- The Washington Times - Wednesday, June 19, 2002

The Senate yesterday approved legislation intended to reduce the cost of insurance against terrorist attacks.

Under the bill, the federal government would pay for 90 percent of the losses in a terrorist attack after insurance companies pay the first $10 billion for two years. Afterward, insurers would pay 10 percent of the costs.

However, the bill faces a presidential veto unless the House and Senate can agree on a compromise that would limit lawsuits after terrorist attacks. President Bush has said he would veto any terrorism-insurance legislation that does not protect companies victimized by terrorism from being sued for punitive damages.

After September 11, many insurers dropped or limited coverage for property and casualty losses from terrorism because of the record $30 billion to $50 billion losses and continuing risk from the war on terrorism. Some survivors of the September 11 World Trade Center attack sued the building owners for punitive damages.

The Senate bill, which passed 84-14, is supposed to reduce the financial risks to insurance companies enough that they can offer affordable policies to potential victims of terrorism. There would be a $100 billion cap on government payouts.

The Treasury secretary would need congressional approval for any additional amounts. The Treasury secretary also could extend the two-year limit for a third year before the government backstop starts paying for terrorist attacks.

The House has passed similar legislation. It would make the government pay 90 percent of terrorism losses for the first year after an attack.

Now a conference committee of House and Senate leaders must work out a compromise of their bills before it is sent to the president.

"I am pleased that the Senate has now passed a bill that will help give businesses access to reasonable terrorism insurance," President Bush said in a statement after the Senate vote. "The terrorism-insurance package must include reasonable litigation procedures so that Americans who are victimized by terrorism do not also fall victim to predatory lawsuits and punitive damages. I look forward to working with the House and Senate conferees so that I can sign responsible terrorism-insurance legislation into law."

The issue of terrorism insurance is particularly important for the Washington area, where some business owners had their insurance for acts of terrorism canceled and others reported premiums that have more than doubled in the last year.

Delegate Eleanor Holmes Norton, the District's nonvoting member of Congress, hopes to hold a hearing on how skyrocketing insurance costs are hurting the local economy.

"We also need to know whether there is any indication that insurance companies may take advantage of fears of terrorism to raise rates on government and other facilities," Mrs. Norton said last week in her request to Congress for a hearing.

Insurance Services Office Inc., a company that supplies statistical information to insurers, released yesterday a report estimating insured property losses from the September 11 attack on the Pentagon at $6.5 million. The total damage was nearly $740 million, but was paid by the government rather than by private insurance companies.

The 14 votes against the Senate bill came from Republicans concerned that the government backstop against terrorism would remove the incentive for the insurance industry to reinsure their policies, making them dependent on government guarantees.

"The government will not be able to get out of the insurance business," said Sen. Phil Gramm, a Texas Republican.

Sen. Joseph I. Lieberman, Connecticut Democrat, warned of "severe" consequences to the economy unless government makes insurance more affordable by paying for catastrophic terrorism losses.

"American businesses will not be able to get the insurance they need," he said. "We have to intervene in this process to create a backup."

Sen. Charles E. Schumer, New York Democrat, disagreed with Republican contentions that the insurance industry should pay most of the losses from terrorism.

"The private sector could not solve this problem alone," Mr. Schumer said. "It's the kind of challenge we face in the post 9/11 world."

Senators who voted against the bill, all Republicans, were Jeff Sessions of Alabama, Jon Kyl of Arizona, Ben Nighthorse Campbell of Colorado, Larry E. Craig of Idaho, Charles E. Grassley of Iowa, Mitch McConnell of Kentucky, Conrad Burns of Montana, Robert C. Smith of New Hampshire, Don Nickles of Oklahoma, Rick Santorum of Pennsylvania, Phil Gramm and Kay Bailey Hutchison of Texas, and Michael B. Enzi and Craig Thomas of Wyoming.

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