|Christopher Dodd (Photo courtesy of Sen. Dodd's office)|
House and Senate conferees are closing in on a final compromise providing a federal "backstop" to insurance companies for large, future terrorism-related claims. Sen. Christopher J. Dodd (D-Conn.), a key negotiator, said Oct. 17 that "we are on the brink of a very good and strong agreement dealing with terrorism insurance." But Dodd said conferees still had to sign the agreement and it had to be approved by the Senate and House and signed by President Bush.
Although Congress is holding pro forma sessions before the Nov. 5 elections, final approval of the insurance measure may have to wait until a post-election lame-duck session.
Industry welcomed the news of the progress. Real Estate Roundtable Chairman Nelson C. Rising said, "The agreement by House and Senate lawmakers would remove a significant impediment to the financing, construction, acquisition, sale and leasing of commercial real estate properties across the country and help get billions of dollars of new and existing projects moving again." The roundtable had estimated in September that more than $15.5 billion in projects in 17 states had been canceled or delayed because of the high cost or lack of availability of terrorism insurance.
An industry source says the plan is similar to the Senate's version. It would extend for three years. Federal assistance would be provided when claims exceeded threshholds for each insurer. Those limits would be 7% of an insurance company's commercial premiums in 2003, 10% in 2004 and 15% in 2005. Above that amount, the federal government would cover 90% of the terrorism-related claims.
|Michael Oxley (Photo from the office of Rep. Michael Oxley)|
In addition, there is an industry-wide loss provision, with aggregate loss levels set at $10 billion in 2003, $12.5 billion in 2004 and $15 billion in 2005. If industry's total terrorism claims exceed those levels, the federal assistance would not have to be repaid. If claims are below those caps, industry would repay the federal aid through a surcharge of up to 3% on commercial policy premiums, according to the source.
House Financial Services Committee Chairman Michael G. Oxley (R-Ohio), the lead House negotiator, said, "As we continue to deal with the aftermath of 9/11, I expect the legislation to provide some needed certainty for the insurance markets, while removing an important obstacle that now stands in the way of development projects across the nation."