye Nay Present

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Mr. Frank              X                   Mr. Bachus   X

Mr. Kanjorski          X                    Mr. Baker   X

Ms. Waters             X               Ms. Pryce (OH)   X

Mrs. Maloney           X                   Mr. Castle   X

Mr. Gutierrez          X                Mr. King (NY)       X

Ms. Velazquez          X                    Mr. Royce   X

Mr. Watt               X                    Mr. Lucas   X

Mr. Ackerman           X                     Mr. Paul   X

Ms. Carson             X                  Mr. Gillmor

Mr. Sherman            X               Mr. LaTourette       X

Mr. Meeks              X                 Mr. Manzullo   X

Mr. Moore (KS)         X                    Mr. Jones       X

Mr. Capuano            X                 Mrs. Biggert   X

Mr. Hinojosa           X                    Mr. Shays

Mr. Clay               X              Mr. Miller (CA)       X

Mrs. McCarthy          X                  Mrs. Capito   X

Mr. Baca                                   Mr. Feeney   X

Mr. Lynch              X               Mr. Hensarling   X

Mr. Miller (NC)        X             Mr. Garrett (NJ)   X

Mr. Scott              X         Ms. Brown-Waite (FL)   X

Mr. Green              X             Mr. Barrett (SC)   X

Mr. Cleaver            X                  Mr. Gerlach   X

Ms. Bean               X                   Mr. Pearce   X

Ms. Moore (WI)         X               Mr. Neugebauer   X

Mr. Davis (TN)         X               Mr. Price (GA)   X

Mr. Sires              X               Mr. Davis (KY)   X

Mr. Hodes              X                  Mr. McHenry

Mr. Ellison            X                 Mr. Campbell   X

Mr. Klein              X                   Mr. Putnam   X

Mr. Mahoney (FL)       X                Mrs. Bachmann   X

Mr. Wilson             X                   Mr. Roskam   X

Mr. Perlmutter         X                 Mr. Marchant   X

Mr. Murphy             X                 Mr. McCotter   X

Mr. Donnelly           X

Mr. Wexler

Mr. Marshall           X

Mr. Boren              X

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An amendment by Mr. King (N.Y.), No. 6, extending the program by 15 years, was agreed to by a record vote of 39 yeas and 30 nays (Record vote No. FC-64):

RECORD VOTE NO. FC-64

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Representative   Aye Nay Present       Representative Aye Nay Present

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Mr. Frank        X                         Mr. Bachus       X

Mr. Kanjorski          X                    Mr. Baker       X

Ms. Waters       X                     Ms. Pryce (OH)       X

Mrs. Maloney     X                         Mr. Castle       X

Mr. Gutierrez    X                      Mr. King (NY)   X

Ms. Velazquez    X                          Mr. Royce       X

Mr. Watt         X                          Mr. Lucas       X

Mr. Ackerman     X                           Mr. Paul       X

Ms. Carson       X                        Mr. Gillmor       X

Mr. Sherman      X                     Mr. LaTourette   X

Mr. Meeks        X                       Mr. Manzullo       X

Mr. Moore (KS)   X                          Mr. Jones   X

Mr. Capuano            X                 Mrs. Biggert       X

Mr. Hinojosa     X                          Mr. Shays   X

Mr. Clay         X                    Mr. Miller (CA)   X

Mrs. McCarthy    X                        Mrs. Capito       X

Mr. Baca                                   Mr. Feeney       X

Mr. Lynch        X                     Mr. Hensarling       X

Mr. Miller (NC)  X                   Mr. Garrett (NJ)       X

Mr. Scott        X               Ms. Brown-Waite (FL)       X

Mr. Green        X                   Mr. Barrett (SC)       X

Mr. Cleaver      X                        Mr. Gerlach       X

Ms. Bean         X                         Mr. Pearce       X

Ms. Moore (WI)   X                     Mr. Neugebauer       X

Mr. Davis (TN)   X                     Mr. Price (GA)       X

Mr. Sires        X                     Mr. Davis (KY)       X

Mr. Hodes        X                        Mr. McHenry   X

Mr. Ellison      X                       Mr. Campbell       X

Mr. Klein        X                         Mr. Putnam       X

Mr. Mahoney (FL) X                      Mrs. Bachmann       X

Mr. Wilson       X                         Mr. Roskam       X

Mr. Perlmutter   X                       Mr. Marchant       X

Mr. Murphy       X                       Mr. McCotter       X

Mr. Donnelly     X

Mr. Wexler       X

Mr. Marshall           X

Mr. Boren        X

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An amendment by Mr. Garrett, No. 10, regarding a revised 5 percent deductible, was agreed to by a record vote of 42 yeas and 27 nays (Record vote No. FC-65):

