To extend the temporary suspension of duty on 3-Amino-5-mercapto-1,2,4-triazole.

Mr. Speaker, I move to suspend the rules and pass the Senate bill (S. 467) to extend the applicability of the Terrorism Risk Insurance Act of 2002, as amended.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to

revise and extend their remarks and include extraneous material on S. 467.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, in the aftermath of the brutal terrorist attacks on our Nation on September 11, 2001, America's economic and financial security was put at risk. Thousands of innocent people were victimized and our insurance industry was brought to its knees.

Insurers could not predict when or where or how damaging the next attack would be. As a result, the insurance markets pulled back and businesses were unable to obtain terrorism insurance at any price. Business development plans stalled and our economy was put at risk.

President Bush immediately called on Congress to pass legislation that would prevent severe economic disruptions caused by a lack of available terrorism insurance. The Financial Services Committee worked closely with the administration and the Senate to draft the Terrorism Risk Insurance Act of 2002, or TRIA. TRIA provided a temporary Federal backstop to protect against future catastrophic terrorist attacks. This program, by any measure, has been a resounding success.

On June 30, 2005, the Treasury Department submitted a report to Congress on the effectiveness of the TRIA program, the availability and affordability of terrorism insurance for various policyholders, and the likely capacity of the property and causality insurance industry to offer insurance for terrorism risk after TRIA expires on December 31 of this year. According to the report, the removal of TRIA would result in ``less terrorism insurance written by insurers, higher prices, and lower policyholder take-up.''

The administration stated that it wanted to reform the TRIA program and foster the development of a private market for terrorism insurance.

The legislation before us today would temporarily extend the terrorism risk backstop for policyholders, but would also add a number of critical reforms. Perhaps most importantly, this bill is the only proposal providing significant taxpayer protections.

Unlike the current TRIA program which sets a limit on the amount of Federal assistance taxpayers may recoup, this legislation may have full 100 percent taxpayer payback. Every dollar the Federal Government pays out gets repaid over time. This bill also significantly increases industry co-shares, providing further taxpayer relief in the short run.

The bill raises the program trigger from $5 million to $50 million in the first year of the extension and then to $100 million for the second year. It also eliminates commercial automobile insurance from the terrorism insurance program, for a reduction of over $30 billion dollars in covered line premiums. The bill raises the deductibles on all lines of insurance from the current level of 15 percent to an average of over 20 percent, the biggest increase among all of the proposals.

The legislation encourages insurers to make coverage available for nuclear, biological, chemical and radioactive risk attacks, which are currently excluded from most insurance policies. Without these provisions, policyholders will continue to be unprotected for the most catastrophic of events.

Any Federal terrorism insurance program must be temporary. Because terrorism risk will not go away, one of our major goals must be to decrease the role of the Federal Government over time and provide real, lasting market reforms that will increase industry responsibility for terrorism insurance.

It is important that industry have more ``skin in the game'' to ease the transition to the private market for terrorism insurance. In addition to a raised trigger and deductibles, this bill is the only legislation that requires that development of a long-term solution shifting the backstop to the private sector and phasing out the Federal role.

A public-private entity is created and is required to issue specific proposals within a short period of time, and the bill sets up various risk-pooling mechanisms and dedicated terrorism capital accounts to immediately begin the transition. Without these provisions, we will be back here in 12 months arguing over another extension with no improved reforms.

This legislation is identical to the bill that passed our Financial Services Committee overwhelmingly by a vote of 64-3, with the exception of striking certain provisions that are within the jurisdiction of the Judiciary Committee by agreement, a slight change in the definition of exempt commercial purchasers, and other technical and conforming changes.

I applaud my friend and colleague, the gentleman from Louisiana (Mr. Baker), chairman of the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, for introducing this legislation.

I would also like to thank the gentlewoman from New York (Mrs. Kelly), the gentleman from Texas (Mr. Sessions), the gentlewoman from Ohio (Ms. Price), the gentleman from Kentucky (Mr. Davis), the gentleman from New York (Mr. Fossella), the gentleman from Arizona (Mr. Renzi), the gentleman from New Jersey (Mr. Ferguson), the ranking member from Massachusetts (Mr. Frank), the gentleman from Pennsylvania (Mr. Kanjorski), and the gentleman from Massachusetts (Mr. Capuano) for their leadership and commitment to this important matter.

I urge my colleagues to vote in favor of this bill.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I am pleased to yield 2 minutes to the gentlewoman from New York (Mrs. Kelly), the chairman of the Oversight Subcommittee.

Mr. Speaker, I yield 2 minutes to the gentleman from Georgia (Mr. Price).

