Terrorism Deal for Real’

By the time this issue of Insurance Journal lands on your desk, federal lawmakers probably won’t have passed legislation that would provide a backstop for terrorism insurance. But they are very close.

It’s about time. For well over a year after the terrorist attacks of Sept. 11, 2001, the industry has been calling for legislation to provide some protection for insurers should the country again suffer those kinds of attacks. And recent warnings by FBI director Robert Mueller and CIA director George Tenet that the risk of a terrorist attack on the U.S. in the near future is fairly high underscores the need for Congress to act.

Negotiators for the U.S. House of Representatives and the U.S. Senate, led by Democrat Sen. Chris Dodd and Republican Rep. Michael Oxley, worked out a three-year, $100 billion deal under which the government would cover 90 percent of all terror losses. The first $10 billion in losses would be covered by insurers. According to Reuters, however, the deal hit a snag when Republican lawmakers objected to a compromise over limits to legal liability in lawsuits. The Washington Post reports that Republicans generally favored placing limits on punitive damages stemming from attack-related lawsuits. Democrats hoped to keep restrictions on people’s ability to sue out of the bill.

Another sticking point is the issue of whether or not the industry would ultimately be required to repay the government for any aid it provides. Rep. Oxley reportedly favors legislation that would require the insurance industry to pay back the government. Another plan would give the Treasury secretary authority to decide if repayment is necessary.

Workers’ compensation is apparently included in the current negotiated legislation, but at least one insurer association lamented the elimination of personal lines from the protection package. Monte Ward, NAMIC’s Federal Affairs vice president, stated that while his association is pleased that the House and Senate negotiators have come close to an agreement that would establish a terrorism insurance backstop, “we are very disappointed that the conferees failed to see the importance of including personal lines insurers in this legislation … Since personal lines insurers are not included in this legislation, with any future terrorist attacks, their solvency will be placed at risk,” Ward said.

He added that NAMIC supports language that “includes a per-company deductible that will allow small, or even large, companies to more accurately measure their loss potential. The vast majority of insurers are small and mid-sized companies writing under $100 million in insurance annually.”

While recognizing that some barriers still remain the Insurance Agents & Brokers of America (IIABA) praised President Bush and Congressional leaders for pushing hard for a compromise on the legislation. “No one should misunderstand that the situation surrounding this agreement is still very fluid. There are still some significant hurdles that must be addressed,” IIABA CEO Robert A. Rusbuldt said.

A compromise bill is expected to pass before the end of the congressional session. Meanwhile, House and Senate lawmakers are back in their home states, on the campaign trail until after the Nov. 5 elections, so if you get a chance, communicate with your congressional representatives about your views on the terror insurance legislation.

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