Terrorism insurance bill passed by House

ASSOCIATED PRESS

The federal government would continue to guarantee insurance coverage for catastrophic losses from terror attacks but private companies would have to pick up more of the initial tab under legislation passed yesterday by the House.

The measure, approved 371-49, would extend for two years the Terrorism Risk Insurance Act, which Congress passed in 2002 to help revive the economy after the September 11, 2001, attacks.

The Senate passed a similar bill last month, and the two chambers must work out differences before concluding their work for the year, probably at the end of next week. The existing act expires Dec. 31.

Both the House and Senate bills, at the urging of the Bush administration, took steps to shift more of the financial burden to the private sector with the goal of eventually eliminating government participation.

Both bills would increase the amount of property and casualty losses that would trigger federal payments — rising from $5 million to $50 million in 2006 and $100 million in 2007. Insurer deductibles would rise from 15 percent to 20 percent.

The federal share under the House bill, after deductibles, ranges from 80 percent of aggregate insurance industry losses of less than $10 billion to 95 percent of losses above $40 billion.

Supporters said the bill was meant to ensure that the insurance industry had the backup to offer terrorism coverage so investors and construction companies have the confidence to initiate new projects.

The legislation helps assure that economic activity in U.S. cities can go on uninterrupted, said Rep. Barney Frank, Massachusetts Democrat. “The alternative is to let the terrorists put a terrorist tax on building large buildings in our large cities and we should not allow that.”

The legislation, said the Coalition to Insure Against Terrorism, a group of business insurance policyholders, was important so “the nation has a sound policy in place to enable the economy to quickly recover should another terrorist attack occur in the United States.”

The White House — which last month expressed support for the Senate bill, saying that it “sends the proper signal to the marketplace” that the program was envisioned to be temporary — yesterday came out against changes made in the House version.

It said the House expanded the program by including group life insurance and adding domestic terrorism coverage. The House bill also goes beyond the Senate in requiring coverage for nuclear, biological, chemical and radioactive attacks.

House Financial Services Committee Chairman Michael G. Oxley, Ohio Republican, defended the House bill, saying that unlike the Senate version it guarantees that taxpayers eventually will be repaid 100 percent of any payouts.