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SEC. 212. DUTIES OF ASBESTOS INSURERS COMMISSION.
(a) Determination of Insurer Payment Obligations-
(A) DEFINITIONS- For the purposes of this Act, the terms `insurer' and `insurer participant' shall, unless stated otherwise, include direct insurers and reinsurers, as well as any run-off entity established, in whole or in part, to review and pay asbestos claims.
(B) PROCEDURES FOR DETERMINING INSURER PAYMENTS- The Commission shall determine the amount that each insurer participant shall be required to pay into the Fund under the procedures described in this section. The Commission shall make this determination by first promulgating a rule establishing a methodology for allocation of payments among insurer participants and then applying such methodology to determine the individual payment for each insurer participant. The methodology may include 1 or more allocation formulas to be applied to all insurer participants or groups of similarly situated participants. The Commission's rule shall include a methodology for adjusting payments by insurer participants to make up, during any applicable payment year, any amount by which aggregate insurer payments fall below the level required in paragraph (3)(C). Under this procedure, not later than 120 days after the initial meeting of the Commission, the Commission shall commence a rulemaking proceeding under section 213(a) to propose and adopt a methodology for allocating payments among insurer participants. In proposing an allocation methodology, the Commission may consult with such actuaries and other experts as it deems appropriate. After hearings and public comment on the proposed allocation methodology, the Commission shall as promptly as possible promulgate a final rule establishing such methodology. After promulgation of the final rule, the Commission shall determine the individual payment of each insurer participant under the procedures set forth in subsection (b).
(C) SCOPE- Every insurer, reinsurer, and runoff entity with asbestos-related obligations in the United States shall be subject to the Commission's and Administrator's authority under this Act, including allocation determinations, and shall be required to fulfill its payment obligation without regard as to whether it is licensed in the United States. Every insurer participant not licensed or domiciled in the United States shall, upon the first payment to the Fund, submit a written consent to the Commission's and Administrator's authority under this Act, and to the jurisdiction of the courts of the United States for purposes of enforcing this Act, in a form determined by the Administrator. Any insurer participant refusing to provide a written consent shall be subject to fines and penalties as provided in section 223.
(A) AGGREGATE PAYMENT OBLIGATION- The total payment required of all insurer participants over the life of the Fund shall be equal to $46,025,000,000.
(B) ACCOUNTING STANDARDS- In determining the payment obligations of participants that are not licensed or domiciled in the United States or that are runoff entities, the Commission shall use accounting standards required for United States licensed direct insurers.
(C) CAPTIVE INSURANCE COMPANIES- No payment to the Fund shall be required from a captive insurance company, unless and only to the extent a captive insurance company, on the date of enactment of this Act, has liability, directly or indirectly, for any asbestos claim of a person or persons other than and unaffiliated with its ultimate parent or affiliated group or pool in which the ultimate parent participates or participated, or unaffiliated with a person that was its ultimate parent or a member of its affiliated group or pool at the time the relevant insurance or reinsurance was issued by the captive insurance company.
(D) SEVERAL LIABILITY- Unless otherwise provided under this Act, each insurer participant's obligation to make payments to the Fund is several. Unless otherwise provided under this Act, there is no joint liability and the future insolvency by any insurer participant shall not affect the payment required of any other insurer participant.
(A) INCLUSION IN INSURER PARTICIPANT CATEGORY- Insurers that have paid, or been assessed by a legal judgment or settlement, at least $1,000,000 in defense and indemnity costs before the date of enactment of this Act in response to claims for compensation for asbestos injuries arising from a policy of liability insurance or contract of liability reinsurance or retrocessional reinsurance shall be insurer participants in the Fund. Other insurers shall be exempt from mandatory payments.
(B) INSURER PARTICIPANT ALLOCATION METHODOLOGY-
(i) IN GENERAL- The Commission shall establish the payment obligations of individual insurer participants to reflect, on an equitable basis, the relative tort system liability of the participating insurers in the absence of this Act, considering and weighting, as appropriate (but exclusive of workers' compensation), such factors as--
(I) historic premium for lines of insurance associated with asbestos exposure over relevant periods of time;
(II) recent loss experience for asbestos liability;
(III) amounts reserved for asbestos liability;
(IV) the likely cost to each insurer participant of its future liabilities under applicable insurance policies; and
(V) any other factor the Commission may determine is relevant and appropriate.
