[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 9 Reported in House (RH)]
Union Calendar No. 470
103d CONGRESS
2d Session
H. R. 9
[Report No. 103-853]
_______________________________________________________________________
A BILL
To modify the antitrust exemption applicable to the business of
insurance.
_______________________________________________________________________
October 7, 1994
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
Union Calendar No. 470
103d CONGRESS
2d Session
H. R. 9
[Report No. 103-853]
To modify the antitrust exemption applicable to the business of
insurance.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 5, 1993
Mr. Brooks introduced the following bill; which was referred to the
Committee on the Judiciary
June 2, 1994
Additional sponsors: Mr. Edwards of California, Miss Collins of
Michigan, Mr. Kopetski, and Mr. Johnston of Florida
October 7, 1994
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed
in italic]
[For text of introduced bill, see copy of bill as introduced on January
5, 1993]
_______________________________________________________________________
A BILL
To modify the antitrust exemption applicable to the business of
insurance.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Insurance Competitive Pricing Act of
1994''.
SEC. 2. RULES OF CONSTRUCTION.
The amendments made by this Act preserve--
(1) the provisions relating to State taxing and regulatory
authority in section 2 of the Act of March 9, 1945 (59 Stat.
34; 15 U.S.C. 1012), commonly known as the McCarran-Ferguson
Act;
(2) the availability, to persons engaged in the business of
insurance, of the defense of State action in the same manner
and to the same extent as such defense is available to other
persons;
(3) the availability, to persons engaged in the business of
insurance, of any antitrust immunity or defense that may be
applicable under law other than the McCarran-Ferguson Act;
(4) the legal standards applicable under the McCarran-
Ferguson Act, as in effect before such Act is amended by this
Act, to all conduct described in the safe harbors found in
subparagraphs (B), (C), (D), and (E) of section 2(b)(1) of the
McCarran-Ferguson Act, as amended by this Act; and
(5) the provisions relating to boycott, coercion, or
intimidation in section 3(b) of the McCarran-Ferguson Act.
SEC. 3. AMENDMENTS.
Section 2 of the Act of March 9, 1945 (59 Stat. 34; 15 U.S.C.
1012), commonly known as the McCarran-Ferguson Act, is amended--
(1) in subsection (b) by striking ``: Provided,'' and all
that follows through ``law.'' and inserting the following:
``except as follows:
``(1)(A) The antitrust laws shall be applicable to the
business of insurance except as provided in subparagraphs (B),
(C), (D), and (E).
``(B) The antitrust laws shall not be applicable to conduct
that consists of making an agreement or engaging in joint
conduct--
``(i)(I) to collect, compile, classify, or
disseminate historical data;
``(II) to develop procedures to collect, compile,
classify, or disseminate historical data; or
``(III) to verify that historical data is accurate
and complete;
``(ii) to determine, using standard actuarial
techniques, or disseminate, a loss development factor
or developed losses;
``(iii) to develop or disseminate a standard
insurance policy form (including a standard addendum to
an insurance policy form and standard terminology in an
insurance policy form) if such agreement or joint
conduct does not include an agreement to adhere to such
standard form, or to require adherence to such standard
form, except that the fact that 2 or more persons
engaged in the business of insurance use such standard
form--
``(I) shall not be sufficient in itself to
support a finding that an agreement to adhere,
or to require adherence, to such standard form
exists; and
``(II) may be used only for the purpose of
supplementing or explaining direct evidence of
the existence of an agreement to adhere, or to
require adherence, to such standard form;
``(iv) to develop or disseminate, for use in
providing insurance in a State, a manual that is filed,
before dissemination, with the State entity that
regulates the business of insurance under State law, if
such manual includes only--
``(I) information and conduct described in
clauses (i), (ii), and (iii), including
relativity factors;
``(II) during the transition period, a
trend factor or information to which a trend
factor has been applied, to the extent
permitted under subparagraph (C); and
``(III) explanations and instructions for
using the manual (or any of the information
contained in the manual), if such agreement or
joint conduct does not include an agreement
among competitors to adhere, or to require
adherence, to any of such explanations or
instructions;
``(v) to provide insurance pursuant to a public
necessity market mechanism;
``(vi) to provide insurance as a historical
underwriting capacity risk pool;
``(vii) to administer a public necessity market
mechanism in a State, pursuant to the authorization of
and under the supervision of such State, if all persons
who provide insurance in such State pursuant to such
mechanism, and all persons seeking to obtain insurance
through such mechanism, have a reasonable opportunity
to appeal determinations affecting them to a
governmental entity;
``(viii) to develop or participate in a program to
inspect commercial buildings and fire protection
facilities, and evaluate government building code
requirements and enforcement of such requirements, to
determine the likelihood and potential extent of loss
