Bill Nelson

Mr. NELSON of Florida

Mr. NELSON of Florida. The Senator has made much of the fact that this would suddenly be the Federal Government getting into ratemaking. Of course, the Senator would concede, would he not, that this is the first time the Federal Government would be getting into big time insuring an insurance risk?

Mr. NELSON of Florida. And acts of war are exempt on every insurance policy that I know of as a covered risk. It is exempt. I say to the distinguished----

Mr. NELSON of Florida. You not only are distinguished, you look distinguished.

Mr. NELSON of Florida. You sound very distinguished, too, but I want you to answer my questions.

Mr. NELSON of Florida. The question is, since we have the Federal Government involved big time under your bill, 80, 90 percent of the risk is going to be borne by the Federal Government----

Mr. NELSON of Florida. Would the Senator concede under that complicated mathematical formula, often it is a fraction of a percentage of the total annual premium of a company that they will actually pay in an individual company in any one year?

Mr. NELSON of Florida. Underlying bill.

Mr. NELSON of Florida. Madam President, I would like to close on my amendment. This has been a good debate. Again, although I have serious reservations about this legislation, I did not prevent it from coming to the floor, which I could have done last night. I appreciate the distinguished Senator from Connecticut engaging in the colloquy, the series of questions and answers. I hope it is better understood. Now I would like to make a couple of points before we vote on the amendment, and I will ask for the yeas and nays. First of all, I want to correct something the distinguished Senator from Nebraska said. In fact, terrorism insurance under this bill is mandatory. That is the whole point of setting the system up whereby the Federal Government is coming in and backstopping insurance companies. It is mandatory for all commercial property and casualty insurance. The insurance is there. The Federal Government is picking up most of the tab. If the loss occurs, who is paying? The consumer is paying through the premiums that have already been hiked as chronicled daily over the last 6 months, including this one in today's paper talking about a 300-percent increase in the last 6 months. That, in fact, is what has happened. What should we do about it? We have to make insurance available. That is part of the reason for the underlying bill. But we also have to make it affordable. When rates get hiked 300 percent, you are getting to the precipice of whether it is affordable. Don't just think it is the big real estate conglomerates that are having trouble getting this insurance. This affects small businesses as well. Whatever the size of the business, these rate hikes are going to be passed on to the consumers as a cost of doing business. The huge rate hikes are going directly to the consumers. I reiterate that consumers and taxpayers do not like to have their Senators voting to increase their taxes. Let me tell you what they do not like even more: They do not want their Senators approving legislation that causes rate hikes to be etched into law. I come forth humbly and respectfully with an amendment that says we are going to put a process in place--that we are going to put this process in place that says the Secretary of Treasury is going to consult with the NAIC and other Federal agencies as to what ought to be the range of a rate hike or rate decrease, whatever is warranted; and, furthermore, where there has been the huge increase already, but then the Secretary says the rate increase ought to be there or not there for the remainder of that policy, that difference has to be rebated to the policyholder. Naturally, this is stepping on some toes because it not only puts a process of logic in the handling of rates, but it causes rebates to go back where the rates have been determined to be excessive. Senators, hear me. This is a dangerous vote. Watch out what you are voting on as you vote on the Nelson amendment. I ask for the yeas and nays.

Mr. NELSON of Florida. If I may respond, the NAIC, National Association of Insurance Commissioners, has formally adopted a new version of the property and casualty energy rate and policy form model law which essentially encourages the optional use and file system, which is a system where the companies file what they want without the insurance commissioner having to approve that rate ahead of time. That is what I am trying to get across to the distinguished Senator from Connecticut. That, in fact, there is not this closely held tight reign out there in the 50 States by the insurance commissioners over what are the rates on commercial policies. When you use that as an excuse to justify not having some kind of mechanism by which we control the rate hikes on terrorism insurance under a bill that the Federal Government is basically going to support, the terrorism risk, it has the potential of taking the rates to the Moon.

Mr. NELSON of Florida. Yes, I do. Is the Senator aware as a matter of practice insurance commissioners of the States basically do not set rates for commercial policies?