(ii) DETERMINATION OF RESERVES- The Commission may establish procedures and standards for determination of the asbestos reserves of insurer participants. The reserves of a United States licensed reinsurer that is wholly owned by, or under common control of, a United States licensed direct insurer shall be included as part of the direct insurer's reserves when the reinsurer's financial results are included as part of the direct insurer's United States operations, as reflected in footnote 33 of its filings with the National Association of Insurance Commissioners or in published financial statements prepared in accordance with generally accepted accounting principles.
(C) PAYMENT SCHEDULE- The aggregate annual amount of payments by insurer participants over the life of the Fund shall be as follows:
(i) For year 1, $2,700,000,000.
(ii) For year 2, $2,700,000,000.
(iii) For year 3 through 5, $5,075,000,000 annually.
(iv) For years 6 through 17, $1,625,000,000 annually.
(v) For years 18 through 21, $1,350,000,000 annually.
(vi) For years 22 through 26, $1,080,000,000 annually.
(vii) For year 27, $100,000,000.
(D) CERTAIN RUNOFF ENTITIES-
(i) IN GENERAL- Whenever the Commission requires payments by a runoff entity that has assumed asbestos-related liabilities from a Lloyds syndicate or names that are members of such a syndicate, the Commission shall not require payments from such syndicates and names to the extent that the runoff entity makes its required payments. In addition, such syndicates and names shall be required to make payments to the Fund in the amount of any adjustment granted to the runoff entity for severe financial hardship or exceptional circumstances.
(ii) INCLUDED RUNOFF ENTITIES- Subject to clause (i), a runoff entity shall include any direct insurer or reinsurer whose asbestos liability reserves have been transferred, directly or indirectly, to the runoff entity and on whose behalf the runoff entity handles or adjusts and, where appropriate, pays asbestos claims.
(E) FINANCIAL HARDSHIP AND EXCEPTIONAL CIRCUMSTANCE ADJUSTMENTS-
(i) IN GENERAL- Under the procedures established in subsection (b), an insurer participant may seek adjustment of the amount of its payments based on exceptional circumstances or severe financial hardship.
(ii) FINANCIAL ADJUSTMENTS- An insurer participant may qualify for an adjustment based on severe financial hardship by demonstrating that payment of the amounts required by the Commission's methodology would jeopardize the solvency of such participant.
(iii) EXCEPTIONAL CIRCUMSTANCE ADJUSTMENT- An insurer participant may qualify for an adjustment based on exceptional circumstances by demonstrating--
(I) that the amount of its payments under the Commission's allocation methodology is exceptionally inequitable when measured against the amount of the likely cost to the participant of its future liability in the tort system in the absence of the Fund;
(II) an offset credit as described in subsection (b)(4) (A) and (C); or
(III) other exceptional circumstances.
The Commission may determine whether to grant an adjustment and the size of any such adjustment, but adjustments shall not reduce the aggregate payment obligations of insurer participants specified in paragraph (2)(A) and (3)(C).
(iv) TIME PERIOD OF ADJUSTMENT- Except for adjustments for offset credits, adjustments granted under this subsection shall have a term not to exceed 3 years. An insurer participant may renew its adjustment by demonstrating to the Administrator that it remains justified.
(b) Procedure for Notifying Insurer Participants of Individual Payment Obligations-
(1) NOTICE TO PARTICIPANTS- Not later than 30 days after promulgation of the final rule establishing an allocation methodology under subsection (a)(1), the Commission shall--
(A) directly notify all reasonably identifiable insurer participants of the requirement to submit information necessary to calculate the amount of any required payment to the Fund under the allocation methodology; and
(B) publish in the Federal Register a notice requiring any person who may be an insurer participant (as determined by criteria outlined in the notice) to submit such information.
(2) RESPONSE REQUIRED BY INDIVIDUAL INSURER PARTICIPANTS-
(A) IN GENERAL- Any person who receives notice under paragraph (1)(A), and any other person meeting the criteria specified in the notice published under paragraph (1)(B), shall respond by providing the Commission with all the information requested in the notice under a schedule or by a date established by the Commission.
