- The Washington Times - Friday, November 2, 2001

House and Senate lawmakers yesterday outlined competing plans designed to ensure that insurance against terrorism remains available in the wake of the September 11 terrorist attacks.

Republicans and Democrats in the Senate came together to formulate a plan for the government to share the costs of future terrorist attacks with the insurance industry. But in the House, both parties were unable to agree on a single approach.

Legislation has become necessary over the past six weeks as insurance companies have canceled terrorism insurance policies and said they cannot accurately gauge the risk of future attacks.

Without terrorism insurance, lenders will not fund the construction of new office buildings and other commercial property, and existing property owners will go without coverage. By most estimates, 70 percent of the terrorism policies in the United States will be canceled by the end of the year.

"Acting now is crucial to help ensure financing of business and economic development can continue uninterrupted," Treasury Secretary Paul H. O'Neill said in a statement.

The Senate bill, which has the backing of Banking Committee Chairman Paul S. Sarbanes, Maryland Democrat, would have the federal government assume the cost of terrorist attacks above $10 billion, up to $100 billion, for two years.

The Treasury Department would then have the option of extending the program for a third year, in which the federal government would agree to pay claims that exceeded $20 billion.

"Only if we have a catastrophic event will the federal government become the [insurer] of last resort," said Sen. Phil Gramm of Texas, the top Republican on the banking panel.

Mr. Gramm also stressed that no money would go to insurance companies, but only to victims of terrorism with insurance coverage.

The bill would also consolidate all lawsuits arising from a terror attack in a single federal court, and would prohibit punitive damages.

The proposal was the product of intense negotiations with the Bush administration. Senators won a strong endorsement from Mr. O'Neill, who said the bill "addresses a real and critical need to assure the continued availability and affordability of terrorism risk insurance."

By contrast, the House bill, sponsored by House Financial Services Committee Chairman Michael G. Oxley, Ohio Republican, is based on a program of loans to the insurance industry that would last up to three years.

After a terrorist attack that inflicted damages above $100 million, the federal government would loan the insurance industry 90 percent of the money it needs to pay claims. Companies would eventually repay that money.

For the longer term, Mr. Oxley would use federal tax policy to encourage insurance companies to build up reserves that would be used to pay future claims.

Rep. John J. LaFalce of New York, the ranking Democrat on the banking committee, criticized the House bill as "too complex," and said it would be impossible to implement quickly.

Mr. LaFalce instead endorsed the Senate approach.

Julie Rochman, a senior vice president at the American Insurance Association, said insurance companies "have some difficulties" with the House bill because they would still be liable for the federal loans.

As a result, it offers little financial protection from the risk of additional terror attacks, which they say they need to resume coverage.

"We know the Senate plan better and there's a lot to like about it," she said.

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