If the gentleman would yield, the gentleman has my assurances. I know we had some discussions in the committee, in the markup. Going forward, we have not been able to close that circle yet, but I see the

gentlewoman from Florida there nodding, and the gentleman has my assurances, as do all the other members of the committee, that we will address that issue. I think there were some drafting issues and the like that we will certainly take care of before the conference is concluded.

I thank the gentleman for his support.

Mr. Speaker, I am pleased to yield whatever time he may consume to the gentleman from Louisiana (Mr. Baker), the chairman of the subcommittee.

Mr. Speaker, I am pleased now to yield 2 minutes to the

gentleman from New York (Mr. Reynolds).

(Mr. REYNOLDS asked and was given permission to revise and extend his remarks.)

Mr. Speaker, I yield such time as she may consume to the gentlewoman from New York (Mrs. Kelly).

Mr. Speaker, I thank the gentlewoman for her inquiry, and clearly the committee on the point that she mentioned did not have hearings on the amendment offered, but I think it may be ripe for further exploration by the committee because the gentlewoman raises some interesting issues regarding foreign travel, particularly as it relates to life insurance policies.

I thank the gentlewoman for her interest and expertise.

Mr. Speaker, just in conclusion, I thank the gentleman from Pennsylvania for his kind words, and all the members on the committee who worked so hard on this, particularly Mr. Kanjorski and Mr. Frank on that side, and many, many others.

Mr. Speaker, when we had the hearing on this legislation with the Treasury Secretary after the Treasury report came out, I made the comment it would be irresponsible on the part of this Congress if we did not address the issue of terrorism risk insurance. It was far too important to ignore; it had too many implications for our economy going forward.

And Mr. Frank was right when he said this is not about the insurers. It is about the insured, the people out there creating jobs and making our economy work. And it is also a recognition that an act of terrorism is almost impossible to try to get actuarial information on to be able to set rates. It is virtually impossible. Anybody that knows anything about insurance knows that it is virtually impossible to work that in to any kind of an insurance scheme in which they would charge premiums. So that is why we needed this bottom-up, and that is why we need to continue this bottom-up.

And the idea is to transition during that period to a market-based solution, creating the incentive for insurance companies to create a pool, not unlike what the Brits have, the pool-rate concept, so you have this pool that could guard against losses. It is something that hopefully over the next year, as we finish this Congress, we can set the stage for that transition that will enable our economy to continue to grow and provide a robust insurance protection for those activities at the same time.

This is, in my estimate, as the gentleman from Pennsylvania pointed out, the legislative process at its best and I am very proud of the committee and the job that we have done. I ask for support of the legislation.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, 4 years ago, when the Congress considered the bill creating the terrorism insurance program, I urged my colleagues to reject it. One of the reasons I opposed the bill was my concern that, contrary to the claims of the bill's supporters, terrorism insurance would not be allowed to sunset after 3 years. As I said then:

The drafters of H.R. 3210 claim that this creates a

``temporary'' government program. However, Mr. Speaker, what

happens in 3 years if industry lobbyists come to Capitol Hill

to explain that there is still a need for this program

because of the continuing threat of terrorist attacks. Does

anyone seriously believe that Congress will refuse to

reauthorize this ``temporary'' insurance program or provide

some other form of taxpayer help to the insurance industry? I

would like to remind my colleagues that the Federal budget is

full of expenditures for long-lasting programs that were

originally intended to be ``temporary.''

I am disappointed to be proven correct. I am also skeptical that, having renewed the program once, Congress will ever allow it to expire, regardless of the recommendations made by the commission created by this bill.

As Congress considers extending this program, I renew my opposition to it for substantially the same reasons I stated 4 years ago. However, I do have a suggestion on how to improve the program. Since one claimed problem with allowing the private market to provide terrorism insurance is the difficulty of quantifying the risk of an attack, the taxpayers' liability under the terrorism reinsurance program should be reduced for an attack occurring when the country is under orange or red alert. After all, because the point of the alert system is to let Americans know when there is an increased likelihood of an attack it is reasonable to expect insurance companies to demand that their clients take extra precautionary measures during periods of high alert. Reducing taxpayer subsidies will provide an incentive to ensure private parties take every possible precaution to minimize the potential damage from possible terrorists attack.

While this bill does contain some provisions making it more favorable to taxpayers than the original program, my fundamental objections to the program remain the same as 4 years ago. Therefore, I am attaching my statement regarding H.R. 3210, which created the terrorist insurance program in the 107th Congress:

Mr. Speaker, no one doubts that the government has a role to play in compensating American citizens who are victimized by terrorist attacks. However, Congress should not lose sight of fundamental economic and constitutional principles when considering how best to provide the victims of terrorist attacks just compensation. I am afraid that H.R. 3210, the Terrorism Risk Protection Act, violates several of those principles and therefore passage of this bill is not in the best interests of the American people.

