Under Aon's proposal, the facility it is suggesting will be designed to fund up to two $40 billion events. According to the Insurance Services Office in Jersey City, N.J., the terrorism attack of Sept. 11, 2001 left an insured loss of $18.8 billion.

Under the Aon proposal the reinsurance facility will be tax-exempt, and if it should run short of funds, losses up to $40 billion would be paid through the issuance of tax-exempt bonds.

Losses covered by the facility
"will be above a reasonable industry and company level threshold from a foreign or domestic terrorism event," Aon officials said. All commercial and all personal lines of insurance would be covered by the pool to be created to pay for the event.

According to Aon's plan, the facility will provide up to 95 percent quota-share reinsurance coverage on covered losses up to a total industry loss of $40 billion.

Under the Aon blueprint, the federal government would pay for any event from $40 billion to $100 billion, with losses above $100 billion "to be reviewed by Congress."

The latter provision would mirror TRIA, which would have the federal government cover most of the losses up to $100 billion. However, the government's threshold for paying losses under TRIA is far lower than the $40 billion proposed under the Aon facility.

Currently, under TRIA, the federal government starts to pick up part of the tab when an event exceeds $5 million.