WASHINGTON, Oct 27: Key House of Representatives and Senate lawmakers are readying legislation to aid US insurers hit hard by last month’s attacks on the United States, but remain deeply split on the best way to do so, congressional and industry sources said on Friday.
The split is complicating efforts to craft a solution to an issue policymakers see as a potentially severe threat to the stability of the US economy in the short time left before Congress adjourns for the year, likely by mid-November.
There is a general consensus that Congress needs to act, said Travis Plunkett, legislative director for the Consumer Federation of America. But that consensus completely breaks down when you start talking about what the solution is.
Insurers have been pushing hard for government help in covering the costs of any future attacks since the destruction of New York’s World Trade Center and part of the Pentagon by hijacked airliners on Sept. 11.
The industry says it can pay the $40 billion in expected claims from the attacks, but cannot support repeated losses of that magnitude, particularly as reinsurance companies have said they will start canceling commercial terrorism-risk coverage from Jan. 1, when most such contracts come up for renewal.
The possibility that companies could lose their terrorism insurance coverage or face sky-high premiums for it as a result poses a severe economic threat that must be neutralized quickly, Treasury Secretary Paul O’Neill warned on Wednesday.
In the Senate, Texas Republican Sen. Phil Gramm and Connecticut Democratic Sen. Chris Dodd expect to introduce a bill to deal with the issue by providing some government back-up for terrorism losses next week, aides said.
Under their proposal, insurers would pay up the first $10 billion in claims from any future terrorist attack and a further 10 per cent to 20 per cent of any other claims above that figure with the government absorbing the rest.
In the House, however, key lawmakers are leaning toward a shorter-term fix, aides said, eyeing a bridge programme possibly involving loan guarantees to get insurers past Jan. 1, but also allow Congress to hammer out a more permanent solution when it returns next year.
The House is also moving on a slower schedule, with its legislative proposal unlikely to be finalized next week.
Insurance industry sources expected the Bush administration to throw its weight behind the Senate effort which borrows from a proposal the administration floated earlier this month.
The plan, however, was quickly termed a “non-starter” by lawmakers reluctant to put taxpayers on the hook from the first dollar of insurance industry losses.—Reuters
