Approval of the Senate bill "will kill the strong market for terrorism insurance that has been emerging in the last few months," said J. Robert Hunter, CFA's Director of Insurance.

"While some problems exist in Manhattan and a few cities, taxpayers should not be forced to foot the bill for businesses and insurers that have already found terror coverage," he said.

"The economic collapse predicted by the insurance industry has not happened, which calls into question whether these new threats are real and whether a taxpayer bailout is needed," said Frank Torres, Legislative Counsel for Consumers Union. "In short, the insurance industry hasn't come close to proving their case."

The groups pointed to a number of problems with the bill:

? A vigorous private market is filling most terror insurance gaps. A federal handout is not necessary. Most larger firms, including those that are at the highest risk of being targeted in future terrorist attacks, have found terrorism coverage.

The groups noted that the Federal Reserve has found that banks are freely loaning money to businesses, regardless of whether terror coverage is available. Insurers are in a better financial position than before Sept. 11 to handle future terrorism losses.

The consumer advocates noted more than $25 billion in new capital has poured into the industry, whereas losses from the terrorist attacks (after taxes) will be less than that amount.

? Taxpayers, they said, would pick up the tab for most terror losses. Insurers would not have to pay back financial assistance that they receive. The bill requires the federal government to pay for 80-to-90 percent of terrorism losses of up to $100 billion.

? State regulators are banned from effectively controlling excessive rates. The bill actually forbids insurance commissioners from pre-approving rates, which is allowed in about half of all states, including most of the largest states. Given that taxpayers will be picking up the tab for terror insurance coverage, prior approval power is essential if states are to have the meaningful ability to prevent rate gouging, CFA said.

? Insurance companies, they said, can pocket terror insurance premiums that have already been paid, even though federal back up will sharply reduce their financial risk.

The legislation, according to CFA, will reduce the risk assumed by companies offering terror coverage overnight. It should also require that these companies offer rebates to their customers as a result of this lower risk.

Why should consumers continue to pay for risks that their insurers are no longer covering? the group demanded.

A Conference Committee will now begin negotiations to resolve differences between quite different bills passed by the two houses.

The consumer groups said they have supported a provision in the House bill (H.R. 3210) that would require insurers to pay back any financial assistance they receive from the federal government.

"It is scandalous to require taxpayers to give away insurance to an industry that is in extremely good financial condition after September 11th," said Mr. Hunter.

"At the very least, this bill should require insurers to pay back any financial assistance they receive, as the House bill does."

CFA agreed that availability of terror coverage has been a problem in a few cities, due to a concentration of skyscrapers and other possible terrorist targets. But even in these areas, coverage is available for all but the largest risks, the group said.

High rates have been a problem for mid-sized and larger firms but they are starting to decline according to CFA.