due to fire, wind, hail, earthquake, flood, or tidal
wave, pursuant to a State law that provides procedures
for making such a determination and provides a
reasonable opportunity for an affected person to appeal
such a determination to a governmental entity; or
``(ix) to develop or participate in a program,
pursuant to a workers' compensation insurance plan
filed with the State entity that regulates the business
of insurance under State law, to measure an employer's
experience with respect to occupational accidents and
illnesses for which such employer is liable, against
the comparable experience of other employers, and to
make a modification for an individual employer based on
such comparisons, if an affected employer has a
reasonable opportunity to appeal a determination under
such program to a governmental entity;
to the extent that such conduct is regulated by State law.
``(C) During the transition period, the antitrust laws
shall not be applicable to conduct that consists of making an
agreement or engaging in joint conduct to determine or
disseminate a trend factor, to the extent that such conduct is
regulated by State law.
``(D) The antitrust laws shall not be applicable to conduct
by a director, officer, or employee of a national trade
association representing insurance agents, or of a State trade
association representing insurance agents that is affiliated
with such national trade association, acting within the scope
of the authority vested in such director, officer, or employee
by the trade association involved, that consists of preparing,
disseminating, or discussing a report or comment (including
describing, evaluating, and suggesting possible responses for
members of the association whose directors, officers, or
employees prepared such report or such comment to consider)
with respect to any insurer practice affecting the relationship
between insurers and insurance agents, if--
``(i) such report or such comment includes a
conspicuous statement that each insurance agent is
expected to make his or her own decision regarding
matters contained in such report or such comment and
that anticompetitive agreements among insurance agents
with respect to any response to such practice are
illegal under the antitrust laws;
``(ii) such conduct does not involve--
``(I) monitoring or policing the extent to
which any insurance agent follows, or
pressuring any insurance agent to follow, any
of such responses;
``(II) initiating any communication
(including a mailing, association publication,
or association meeting) with any member of any
such association with respect to such report or
such comment (including any of such responses),
other than by a means designed to reach all
members, or all directors and officers, of such
association;
``(III) referring to any of such responses
in any discussion unless the discussion
emphasizes that each insurance agent is
expected to make his or her own decision
regarding matters contained in such report or
such comment and that anticompetitive
agreements among insurance agents with respect
to any response to such practice are illegal
under the antitrust laws; or
``(IV) the formal endorsement of such
report or such comment (including any of such
responses) by any part of the membership of any
such association, other than a statement that
dissemination of such report or such comment
has been approved by the directors or officers
of the association whose directors, officers,
or employees prepared such report or such
comment; and
``(iii) the number of directors and officers of any
such association who are involved in preparing,
disseminating, or discussing such report or such
comment (including any of such responses) does not
substantially exceed the number of directors and
officers of such association serving on April 30, 1994;
and if the business of insurance is regulated by State law.
``(E) The antitrust laws shall not be applicable to conduct
of an insurance agent that is a member of an association
referred to in subparagraph (D) that consists of independently
initiating a communication, in an issue of a regularly
scheduled association publication or at a regularly scheduled
association meeting, to members of a local trade association
representing insurance agents of which such agent is a member,
that describes or summarizes all or part of the contents of a
report or comment described in such subparagraph provided to
such agent by such association described in such subsection and
that is made only by a means designed to reach all such
members, if--
``(i) such conduct does not involve--
``(I) monitoring or policing the extent to
which any insurance agent follows, or
pressuring any insurance agent to follow, any
of the possible responses contained in such
report or such comment;
``(II) referring to any of such responses
unless the reference emphasizes that each
insurance agent is expected to make his or her
own decision regarding matters contained in
such report or such comment and that
anticompetitive agreements among insurance
agents with respect to any response to an
insurance practice discussed in such report or
such comment are illegal under the antitrust
laws; or
``(III) the formal endorsement of such
report or such comment (including any of such
responses); and
``(ii) the primary purpose of such meeting, or of
such issue of such publication, is not the discussion
of such report or such comment (including any of such
responses);
and if the business of insurance is regulated by State law.
