Mr. Wood was one of several panelists who shared their views during a discussion hosted by Kaye Insurance Associates in New York last week.

"This transition could be quite chaotic?it will be difficult to see 100 percent compliance right away. And there are no specific policies yet by the U.S. Treasury Department on how different aspects of the legislation will be implemented," he said.

Mr. Wood explained this is the first law of its kind that will have immediate requirements for insurers.

"Insurance companies are still trying to figure out how to price this. There is no restriction on what insurers can charge on premiums for terrorism insurance. Theoretically, the sky is the limit," he said.

Some have been speculating that the Fortune 500 businesses will see massive increases in premiums and that companies in urban areas will get socked, he observed, while others are betting insurers will use this bill as a crutch to artificially reduce rates.

"My conclusion is that it will be neither giveaway nor price-gouging. Depending on the perceived risk of terrorism, pricing is going to occur in a competitive market. State regulators also said they intend to be very aggressive on this front to prevent overpricing," he said.

Warren Azano, vice president of governance affairs for The Hartford Financial Services Group Inc. in Hartford, Conn., agreed that insurance companies are working overtime to comply with the new legislation and to provide a premium rate within 30 days or obtain the insured's agreement to reinstate the terrorism exclusion.

"We have to figure out how to comply and we are working on that--we are all just wrestling with this. I expect many insurance companies to scramble," Mr. Azano said.

"We obviously would have preferred more time to prepare, but lawmakers wanted to get this done as quickly as possible, and I understand that.

"Insurers will try to send out notifications of premium rates as quickly as possible, because once the bill is enacted they will be providing terrorism coverage for which they received no premiums. We followed this bill as closely as anybody, and I would be surprised if other companies are much farther ahead than we are."

The principal difficulty in setting premiums is that insurers have no idea what the severity and frequency of terrorist acts will be in the future since these are determined solely by terrorists.

"It really is difficult to figure out what the rate ought to be. We have seen models that use game theories. But the bottom line is that it is extremely difficult to set appropriate rates because, let's face it, no one knows what the appropriate premium levels are. This is a crapshoot--nobody knows what the future losses might be," Mr. Azano said.

He noted that many actuaries he spoke with around the country said there is no reliable way to price premiums for terrorism insurance.

"As you can imagine, some will be hefty and some insureds will not want to pay for it. Theoretically, the sky is the limit, but we are very cognizant of the fact that state regulators will be looking at this. The bill, in terms of preempting rate regulations, doesn't do that much," he said.

Mr. Wood said he has been hearing complaints that in the later stages of the bill, deductible levels are too high. For the rest of 2002, they would amount to 1 percent of an insurer's earned premiums, but that would rise to 7 percent in 2003, 10 percent in 2004, and 15 percent in 2005.

"What I heard from insurers is that the first year is fine, but they are concerned about second and third years. This is a very, very positive move, but it is clearly more positive for the industry in the first year than in the second and third year," Mr. Wood said.

Mr. Azano agreed that insurers would have preferred much smaller deductibles.

"The real question is how it will work when there are big losses. If we do get more significant terrorist attacks, certainly a company the size of Hartford could get hit bad," he said. "In addition to deductibles, we would have a 10 percent loss, so cost-sharing could still be significant. So even with this bill, the cost of writing terrorism insurance will not go back to the pre-9/11 level. The amounts we are exposed to are still high, simply because if we have a series of losses, there is no way we could stay in the market."

Mr. Azano said while the new legislation is not perfect or ideal, "I do think the bill, on balance, is very good. The bottom line is that it came out much better than we expected."

Bruce Guthart, president of U.S. operations of HUB International and chief executive officer of Kaye Insurance Associates, also applauded the terrorism bill, noting that insurance companies will no longer have to risk their entire solvency on one catastrophic event.

"The insurance marketplace has certainly been in turmoil. Sept. 11 led to a difficulty in purchasing terrorism insurance even though various options have been provided from insurers, such as exclusions, sub-limits and stand-alone policies. Insureds are pleased that any exclusion in their policies will be eliminated."

He added that insureds are taking a wait-and-see approach "because they have to see how much their insurers will charge.

It's so hard to predict, but for businesses that are not in vulnerable or exposed areas, I think the pricing will be fair and reasonable," Mr. Guthart said.

The bill also gives insurers the ability to offer workers' compensation insurance to large companies again, he said. "Major employers that have more than 500 workers at any one site had difficulty getting workers' compensation insurance since Sept. 11, but that will change."

Mr. Guthart said business owners in New York City, the epicenter of last year's terror attacks, will also find it easier to get terrorism insurance. In New York, terrorism exclusions were not permitted in the wake of Sept. 11, but there are now many businesses whose policies have such exclusions attached by their insurers' non-admitted sister companies, he noted.

"These non-admitted companies are free from state rate and form filings, and they were allowed to put a terrorism exclusion on. These exclusions found their way into large trophy buildings in New York," Mr. Guthart said.