Under H.R. 3210, taxpayers are responsible for paying 90 percent of the costs of a terrorist incident when the total cost of that incident exceeds a certain threshold. While insurance companies technically are responsible under the bill for paying back monies received from the Treasury, the administrator of this program may defer repayment of the majority of the subsidy in order to ``avoid the likely insolvency of the commercial insurer,'' or avoid ``unreasonable economic disruption and market instability.'' This language may cause administrators to defer indefinitely the repayment of the loans, thus causing taxpayers to permanently bear the loss. This scenario is especially likely when one considers that ``avoid . . . likely insolvency, unreasonable economic disruption, and market instability'' are highly subjective standards, and that any administrator who attempts to enforce a strict repayment schedule likely will come under heavy political pressure to be more ``flexible'' in collecting debts owed to the taxpayers.

The drafters of H.R. 3210 claim that this creates a ``temporary'' government program. However, Mr. Speaker, what happens in 3 years if industry lobbyists come to Capitol Hill to explain that there is still a need for this program because of the continuing threat of terrorist attacks. Does anyone seriously believe that Congress will refuse to reauthorize this ``temporary'' insurance program or provide some other form of taxpayer help to the insurance industry? I would like to remind my colleagues that the Federal budget is full of expenditures for long- lasting programs that were originally intended to be ``temporary.''

H.R. 3210 compounds the danger to taxpayers because of what economists call the ``moral hazard'' problem. A moral hazard is created when individuals have the costs incurred from a risky action subsidized by a third party. In such a case individuals may engage in unnecessary risks or fail to take steps to minimize their risks. After all, if a third party will bear the costs of negative consequences of risky behavior, why should individuals invest their resources in avoiding or minimizing risk?

While no one can plan for terrorist attacks, individuals and businesses can take steps to enhance security. For example, I think we would all agree that industrial plants in the United States enjoy reasonably good security. They are protected not by the local police, but by owners putting up barbed wire fences, hiring guards with guns, and requiring identification cards to enter. One reason private firms put these security measures in place is because insurance companies provide them with incentives, in the form of lower premiums, to adopt security measures. H.R. 3210 contains no incentives for this private activity. The bill does not even recognize the important role insurance plays in providing incentives to minimize risks. By removing an incentive for private parties to avoid or at least mitigate the damage from a future terrorist attack, the government inadvertently increases the damage that will be inflicted by future attacks.

Instead of forcing taxpayers to subsidize the costs of terrorism insurance, Congress should consider creating a tax credit or deduction for premiums paid for terrorism insurance, as well as a deduction for claims and other costs borne by the insurance industry connected with offering terrorism insurance. A tax credit approach reduces government's control over the insurance market. Furthermore, since a tax credit approach encourages people to devote more of their own resources to terrorism insurance, the moral hazard problems associated with federally funded insurance is avoided.

The version of H.R. 3210 passed by the Financial Services committee took a good first step in this direction by repealing the tax penalty which prevents insurance companies from properly reserving funds for human-created catastrophes. I am disappointed that this sensible provision was removed from the final bill. Instead, H.R. 3210 instructs the Treasury Department to study the benefits of allowing insurers to establish tax-free reserves to cover losses from terrorist events. The perceived need to study the wisdom of cutting taxes while expanding the federal government without hesitation demonstrates much that is wrong with Washington.

In conclusion, Mr. Speaker, H.R. 3210 may reduce the risk to insurance companies from future losses, but it increases the costs incurred by American taxpayer. More significantly, by ignoring the moral hazard problem this bill may have the unintended consequence of increasing the losses suffered in any future terrorist attacks. Therefore, passage of this bill is not in the long-term interests of the American people.

Mr. Speaker, the ranking member of the subcommittee, the gentleman from Pennsylvania (Mr. Kanjorski), is on his way over. He has taken the lead for us on this bill.

I would just ask at this point unanimous consent for me to turn over to him the management of our time when he arrives.

Mr. Speaker, this is a bill to which my response is, ``Better late than never.'' I wish we would have done this earlier. We have known for some time the deadline was coming. I appreciate the efforts of the chairman of the committee to get the attention of the House to this bill. We passed it in committee some time ago before the break. It frankly could have come to the floor before that.

I say that because I am pleased with this bill in general. I think it is useful that we are producing it. And there are differences between this bill and the one passed by the Senate, and we do need some time to work them out.

