The House will move swiftly after the Thanksgiving recess to put into law a terrorism insurance bill aimed at preventing an economic crisis if coverage is not available after Jan. 1.
According to The Washington Post, although House Republicans and Democrats have not resolved all of their differences, including disagreement on a provision in the legislation to limit liability, it is likely a new federal system for backing up the insurance industry can be in place soon.
The Senate is considering other proposals.
The House plan would offer billions of dollars in loans to help pay terrorism claims resulting from a future attack. The insurance industry would be required to pick up the initial $1 billion in losses, and the government would cover 90 percent of any additional claims. The industry and its policyholders would have to repay the money.
A provision that would have allowed insurers to use tax-free reserves to build resources to pay terrorism claims was eliminated Nov. 16 after the Ways and Means Committee called for a study of the issue instead.
The House leaders looked to ease concern among regulators, insurers and businesses over whether Congress could act soon enough to resolve a crisis looming over the insurance industry.
Reinsurance companies have already noted that they will not cover terrorism after Jan. 1 because of uncertainty over how to price the risk. Around 70 percent of reinsurance policies expire at the end of the year.
As a result, primary insurers have started petitioning state regulators to allow them to exclude coverage for losses due to terrorism from commercial and personal policies.
Senate leaders are still attempting to work out jurisdictional and substantive conflicts in two competing insurance proposals, one put forth by the Banking Committee and the other by Commerce Committee. Senate leaders met late last week to try to reconcile them.
The White House also hosted a meeting Nov. 16 with several dozen business groups to discuss the problems facing the insurance industry.
The Bush administration has backed a plan that was used as a basis for the Senate Banking Committee proposal, under which the government would pay the first 80 percent of claims resulting from a terrorist attack in 2002.
Different from the House proposal, the Bush plan would not require insurers or policyholders to reimburse the government.
Topics Catastrophe Natural Disasters Market
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