The Senate approved legislation that provides federal dollars to insurance companies to help pay claims resulting from future terrorist attacks. The vote on June 18 was 84-14. The measure next must be reconciled with a different version the House passed in November. Sources expect a House-Senate conference on the legislation to begin before the start of the congressional July 4 recess.

Since Sept. 11, insurance for risks associated with terrorism has been unavailable or not affordable. Property owners and lenders have become increasingly exposed to catastrophic loss in the event of the next terror attack, claims the Financial Services Roundtable. Many large lenders have refused to issue loans over $25 million without terrorism coverage, the Roundtable notes. "Passage of this critical bill represents a great leap forward for a return to normalcy in the insurance market and alleviate the downward pressure on economic activity that the insurance crisis has created," says Steve Bartlett, Roundtable president.

The Senate measure sets a limit on the amount insurers would have to pay in the event of another attack. Insurers would pay a portion of claims based on market shares. The federal government would pay 80% of the remaining claims if they total less than $10 billion and 90% if claims exceed $10 billion. The House bill also would provide a federal "backstop," but in the form of a no-interest loan to insurers. The House calls for insurers to divide the costs of terrorism-related claims totaling less than $1 billion. The Treasury Dept. would pay claims between $1 billion and $20 billion, but would be repaid from assessments on all propery-casualty insurance companies. If the terrorism-related claims topped $20 billion, Treasury would pay 90%, up to $100 billion. Property-casualty insurers would face assessments to repay the Treasury for that aid.

Another key difference between the Senate and House versions concerns payment of punitive damages. The House bill prohibits use of federal money to cover punitive damages. The Senate bill sets limits on punitive damages, but does not prohbit them, says Kelly Krauser, the Associated General Contractors' director of congressional affairs for labor issues. The Senate measure leaves private businesses "wide open" to expensive claims, she says.