None of them is of enormous difficulty, it seems to me, they all have a similar capacity, but it would have been better if we had done this earlier.

Having said that, I want to stress what is so important about this bill to me, and it is it establishes or maintains the principle that we will try to minimize the extent to which terrorists influence decisions that we make here in America. I do not regard this as a favor to the insurance companies. Frankly, terrorism insurance would, I believe, not exist if it were not for this bill or, if it did exist, it would be at very high premiums. The insurance industry would have the option either of walking away from offering this or of charging high premiums. I do not think the insurance industry would be greatly disadvantaged.

The losers, if we do not reenact terrorism risk insurance, are people who want to build and particularly in those cities that are seen as potential targets of terrorism. We have been told by people who want to do large commercial buildings, very important to the big cities of this country, to the areas that would be the targets of terrorism, that they would not be able to get loans that are necessary obviously to build if they are not fully insured. Lenders are telling us, yes, we cannot now lend large amounts of money, tens, hundreds of millions of dollars to a building that might be at risk from terrorism and be uninsured against that risk.

I think we ought to have a responsible insurance system so that where we can minimize risk we can give people an incentive to be responsible in dealing with them. I do not think it is

good public policy to say to people who want to build in New York or Chicago or Los Angeles or here in Washington, D.C., There are terrorists out there and they want to blow things up and you will bear that financial responsibility; that is up to you. That is unfair to the cities, and it gives the terrorists leverage over our economy.

So this is a bill which, in my mind, is not for benefit of the insurers but for the insured, and it is for the benefit of the insured so that we can go forward with the development of our economy.

Indeed, there is one issue here regarding the World Trade Center that we have not yet fully resolved, and I appreciate the chairman showing some interest in this. We were asked, both of us, by Members from the New York area about some provisions to deal with the possibility that the World Trade Center reconstruction will take too long. Frankly, those in charge in New York did not come to us until very late in the process, and it was not possible to accommodate something of that complexity now. I hope we do not rule it out for the future, but if they had come to us earlier, we might have been able to deal with it somewhat differently, but that illustrates the point.

This is a bill to make sure that economic activity in our biggest cities can go on uninterrupted, and the alternative is to let the terrorists put a terrorist tax on building large buildings in our big cities, and we should not allow that.

Let me just say, finally, I want to acknowledge, and my friend from Pennsylvania is here and will be taking this over, but this has been a cooperative effort with the chairman of the committee, the gentleman from New York (Mr. Israel), the gentleman from New York (Mr. Crowley). The gentleman from Massachusetts (Mr. Capuano) has done a lot.

Last point. Some of the consumer groups have raised what I think are misguided objections here. I do not see that this, in any way, impinges on the consumers negatively, but thanks to the gentlewoman from Florida, who will be speaking later, it has a very important proconsumer piece, and I appreciate the chairman's agreeing to add it, that protects Americans from arbitrary treatment if they are traveling to certain parts of the world.

So I am very supportive of this, and I would now turn over the management of the time to the gentleman from Pennsylvania.

Mr. Speaker, I yield 2 minutes to the gentleman from New York (Mr. Israel).

Mr. Speaker, I yield myself 3 minutes.

(Mr. KANJORSKI asked and was given permission to revise and extend his remarks.)

Mr. Speaker, I rise in support of the Terrorism Risk Insurance Revision Act.

The terrorist attacks on the World Trade Center and the Pentagon altered how we each assess risk. This adjustment was especially apparent in the insurance industry.

Terrorism insurance is critical to protecting jobs and promoting America's economic security. Unfortunately, the supply of terrorism reinsurance after the September 11 attacks significantly decreased.

Eventually, we approved the Terrorism Risk Insurance Act to address this problem. At recent hearings, we have learned that this law has worked to increase the availability of terrorism risk insurance, lowered the cost of such insurance, contributed significantly to stabilizing the overall insurance marketplace, and advanced delayed economic development projects.

We also wisely designed this program as a temporary backstop to get our Nation through a period of economic uncertainty until the private sector could develop the models to price for terrorism reinsurance. Unlike hurricanes and fires, acts of terrorism in the American experience currently remain inherently unpredictable in frequency and scale. As a result, the private sector has not yet returned to the terrorism reinsurance marketplace.

Many studies support this finding. The Government Accountability Office, for example, has determined that the industry has made little progress to date in providing terrorism insurance without government involvement. A report by the Rand Corporation also found that TRIA is needed, but because of its gaps, it is not robust enough to protect against evolving threats like those posed by nuclear, biological, chemical and radioactive events.