RECORD VOTE NO. FC-65

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Representative   Aye Nay Present        Representative Aye Nay Present

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Mr. Frank              X                    Mr. Bachus   X

Mr. Kanjorski    X                           Mr. Baker   X

Ms. Waters       X                      Ms. Pryce (OH)   X

Mrs. Maloney           X                    Mr. Castle   X

Mr. Gutierrez          X                 Mr. King (NY)       X

Ms. Velazquez          X                     Mr. Royce   X

Mr. Watt               X                     Mr. Lucas   X

Mr. Ackerman           X                      Mr. Paul   X

Ms. Carson             X                   Mr. Gillmor   X

Mr. Sherman            X                Mr. LaTourette   X

Mr. Meeks              X                  Mr. Manzullo   X

Mr. Moore (KS)   X                           Mr. Jones   X

Mr. Capuano            X                  Mrs. Biggert   X

Mr. Hinojosa     X                           Mr. Shays   X

Mr. Clay               X               Mr. Miller (CA)   X

Mrs. McCarthy          X                   Mrs. Capito   X

Mr. Baca                                    Mr. Feeney   X

Mr. Lynch              X                Mr. Hensarling   X

Mr. Miller (NC)        X              Mr. Garrett (NJ)   X

Mr. Scott              X         Ms. Brown-Waite) (FL)   X

Mr. Green              X              Mr. Barrett (SC)   X

Mr. Cleaver            X                   Mr. Gerlach   X

Ms. Bean         X                          Mr. Pearce   X

Ms. Moore (WI)         X                Mr. Neugebauer   X

Mr. Davis (TN)   X                      Mr. Price (GA)   X

Mr. Sires              X                Mr. Davis (KY)   X

Mr. Hodes              X                   Mr. McHenry   X

Mr. Ellison            X                  Mr. Campbell   X

Mr. Klein        X                          Mr. Putnam   X

Mr. Mahoney (FL)       X                 Mrs. Bachmann   X

Mr. Wilson             X                    Mr. Roskam   X

Mr. Perlmutter         X                  Mr. Marchant   X

Mr. Murphy             X                  Mr. McCotter   X

Mr. Donnelly     X

Mr. Wexler             X

Mr. Marshall     X

Mr. Boren        X

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The following other amendments were also considered by the Committee:

An amendment in the nature of a substitute recommended by the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, making various technical and substantive changes, as amended, was agreed to by a voice vote.

The following amendments to the amendment in the nature of a substitute were considered:

An amendment by Mr. Frank, No. 1, a manger's amendment making various technical and substantive changes, was agreed to by a voice vote.

An amendment by Mr. Manzullo, No. 2, providing for NBCR small insurer exemption, was agreed to by a voice vote.

An amendment by Mr. Clay, No. 3, including farm owners' multiple peril insurance, was agreed to by a voice vote.

An amendment by Mr. Marchant, No. 4, inserting a rule of construction regarding insurer coordination, was agreed to by a voice vote.

An amendment by Ms. Brown-Waite, No. 7, requiring an annual adjustment, was agreed to by a voice vote.

An amendment by Mrs. Bachmann, No. 8, regarding discretionary recoupment, was agreed to by a voice vote.

An amendment by Mr. Garrett, No. 9, regarding a 5 per cent deductible, was not agreed to.

On Tuesday, July 24, 2007, the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises met in open session and ordered H.R. 2761, as amended, forwarded to the Full Committee with a favorable recommendation, by a record vote of 26 yeas and 17 nays (Record vote No. CM-4). The names of Members voting for and against follow:

RECORD VOTE NO. CM-4

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Representative        Aye Nay Present         Representative Aye Nay Present

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Mr. Kanjorski         X                            Ms. Pryce       X