Mr. NELSON of Florida. Maybe I can ask a question of the distinguished Senator to which he could give a yes or no. First, I merely point out the fact with the Federal Government being so involved in assuming the terrorism risk, what will be charged for that risk is clearly a legitimate issue for the Secretary of the Treasury with the consultation of the States to determine what you ought to charge for that risk. Particularly given the fact that since this is only a 1-year bill and maybe a 2-year bill by the time you get to the end of that time, the 50 insurance commissioners of the country would not have even had a chance to determine if a rate was actuarially sound. Usually that is done only when the insurance companies file those rates, when, in fact, these rates are already in effect as indicated by this morning's newspaper.

Mr. NELSON of Florida. Would the distinguished Senator from Connecticut yield for a further question?

Mr. NELSON of Florida. If the Senator will allow me to continue with another couple of questions, I would merely respond to the distinguished Senator's comments, that here is an example today on the front page of the Washington Post, that we are talking about rates being hiked using the terrorism risk as an excuse. Therefore, I clearly implore the Senate that it makes common sense, if rates are going to be hiked for terrorism risk, make sure it is those rate premiums that are paying the terrorism losses, and not going into the general fund and suddenly all of the premiums get jacked up. If we are going to jack rates higher than the Moon, then let us at least segregate them so they are there for what they are purported to be there for, and that is to pay for a terrorism loss. That is what I would propound to the Senator.

Mr. NELSON of Florida. I will merely respond before I ask my next question by saying that we have clearly a separate matter because all the other premiums with regard to all the other risks--be it wind, hail, dog bite, slip and fall, construction malfunction, whatever the risk is--is not subsidized by the Federal Government as we are doing with this bill where the Federal Government is taking a part of the risk. It seems to me that it makes common sense that since the Federal Government is getting into the business of terrorism insurance in such a big-time way, that we ought to separate out the premiums in a separate account, purely from an accounting function, so there is no question that those terrorism premiums get commingled with all the other premiums and suddenly we do not know how much that is. I further ask the distinguished Senator, does the Senator's bill require that premiums collected for terrorism risk be used for terrorism losses only?

Mr. NELSON of Florida. Would the Senator want to propound why it should not be in a separate account?

Mr. NELSON of Florida. Does the Senator's bill require terrorism premiums to be held in a separate account?

Mr. NELSON of Florida. Will the distinguished Senator from Connecticut yield for a further series of questions?

Mr. NELSON of Florida. Mr. President, I thank my colleague. Again, this was another experience where we had to temporarily suspend the debate in order to go downstairs to the Foreign Relations Committee to provide a quorum so we could vote out a very important piece of legislation. First, I wish to ask a couple of questions about which we agree. The Senator from Connecticut has a provision in his bill that says: The participating insurance company provides clear and conspicuous disclosure to the policyholder of the premium charged for insured loss covered by the program. ``Provide clear and conspicuous disclosure.'' Listen to the language in my amendment with regard to the same issue, and see if the distinguished senior Senator from Connecticut does not think that the language I have would not be something of an improvement by making it a little more specific. I am referring to page 2 of my amendment, line 18. The lead into it is: If a participating insurance company increases annual premium rates on covered risks under subsection (a), the company-- (2) shall identify the portion of the premium insuring against terrorism risk on a separate line item on the policy . . . The reason we put that there is it is my experience that if you do not nail down general language and be very specific, it will not end up on the policy on a separate line so that the consumer can see how much they are being charged for the insured risk, in this case the terrorism risk. I ask the distinguished senior Senator from Connecticut if he would consider that later on as a perfecting amendment to his language on page 12, the paragraph starting at line 7?

Mr. NELSON of Florida. I will be happy to run downstairs with the Senator from Connecticut to make a quorum if we can come back and resume and I can ask the Senator a series of questions.

Mr. NELSON of Florida. Will the Senator yield for a series of questions?

Mr. NELSON of Florida. That is correct. Therefore, we are not talking about this Senator's amendment having any kind of permanent regulation of rates at the Federal level. Rather, we are looking at a process to affect this specific bill having to do with terrorism rates of which the Federal Government is picking up 80 or 90 percent.

Mr. NELSON of Florida. Mr. President, the Senator raised a very legitimate question. I think that ought to be hashed out. However, the Senator's bill does self-destruct at the end of year 2002, unless it is extended by the Secretary for 1 more year.

Mr. NELSON of Florida. Will the Senator yield?

Mr. NELSON of Florida. I would ask that you amend that unanimous consent request so that I have 5 minutes to close before the vote on my amendment.

Mr. NELSON of Florida. Reserving the right to object.