(B) CERTIFICATION- The response submitted under subparagraph (A) shall be signed by a responsible corporate officer, general partner, proprietor, or individual of similar authority, who shall certify under penalty of law the completeness and accuracy of the information submitted.
(3) NOTICE TO INSURER PARTICIPANTS OF INITIAL PAYMENT DETERMINATION-
(A) IN GENERAL- Within 120 days after receipt of the information required by paragraph (2), the Commission shall send each insurer participant a notice of initial determination requiring payments to the Fund, which shall be based on the information received from the participant in response to the Commission's request for information. An insurer participant's payments shall be payable over the schedule established in subsection (a)(3)(C), in annual amounts proportionate to the aggregate annual amount of payments for all insurer participants for the applicable year.
(B) NO RESPONSE; INCOMPLETE RESPONSE- If no response is received from an insurer participant, or if the response is incomplete, the initial determination requiring a payment from the insurer participant shall be based on the best information available to the Commission.
(4) COMMISSION REVIEW, REVISION AND FINALIZATION OF INITIAL PAYMENT DETERMINATIONS-
(A) COMMENTS FROM INSURER PARTICIPANTS- Not later than 30 days after receiving a notice of initial determination from the Commission, an insurer participant may provide the Commission with additional information to support limited adjustments to the required payments to reflect severe financial hardship or exceptional circumstances, including the provision of an offset credit for an insurer participant for the amount of any asbestos-related payments it made or was legally obligated to make, including payments released from an escrow, as the result of a bankruptcy judicially confirmed after May 22, 2003, but before the date of enactment of this Act.
(B) ADDITIONAL PARTICIPANTS- If, before the final determination of the Commission, the Commission receives information that an additional person may qualify as an insurer participant, the Commission shall require such person to submit information necessary to determine whether payments from that person should be required, in accordance with the requirements of this subsection.
(C) REVISION PROCEDURES- The Commission shall adopt procedures for revising initial payments based on information received under subparagraphs (A) and (B), including a provision requiring an offset credit for an insurer participant for the amount of any asbestos-related payments it made or was legally obligated to make, including payments released from an escrow, as the result of a bankruptcy confirmed after May 22, 2003, but before the date of enactment of this Act.
(5) EXAMINATIONS AND SUBPOENAS-
(A) EXAMINATIONS- The Commission may conduct examinations of the books and records of insurer participants to determine the completeness and accuracy of information submitted, or required to be submitted, to the Commission for purposes of determining participant payments.
(B) SUBPOENAS- The Commission may request the Attorney General to subpoena persons to compel testimony, records, and other information relevant to its responsibilities under this section. The Attorney General may enforce such subpoena in appropriate proceedings in the United States district court for the district in which the person to whom the subpoena was addressed resides, was served, or transacts business.
(6) ESCROW PAYMENTS- Without regard to an insurer participant's payment obligation under this section, any escrow or similar account established before the enactment of this Act by an insurer participant in connection with an asbestos trust fund that has not been judicially confirmed by final order by the date of enactment of this Act shall be the property of the insurer participant and returned to that insurer participant.
(7) NOTICE TO INSURER PARTICIPANTS OF FINAL PAYMENT DETERMINATIONS- Not later than 60 days after the notice of initial determination is sent to the insurer participants, the Commission shall send each insurer participant a notice of final determination.
(c) Insurer Participants Voluntary Allocation Agreement-
(1) IN GENERAL- Not later than 30 days after the Commission proposes its rule establishing an allocation methodology under subsection (a)(1), direct insurer participants licensed or domiciled in the United States, other direct insurer participants, reinsurer participants licensed or domiciled in the United States, or other reinsurer participants, may submit an allocation agreement, approved by all of the participants in the applicable group, to--
(B) the Committee on the Judiciary of the Senate; and
(C) the Committee on the Judiciary of the House of Representatives.
(2) ALLOCATION AGREEMENT- To the extent the participants in any such applicable group voluntarily agree upon an allocation arrangement, any such allocation agreement shall only govern the allocation of payments within that group and shall not determine the aggregate amount due from that group.