Mr. Ackerman          X                            Mr. Baker       X

Mr. Sherman           X                            Mr. Shays   X

Mr. Meeks             X                          Mr. Gillmor   X

Mr. Moore (KS)        X                           Mr. Castle       X

Mr. Capuano           X                             Mr. King   X

Mr. Hinojosa          X                            Mr. Lucas

Mrs. McCarthy         X                         Mr. Manzullo       X

Mr. Baca                                           Mr. Royce       X

Mr. Lynch                                         Ms. Capito       X

Mr. Miller (NC)       X                           Mr. Putnam       X

Mr. Scott             X                     Mr. Barrett (SC)       X

Ms. Velazquez         X                      Ms. Brown-Waite       X

Ms. Bean              X                           Mr. Feeney

Ms. Moore             X                     Mr. Garrett (NJ)       X

Mr. Davis (TN)        X                          Mr. Gerlach       X

Mr. Sires             X                       Mr. Hensarling

Mr. Hodes             X                       Mr. Davis (KY)       X

Mr. Klein             X                         Mr. Campbell       X

Mr. Mahoney           X                        Mrs. Bachmann       X

Mr. Perlmutter        X                           Mr. Roskam       X

Mr. Murphy            X                         Mr. Marchant       X

Mr. Donnelly          X                         Mr. McCotter       X

Mr. Wexler            X               Mr. Bachus, ex officio

Mr. Marshall

Mr. Boren             X

Mr. Frank, ex officio

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During the Subcommittee markup, the following amendments were disposed of by record votes. The names of Members voting for and against follow:

An amendment by Mr. Garrett, No. 1f, Section 2 changing of date, was not agreed to by a record vote of 14 yeas and 29 nays (Record vote No. CM-1):

RECORD VOTE NO. CM-1

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Representative        Aye Nay Present         Representative Aye Nay Present

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Mr. Kanjorski               X                      Ms. Pryce       X

Mr. Ackerman                X                      Mr. Baker   X

Mr. Sherman                 X                      Mr. Shays       X

Mr. Meeks                   X                    Mr. Gillmor   X

Mr. Moore (KS)              X                     Mr. Castle   X

Mr. Capuano                 X                       Mr. King       X

Mr. Hinojosa                X                      Mr. Lucas

Mrs. McCarthy               X                   Mr. Manzullo   X

Mr. Baca                                           Mr. Royce   X

Mr. Lynch                                         Ms. Capito       X

Mr. Miller (NC)             X                     Mr. Putnam   X

Mr. Scott                   X               Mr. Barrett (SC)   X

Ms. Velazquez               X                Ms. Brown-Waite   X

Ms. Bean                    X                     Mr. Feeney

Ms. Moore                   X               Mr. Garrett (NJ)   X

Mr. Davis (TN)              X                    Mr. Gerlach       X

Mr. Sires                   X                 Mr. Hensarling

Mr. Hodes                   X                 Mr. Davis (KY)       X

Mr. Klein                   X                   Mr. Campbell   X

Mr. Mahoney                 X                  Mrs. Bachmann   X

Mr. Perlmutter              X                     Mr. Roskam   X

Mr. Murphy                  X                   Mr. Marchant   X

Mr. Donnelly                X                   Mr. McCotter   X

Mr. Wexler                  X         Mr. Bachus, ex officio

Mr. Marshall

Mr. Boren                   X

Mr. Frank, ex officio

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An amendment by Mr. Putnam, No. 1g, striking section 2 and inserting new section setting new termination dates, was not agreed to by a record vote of 18 yeas and 25 nays (Record vote No. CM-2):

RECORD VOTE NO. CM-2

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Representative        Aye Nay Present         Representative Aye Nay Present

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Mr. Kanjorski               X                      Ms. Pryce   X

Mr. Ackerman                X                      Mr. Baker   X

Mr. Sherman                 X                      Mr. Shays       X

Mr. Meeks                   X                    Mr. Gillmor   X

Mr. Moore (KS)              X                     Mr. Castle   X

Mr. Capuano                 X                       Mr. King       X

Mr. Hinojosa                X                      Mr. Lucas

Mrs. McCarthy               X                   Mr. Manzullo   X

Mr. Baca                                           Mr. Royce   X

Mr. Lynch                                         Ms. Capito   X

Mr. Miller (NC)             X                     Mr. Putnam   X

Mr. Scott                   X               Mr. Barrett (SC)   X

Ms. Velazquez               X                Ms. Brown-Waite   X

Ms. Bean                    X                     Mr. Feeney

Ms. Moore                   X               Mr. Garrett (NJ)   X

Mr. Davis (TN)              X                    Mr. Gerlach   X

Mr. Sires                   X                 Mr. Hensarling

Mr. Hodes                   X                 Mr. Davis (KY)   X

Mr. Klein                   X                   Mr. Campbell   X

Mr. Mahoney                 X                  Mrs. Bachmann   X

Mr. Perlmutter              X                     Mr. Roskam   X

Mr. Murphy                  X                   Mr. Marchant   X

Mr. Donnelly                X                   Mr. McCotter   X

Mr. Wexler                  X         Mr. Bachus, ex officio

Mr. Marshall

Mr. Boren                   X

Mr. Frank, ex officio

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An amendment by Mrs. Bachmann, No. 1h, requiring full recoupment of Federal financial assistance share, was not agreed to by a record vote of 19 yeas and 24 nays (Record vote No. CM-3):

