November 15, 2002 by Canadian Underwriter
The U.S. House of Representatives last night passed the compromise bill to provide a government backstop for terrorism insurance. In a voice vote, the House agreed to Bill H.R. 3210 the Terrorism Risk Protection Act.
The Senate is expected to put its stamp on the bill today.
Passage was expected after President George W. Bush’s continued public admonition to Congress that the bill was needed in order to kick-start the country’s construction industry. Bush repeatedly warned that billions of dollars in new building project were being impacted by the lack of available terrorism insurance. Insurers had withdrawn the coverage when they were unable to obtain reinsurance following the terrorist attacks of September 11, 2001.
The U.S. plan would see insurers pay for losses up to 7% of written premium (based on the previous year’s results), with this figure rising to 10% and 15% in subsequent years.
Insurers would also retain 10% of losses excess of that base figure. The government would put in 90% for losses above the 7% figure. And for losses in excess of US$100 billion, Congress would decide at the time how to deal with claims.
All commercial insurers must participate and will charge a 3% levy to pay for the program.
The plan has a three-year sunset, at which time Congress will revisit based on the current environment.
The Canadian government has said it would await a U.S. decision before taking action on terrorism insurance here.