Insuring Against Terror
In a move he said would bolster investment and economic growth in an age of increased risk of terrorism, President Bush Tuesday signed a bill intended to shield the insurance industry from the catastrophic costs of future terror onslaughts.
"Builders and investors can begin construction on real estate projects that have been stalled too long and we can get our hard hats back to work," Mr. Bush said in an East Room ceremony where he signed the Terrorism Insurance Act of 2002.
The Senate voted last Tuesday, 86-11, to have the federal government cover up to $90 billion in the first year of the measure's three-year lifetime to back up insurers in any future attacks. The House had already approved the bill.
Last week's vote, the last major action before the Senate adjourned for the year, came less than an hour after the Senate agreed to Mr. Bush's plan to create a new Homeland Security Department.
The terrorism insurance bill has been a top priority for the president since shortly after the Sept. 11 attacks. He has argued that the inability of companies to get affordable insurance for large construction projects is costing the economy thousands of jobs.
The House passed a bill a year ago, but was unable to come to terms with the Senate on a formula for government protections. Democrats also resisted Republican efforts to ban punitive damage awards in civil lawsuits related to terror attacks.
Mr. Bush stepped in after this month's Republican sweep of midterm elections, contacting House GOP leaders and insisting that Congress complete the bill in the lame-duck session before adjourning for the year.
The president bowed to Democratic demands for unlimited punitive damages, which many Republicans consider a boon to trial lawyers usually allied with Democrats. But GOP leaders vowed to take up the issue again next year, when they again will have majorities in the House and Senate.
Sen. Christopher Dodd, D-Conn., a chief sponsor of the bill who hails from a state where insurance companies are major employers, said the Senate would not have passed it "were it not for the efforts of the White House." He said the bill would "help ensure construction sites continue to operate, workers continue to fuel our nation's economic engine and the threat of future attacks on our economy is minimized."
"This was a vote in favor of providing a comprehensive safety net for our national economy," said Robert Vagley, president of the American Insurance Association.
Sen. Phil Gramm, R-Texas, fought the bill to the end, saying it overexposed taxpayers to losses, discouraged development of a private terrorism insurance market and did nothing about punitive damage awards against those hit by terrorism, which he described as "piracy on a hospital ship."
Consumer groups also opposed the bill, saying insurance companies don't need a prospective taxpayer bailout despite their pleas of economic distress.
The government wouldn't step in on any claims less than $5 million. Insurance companies would pay a deductible in 2003 equal to 7 percent of the premiums they received the previous year. The deductible would rise to 10 percent in 2004 and 15 percent in 2005. The federal government would then cover 90 percent of everything above the deductible with insurance companies paying the other 10 percent.
Federal payments would be capped at $90 billion the first year, $87.5 billion the second year and $85 billion in the final year of the program.
The measure does not cover the Sept. 11 attacks, which generated an estimated $40 billion in claims.
The bill expresses the sense of Congress "that the insurance industry should build capacity and aggregate risk to provide affordable property and casualty insurance coverage for terrorism risk."
The bill also allows the government to use frozen assets belonging to countries that sponsor terrorism to settle damages won in U.S. courts by victims of terrorism — unless the president waives that provision for national security reasons.