(3) CERTIFICATION- The Commission shall determine whether an allocation agreement submitted under subparagraph (A) meets the requirements of this subtitle and, if so, shall certify the agreement as establishing the allocation methodology governing the individual payment obligations of the participants who are parties to the agreement. The authority of the Commission under this subtitle shall, with respect to participants who are parties to a certified allocation agreement, terminate on the day after the Commission certifies such agreement. Under subsection (f), the Administrator shall assume responsibility, if necessary, for calculating the individual payment obligations of participants who are parties to the certified agreement.
(1) RECIPIENTS- Until the work of the Commission has been completed and the Commission terminated, the Commission shall submit an annual report, containing the information described under paragraph (2), to--
(A) the Committee on the Judiciary of the Senate;
(B) the Committee on the Judiciary of the House of Representatives; and
(2) CONTENTS- The report under paragraph (1) shall state the amount that each insurer participant is required to pay to the Fund, including the payment schedule for such payments.
(1) AUTHORITY OF ADMINISTRATOR- During the period between the date of enactment of this Act and the date when the Commission issues its final determinations of payments, the Administrator shall have the authority to require insurer participants to make interim payments to the Fund to assure adequate funding by insurer participants during such period.
(2) AMOUNT OF INTERIM PAYMENTS- During any applicable year, the Administrator may require insurer participants to make aggregate interim payments not to exceed the annual aggregate amount specified in subsection (a)(3)(C).
(3) ALLOCATION OF PAYMENTS- Interim payments shall be allocated among individual insurer participants on an equitable basis as determined by the Administrator. All payments required under this subparagraph shall be credited against the participant's ultimate payment obligation to the Fund established by the Commission. If an interim payment exceeds the ultimate payment, the Fund shall pay interest on the amount of the overpayment at a rate determined by the Administrator. If the ultimate payment exceeds the interim payment, the participant shall pay interest on the amount of the underpayment at the same rate. Any participant may seek an exemption from or reduction in any payment required under this subsection under the financial hardship and exceptional circumstance standards established in subsection (a)(3)(D).
(4) APPEAL OF INTERIM PAYMENT DECISIONS- A decision by the Administrator to establish an interim payment obligation shall be considered final agency action and reviewable under section 303, except that the reviewing court may not stay an interim payment during the pendency of the appeal.
(f) Transfer of Authority From the Commission to the Administrator-
(1) IN GENERAL- Upon termination of the Commission under section 215, the Administrator shall assume all the responsibilities and authority of the Commission, except that the Administrator shall not have the power to modify the allocation methodology established by the Commission or by certified agreement or to promulgate a rule establishing any such methodology.
(2) FINANCIAL HARDSHIP AND EXCEPTIONAL CIRCUMSTANCE ADJUSTMENTS- Upon termination of the Commission under section 215, the Administrator shall have the authority, upon application by any insurer participant, to make adjustments to annual payments upon the same grounds as provided in subsection (a)(3)(D). Adjustments granted under this subsection shall have a term not to exceed 3 years. An insurer participant may renew its adjustment by demonstrating that it remains justified. Upon the grant of any adjustment, the Administrator shall increase the payments required of all other insurer participants so that there is no reduction in the aggregate payment required of all insurer participants for the applicable years. The increase in an insurer participant's required payment shall be in proportion to such participant's share of the aggregate payment obligation of all insurer participants.
(3) FINANCIAL SECURITY REQUIREMENTS- Whenever an insurer participant's A.M. Best's claims payment rating or Standard and Poor's financial strength rating falls below A-, and until such time as either the insurer participant's A.M. Best's Rating or Standard and Poor's rating is equal to or greater than A-, the Administrator shall have the authority to require that the participating insurer either--
(A) pay the present value of its remaining Fund payments at a discount rate determined by the Administrator; or
(B) provide an evergreen letter of credit or financial guarantee for future payments issued by an institution with an A.M. Best's claims payment rating or Standard & Poor's financial strength rating of at least A+.
(g) Judicial Review- The Commission's rule establishing an allocation methodology, its final determinations of payment obligations and other final action shall be judicially reviewable as provided in title III. '
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The FAIR Act of 2005 - TITLE I - Asbestos Claims Resolution