Many have, therefore, called upon us to modify and extend the life of the terrorism risk insurance program in order to prevent short-term market disruptions and better protect the economy. The consensus bill before us today wisely extends the program up to 3 years and adopts other prudent reforms.

I am especially pleased that the bill includes group life insurance as a covered line. The original TRIA omitted such coverage. This bill fixes that oversight. We need, after all, to insure the people inside the buildings, not just the buildings themselves.

In closing, Mr. Speaker, this is not a Democratic issue or a Republican issue. It is an American issue, a business issue and an economic security issue.

With less than 4 weeks remaining before the current program expires, we need to expeditiously pass this important economic stabilization legislation and move forward with a conference. I urge my colleagues to support this bill.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield 2 minutes to the gentleman from Massachusetts (Mr. Capuano).

Mr. Speaker, I yield 2 minutes to the charming gentlewoman from Florida (Ms. Wasserman Schultz).

Mr. Speaker, I yield 2 minutes to the gentlewoman from New York (Mrs. Maloney).

Mr. Speaker, this has been a difficult time, because so many of us over the last year have desired to move this legislation along. But I would be remiss if I did not take this occasion to perhaps illuminate an example for this entire Congress as represented by the financial services industry.

I would have to say, without doing an in-depth study, that the Financial Services Committee of the House of Representatives has proven that even in the 109th Congress we can have bipartisan activity of an extraordinary amount, and that to a large extent is due to the incredibly good leadership of our gentleman friend, the chairman from Ohio, and the ranking member, the gentleman from Massachusetts (Mr. Frank). I also would be remiss if I did not suggest a strong and hard effort by our friend, the subcommittee chairman, Mr. Baker of Louisiana.

Perhaps the full House could take note that in pressing times of need for legislation that can be contentious and has philosophical differences of great order, both sides of the aisle on this piece of legislation, and so many more in this session of Congress, have come together to perform the people's work; and I think the congratulations to a large extent for that effort go to the gentleman from Ohio, the chairman, Mr. Oxley.

With those remarks, Mr. Speaker, and urging all my colleagues in the House to vote ``yes'' on this legislation, I yield back the balance of my time.

Mr. Speaker, on that I demand the yeas and nays.

Mr. Speaker, I thank the chairman for yielding.

I rise today in strong support of this measure which represents the work product of the Committee on Financial Services not for a matter of hours but, frankly, a matter of years.

The committee first authorized a terrorism reinsurance program some years ago, initially after the events of 9/11. That program has now exceeded its lifespan and is due to expire at the end of this year.

The consequences of letting the program expire are consequential. The inability to underwrite an indeterminate risk is of great consequence to particularly our real estate and development community, but to all business enterprises which are vulnerable to and concerned with the potential of a terrorism event.

The collective impact of this program will not be felt by taxpayers until and unless there is a terrorist attack. It is something that some appear to not understand. We are not creating a job bureaucracy. We are not spending tens of millions of taxpayer dollars. We are only saying that in the event another unexpected terrible calamity that struck New York some years ago should ever reoccur, that there be in place a governmental mechanism to help us through the crisis.

Some are concerned that this represents a way in which to funnel hundreds of millions of dollars to private interests of taxpayer money without recourse.

The principal reason why the House approach is the only approach that we should adopt is the requirement for the industry, once solvent, once stable, once economic conditions have returned to normality, that there would be repayment of the credit extended by the United States taxpayer. This is not a giveaway. This is a bridge loan in the time of national crisis.

I cannot conceive of how this Congress could go home and walk away from this responsibility to act for a preventive measure. It only gives our economic system the assurance that there will be continuity; that there will be the ability for our economic systems to function should we be called upon to respond to an event of enormous proportions that all of us hope will never occur.

We also are sensitive to the scale of the insurance industry. There are very large companies who can withstand enormous losses and pay them off quite well. There are regional and smaller providers who provide an essential service in our economy that would be disastrously impacted if the provisions contained in the House measure are not adopted.

I cannot speak highly enough about the long-suffering work of our chairman, Chairman Oxley, and the kind assistance offered by the ranking member, Mr. Frank, in really making this a bipartisan recommendation to meet what is an identified and obvious need in the most responsible manner possible.

Let me say it again, because it is so important. If, and only if, the provisions of this act are necessary will it be brought into life. At such time any assistance offered to any private entity who is a for- profit entity and taxpayer resources are expended, there will be a requirement to repay the taxpayers of this country when the solvency of that enterprise is clear and established. Emergency purposes for emergency needs in a time of crisis.

I commend both Members for their leadership and hard work on this measure.