``(2) Subsequent to the transition period, the independent
purchase of a trend factor by a person engaged in the business
of insurance from a person not engaged in providing insurance
(and not affiliated with a person engaged in providing
insurance) shall be presumed not to violate the antitrust laws.
``(3) The Federal Trade Commission Act shall be applicable
to the business of insurance to the extent that such business
is not regulated by State law, except that, with respect to
enforcement of the antitrust laws, section 5 of such Act shall
be applicable to the business of insurance to the same extent
as the other antitrust laws.'', and
(2) by adding at the end the following:
``(c) For purposes of subsection (b)--
``(1) the term `antitrust laws' has the meaning given it in
subsection (a) of the first section of the Clayton Act (15
U.S.C. 12), except that such term includes section 5 of the
Federal Trade Commission Act (15 U.S.C. 45) as such section 5
applies to conduct that constitutes a violation of the Sherman
Act or the Clayton Act;
``(2) the term `developed losses' means aggregate paid
losses and aggregate reserves held for received claims, as
adjusted by a loss development factor;
``(3) the term `historical data' means information
respecting--
``(A) losses paid by, claims received by, reserves
for such claims set aside by, or units of exposure to
loss in insurance policies sold by any person engaged
in the business of insurance; or
``(B) insurance premiums received by any person
engaged in the business of insurance, if such
information is not disseminated in a form from which
information respecting premiums received by any
separately identifiable person engaged in the business
of insurance may be derived;
``(4) the term `historical underwriting capacity risk pool'
means an underwriting capacity risk pool established prior to
April 30, 1994--
``(A) the purpose of which is to provide insurance
for a commercial risk relating to--
``(i) an airport, aviation, or aerospace
activity;
``(ii) a large commercial or industrial
property (including machinery, boilers, and
pressure vessels);
``(iii) a grain elevator or feed mill;
``(iv) an oil, gas, or chemical peril;
``(v) the construction or operation of a
nuclear energy facility;
``(vi) an inland marine peril or an ocean
marine enterprise;
``(vii) a natural disaster;
``(viii) an occupational accident or
illness;
``(ix) transportation of currency, mail,
securities, bullion, or other valuables by a
person with fiduciary responsibility for their
safe transport;
``(x) foreign commercial activities
undertaken in cooperation with the United
States Export-Import Bank; or
``(xi) a war, rebellion, riot, or similar
civil commotion;
``(B) whose conduct has not materially changed from
the conduct described in accordance with subparagraph
(C)(ii) in which such pool--
``(i) was authorized to engage under its
charter, bylaws, or other documents of
organization or governance filed in accordance
with subparagraph (C)(iii); and
``(ii) did engage as so authorized;
prior to April 30, 1994; and
``(C) that, before the effective date of the
Insurance Competitive Pricing Act of 1994, filed with
the Attorney General of the United States, in
accordance with such rules as the Attorney General may
have issued, a notification--
``(i) disclosing the identities of the
members of such pool on April 30, 1994;
``(ii) describing the nature and scope of
the activities of such pool, and the lines of
insurance in which such pool was engaged, prior
to April 30, 1994; and
``(iii) containing the charter, bylaws, and
other documents of organization or governance
of such pool in effect on or before April 30,
1994;
``(5) the term `insurance agent' means a person that is--
``(A) engaged as an independent contractor in the
business of selling insurance;
``(B) licensed under the law of a State as an
insurance agent or insurance broker; and
``(C) neither an insurer in any State in which such
person is so engaged, nor an employee of an insurer;
``(6) the term `insurance policy' means a contract under
which insurance is sold to an insured;
``(7) the term `insurer' means a person that is--
``(A) engaged in the business of providing
insurance; and
``(B) obligated to pay losses under the insurance
policies under which it provides insurance;
``(8) the term `loss' means an amount paid or to be paid by
a person engaged in the business of insurance to (or for the
benefit of) a claimant to satisfy a claim on an insurance