RECORD VOTE NO. CM-3

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Representative        Aye Nay Present         Representative Aye Nay Present

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Mr. Kanjorski               X                      Ms. Pryce   X

Mr. Ackerman                X                      Mr. Baker   X

Mr. Sherman                 X                      Mr. Shays   X

Mr. Meeks                   X                    Mr. Gillmor   X

Mr. Moore (KS)              X                     Mr. Castle   X

Mr. Capuano                 X                       Mr. King       X

Mr. Hinojosa                X                      Mr. Lucas

Mrs. McCarthy               X                   Mr. Manzullo   X

Mr. Baca                                           Mr. Royce   X

Mr. Lynch                                         Ms. Capito   X

Mr. Miller (NC)             X                     Mr. Putnam   X

Mr. Scott                   X               Mr. Barrett (SC)   X

Ms. Velazquez               X                Ms. Brown-Waite   X

Ms. Bean                    X                     Mr. Feeney

Ms. Moore                   X               Mr. Garrett (NJ)   X

Mr. Davis (TN)              X                    Mr. Gerlach   X

Mr. Sires                   X                 Mr. Hensarling

Mr. Hodes                   X                 Mr. Davis (KY)   X

Mr. Klein                   X                   Mr. Campbell   X

Mr. Mahoney                 X                  Mrs. Bachmann   X

Mr. Perlmutter              X                     Mr. Roskam   X

Mr. Murphy                  X                   Mr. Marchant   X

Mr. Donnelly                X                   Mr. McCotter   X

Mr. Wexler                  X         Mr. Bachus, ex officio

Mr. Marshall

Mr. Boren                   X

Mr. Frank, ex officio

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During the Subcommittee markup, the following amendments were also considered:

An amendment by Mr. Kanjorski, No. 1, a manager's amendment in the nature of a substitute, was agreed to, as amended, by a voice vote.

An amendment by Ms. Pryce, No. 1a, striking Section 2 and inserting new termination dates for NBCR, was not agreed to by a voice vote.

An amendment by Mr. Ackerman, No. 1b, including the Secretary of Homeland Security in certification for acts of terrorism and acts of NBCR terrorism, was agreed to by a voice vote.

An amendment by Mr. Baker, No. 1c, regarding rates and disallowed claims at State level may go to Federal court, was withdrawn.

An amendment by Mr. Manzullo, No. 1d, regarding NBCR make-available exceptions for small businesses, was withdrawn.

An amendment by Mr. Marchant, No. 1e, to allow NBCR insurance partnering, was withdrawn.

An amendment by Mr. Baker, No. 1i, striking `in the same previously impacted areas' and `in the same impacted areas', was agreed to by a voice vote.

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AMENDMENTS

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Amendments For H.R.2761

1. H.AMDT.801 to H.R.2761 An amendment numbered 1 printed in Part B of House Report 110-333 to clarify the certification process for acts of NBCR (nuclear, biological, chemical, or radiological) terrorism; apply the reset mechanism to the NBCR deductible, and provide that the Consumer Price Index will be used to adjust for inflation the dollar amounts used in TRIA. The amendment also makes technical and conforming changes.
Sponsor: Rep Frank, Barney [MA-4] (introduced 9/19/2007) Cosponsors (None)
Latest Major Action: 9/19/2007 House amendment agreed to. Status: On agreeing to the Frank (MA) amendment (A001) Agreed to by recorded vote: 426 - 1 (Roll no. 881).

2. H.AMDT.802 to H.R.2761 An amendment numbered 2 printed in Part B of House Report 110-333 to raise the deductible set at 5% above $1,000,000,000 by 1% each program year, rather than by .5% as the bill is written.
Sponsor: Rep Pearce, Stevan [NM-2] (introduced 9/19/2007) Cosponsors (None)
Latest Major Action: 9/19/2007 House amendment not agreed to. Status: On agreeing to the Pearce amendment (A002) Failed by recorded vote: 194 - 230 (Roll no. 882).

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