Archive for Sunday, October 28, 2001

Lawmakers, administrators designing plan for terrorist attack insurance

October 28, 2001

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— The Bush administration and key lawmakers have drawn up the outlines of a government aid package that would help the insurance industry withstand future terrorist attacks.

They hope to introduce legislation next week.

Under the proposal, the industry would finance the first $10 billion in payments following a future attack, and the government would pay 70 percent to 90 percent of costs after that, an administration official said Saturday. The exact percentage remains to be decided.

The agreement came after a meeting Friday with Treasury Secretary Paul O'Neill; Sen. Paul Sarbanes, D-Md., the Banking Committee's chairman; Sen. Phil Gramm of Texas, the committee's senior Republican; and Chris Dodd, D-Conn., also a member of the committee, the official said.

The money would come from general revenues, said Treasury Department spokeswoman Michele Davis. Some lawmakers and consumer groups have questioned whether taxpayers should pay to keep the insurance industry healthy, but Davis defended the proposal.

"An attack on the United States is an attack on all taxpayers," she said.

The administration believes the proposal is vital to the health of the economy.

Major reinsurance companies, which assume part of the risk covered by insurance firms, have said they won't renew terrorism coverage after Dec. 31, when many contracts expire. U.S. insurance companies that write property policies could face payouts of $30 billion to $50 billion for the attacks on the World Trade Center and the Pentagon.

"If a large property can't get terrorism insurance, they can't get financing from a bank, and that project won't get built," she said.

The measure would take effect next year and likely expire after three years at most, she said.

Legislation on the proposal could be introduced as early as next week.

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