Bush proposes to protect insurers from future terror attack losses

To aid the insurance industry to withstand future terrorism losses, the Bush administration has proposed that the insurance industry and the government would split the costs of property claims from future terror attacks. Taxpayers would pick up 80 per cent of the first $20 billion US in costs next year and insurers the rest. The government’s share of costs would decrease gradually through 2004 and end after that.
The administration’s plan is being presented as an alternative an industry-based proposal for a government-backed insurance industry pool to cover future terrorism losses. Under this pool, if insurance losses were to exceed pool amounts, the government would cover the excess.
The Bush plan caps the government’s liability for terror claims at $100 billion. The insurance industry’s maximum costs would be $12 billion next year, $23 billion in 2003 and $36 billion in 2004. Furthermore, next year, the government would pay 90 per cent of claims exceeding $20 billion. In 2003, taxpayers would cover the first $10 billion in costs and an amount over $10 billion but equal to or less than $20 billion would be split between the government and the industry. The treasury would pay 90 per cent of costs over $20 billion. In 2004, the insurance industry would be responsible for the first $20 billion — an amount over $20 billion but equal to or less than $40 billion would be evenly split, while the government would pay 90 per cent of costs exceeding $40 billion.