Industry representatives have been urging Senate Majority Leader Tom Daschle, D-S.D., to resolve the dispute, citing the urgency of the situation and the need to move legislation quickly. However, as of this writing, he had not done so.

On the House side, the House Financial Services Committee has approved legislation, but it now appears that the full House will not take up the bill before the Thanksgiving recess.

Another jurisdictional issue looms in the House, which is whether the House Ways and Means Committee will assert jurisdiction over the portion of the bill that would allow insurers to establish tax-deferred terrorism reserves. If it does, that could further slow consideration of the bill in the House.

Meanwhile, the Kansas City, Mo.-based National Association of Insurance Commissioners is urging Congress to move quickly. NAIC President Kathleen Sebelius, who is the Kansas insurance commissioner, sent a letter to Congressional leaders and to Treasury Secretary Paul ONeill stating that further delay could cause market disruptions.

“Insurers are now issuing notices of non-renewal and filing across-the-board property-casualty exclusions for terrorism risks,” Ms. Sebelius said. “These policy exclusions hold real consequences for the insurance-buying public in communities untouched by terrorist acts and related losses.”

Joel Wood, senior vice president of government affairs for the Washington-based Council of Insurance Agents and Brokers, said that from a jurisdictional standpoint, the situation in the Senate has been “close to chaotic” for the past week or two. “A lot of the momentum behind our efforts has been compromised,” according to Mr. Wood.

He said there is an all-out effort at the Council and other major insurance associations to engage their clients in the effort to regain that momentum. “At the end of the day, we hope the Senate will see the significant consequences of inaction,” Mr. Wood said.

In the Senate, Banking Committee leaders have developed a bill called the Terrorism Risk Insurance Act that would require the insurance industry to retain the first $10 billion of losses from a terrorist event. For losses above $10 billion but below $100 billion, the federal government would assume 90 percent of the losses and the industry 10 percent.

This treatment would apply for the first two years of the program. If the program is continued for a third year, the industry retention level would increase to $20 billion.

The Banking Committees bill has not yet been formally introduced, although it is supported by the Treasury Department.

Meanwhile, the Senate Commerce Committee is considering a different plan. Although it is still being drafted, sources said it would create a reinsurance pool managed by the Department of Commerce. Premiums for reinsurance would be 3 percent of direct written premiums, which would be added to insurance policies as a surcharge. The retention level would be set at 10 percent of a companys direct written premium. For losses above the retention, the pool would pay 90 percent and insurers would pay 10 percent in the first year.

In years two and three, the ratio would be 80 percent and 20 percent. Any losses that exceed the reserves of the pool would be paid by the federal government in terms of a loan, which insurance companies would have to repay over 20 years.

Sources said another major differences between the Banking Committee and Commerce Committee bills is that the former would bar non-economic and punitive damages stemming from terrorist events, while the latters would not.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, November 19, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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