policy, and includes any attorney, investigatory, or litigation
expenses that are separately incurred, identified, and
allocated by such person with respect to that particular claim;
``(9) the term `loss development factor' means an
adjustment to be made to the aggregate of losses incurred
during a prior period of time that have been paid or for which
claims have been received and reserves are being held, in order
to estimate the aggregate of the losses incurred during such
period that will ultimately be paid;
``(10) the term `loss incurred' means a loss for which the
event has occurred that ultimately gives rise to liability on a
claim on an insurance policy, without regard to whether a claim
based on such event has been received;
``(11) the term `public necessity market mechanism' means a
plan established by State law or by the State entity that
regulates the business of insurance under State law--
``(A) for providing a type of insurance in a State;
``(B) in which the persons providing such type of
insurance pursuant to such mechanism represent a
substantial number of the persons engaged in the
business of providing such type of insurance in such
State and are either required by State law, or formally
requested or ordered by such State entity, to
participate;
``(C) the purpose of which is to make such type of
insurance available to persons who would not otherwise
be able to obtain such type of insurance at affordable
cost; and
``(D) in which the rate for such type of insurance
is subject to the approval or disapproval of such
State;
``(12) the term `relativity factor' means a ratio comparing
one classification of historical data to another such
classification, or comparing developed losses in one such
classification to developed losses in another such
classification;
``(13) the term `transition period' means the 2-year period
beginning on the effective date of the Insurance Competitive
Pricing Act of 1994;
``(14) the term `trend factor' means an adjustment to be
made to developed losses in order to account for any change
that is anticipated to affect losses; and
``(15) the term `underwriting capacity risk pool' means a
business arrangement or association--
``(A) whose members consist of 2 or more persons
engaged in the business of insurance; and
``(B) that operates for the purpose of providing
insurance under which the liability for paying losses
is spread among such members.''.
SEC. 4. PUBLICATION AND AVAILABILITY OF HISTORICAL UNDERWRITING
CAPACITY RISK POOL NOTIFICATIONS.
The Attorney General shall, not later than 30 days after receiving
a notification filed in accordance with section 2(c)(4)(C) of the Act
of March 9, 1945 (59 Stat. 34; 15 U.S.C. 1012), commonly known as the
McCarran-Ferguson Act--
(1) publish in the Federal Register--
(A) a summary of such notification; and
(B) notice that such notification is available to
the public; and
(2) make such notification available to the public.
SEC. 5. BUSINESS REVIEW.
If a person engaged in the business of insurance submits a written
request to the Attorney General in accordance with section 50.6 of
title 28 of the Code of Federal Regulations (July 1, 1992), as amended
from time to time, for a business review letter with respect to the
application of the antitrust laws to specified activities of an
underwriting capacity risk pool (as defined in section 2(c)(15) of the
Act of March 9, 1945, commonly known as the McCarran-Ferguson Act) of
which such person is, or intends to become, a member, then the Attorney
General shall issue such letter in accordance with such section.
SEC. 6. STUDY AND REPORT.
(a) Study.--During the 5-year period beginning on the effective
date of this Act, the Attorney General shall conduct a study to
determine the effect of this Act, and the amendments made by this Act,
on the business of insurance.
(b) Report.--Not later than 1 year after the expiration of the 5-
year period referred to in subsection (a), the Attorney General shall
submit, to the Speaker of the House of Representatives and the
President pro tempore of the Senate, a report summarizing the results
of the study required by subsection (a).
SEC. 7. EFFECTIVE DATES.
(a) General Effective Date.--Except as provided in subsection (b),
this Act shall take effect 1 year after the date of the enactment of
this Act.
(b) Effective Date of Sections 4 and 5.--Sections 4 and 5 shall
take effect on the date of the enactment of this Act.
HR 9 RH----2