SECTION: EDITORIAL & COMMENT; Pg. 06A

LENGTH: 730 words

HEADLINE: INSURED AGAINST DISASTER ;
Terrorism-insurance bill is necessary to protect Americans, U.S. economy

BODY:
President Bush's speedy signature will be most welcome on the long-overdue terrorism-insurance bill that Congress sent to him last week. The Senate on Tuesday approved a reasonable compromise bill the House passed the previous week, paving the way for most insurance companies to sell policies that include coverage for damages caused by acts of terrorism.

The Terrorism Risk Insurance Act turns the federal government into a partner with insurance companies for three years, making the government responsible for covering 90 percent of claims that exceed $10 billion next year, $12.5 billion in 2004 and $15 billion in 2005. Thus, collectively, insurance companies would provide full coverage for smaller losses and pay the remaining 10 percent of losses the feds didn't cover. The federal government's role, then, becomes that of a reinsurance company, a business that insures other insurance companies against large losses, especially catastrophic events, such as tornadoes, hurricanes and earthquakes.

After the terrorist attacks of Sept. 11, reinsurance companies largely stopped offering coverage for losses stemming from acts of terrorism, because these businesses no longer could afford to do so. They are in the process of paying enormous amounts of money for life, property, health, workers' compensation, business-interruption and other claims related to the Sept. 11 hijackings. These, the largest insurance losses in history, are expected to total $30 billion to $70 billion, when all the bills are paid, figures that dwarf the previous largest insurance payout of $15.5 billion for damages caused by Hurricane Andrew in 1992.

The upshot has been that insurance coverage against terrorism either is unavailable or is extremely expensive. Especially in New York and other large cities viewed as likely targets, businesses have had difficulty obtaining affordable insurance and loans for major construction projects.

As with any insurance, the hope is that this new policy guarding against terrorism will be unnecessary, that there will be no need to file a claim. And the nation's war on terrorism, indeed, is aimed at removing this danger.

But threats to Western nations on a recently made tape of a voice believed to be that of Osama bin Laden clearly demonstrate that this war is far from over. Many of al-Qaida's operatives remain very much alive, and so-called chatter among suspected terrorists that has been monitored by U.S. and British intelligence agents indicates that more strikes may be on the horizon. President Bush and other Western leaders have taken these threats seriously. In addition, the likelihood of a U.S. war on Iraq has raised concerns about retaliation by sympathizers of Iraq who live within the United States.

The restoration of terrorism-insurance protections is vital to the many Americans who might find themselves in harm's way and is essential to this nation's economy. The availability of coverage should help to restart stalled construction projects and to reduce the costs of doing business in large cities and of operating stadiums, amusement parks and other high-profile American enterprises.

Congress dragged its feet on this bill for far too long. The House had tried to add certain limits to lawsuits that could be filed by victims of terrorism, and the Senate wouldn't go along. These limits, while reasonable and somewhat related, should not have been part of this bill and next year should receive fair and separate consideration.

Some critics of the insurance legislation called this bill a bailout, but it is no such thing. For one, insurance companies still will pay multibillions of dollars in damages if terrorists strike. For another, except where regulations specify otherwise, insurance companies currently have no obligation to sell terrorism coverage, just as these companies typically do not sell policies covering damages resulting from acts of war.

Americans need terrorism insurance, but the world's insurers and industry generally, still recovering from the financial blows of Sept. 11, no longer can afford it without the help of a player who can spread the costs of recovery from any attack across the population. As with floods and other similar large-scale disasters, Uncle Sam has to be the insurer of last resort, who steps in to help when no one else can.

LOAD-DATE: November 25, 2002