SECTION: BUSINESS; Pg. E1

LENGTH: 616 words

HEADLINE: INSURING THE INSURERS;
IN CASE OF TERRORIST ATTACK, BACKSTOP COVERS LOSSES UP TO $100 BILLION A YEAR;
"THE INSURANCE INDUSTRY CAN NOW COME OUT AND MORE COMFORTABLY PROVIDE THIS PRODUCT." RAMANI AYER, CHAIRMAN, HARTFORD FINANCIAL SERVICES GROUP

BYLINE: By MICHAEL REMEZ Courant Staff Writer

DATELINE: WASHINGTON--

BODY:
President Bush Tuesday signed into law a long-debated terrorism insurance backstop intended to shield insurers from catastrophic losses in case of new, large scale terror attacks.

For months, Bush prodded lawmakers to complete action on the legislation -- proposed weeks after the Sept. 11, 2001 terror attacks -- arguing that the limited availability of terrorism insurance was taking a toll on the nation's economy. Tuesday, in the ornate East Room of the White House, the president said the three-year program -- under which the government would pick-up as much as $100 billion in losses a year -- would quickly boost economic confidence and certainty.

"With this new law, builders and investors can begin construction and real estate projects that have been stalled for too long and get our hard hats back to work," Bush said. A group of union workers stood on one side of the stage, while lawmakers stood on the other.

Among the lawmakers was Sen. Christopher J. Dodd, D-Conn., whom Bush said had been a driving force behind the bill. With the measure's fate held up by a partisan debate over liability limits, Dodd and the White House negotiated a compromise in mid-October that won approval last week.

Insurers and business groups supported the backstop, saying it was critical because so many reinsurers had stopped writing coverage after the 9/11 attacks.

"The insurance industry can now come out and more comfortably provide this product and provide it so the construction industry can rebound," said Ramani Ayer, chairman of the Hartford Financial Services Group. "All sorts of commercial industries can rebound as a result of it."

Opponents of the legislation -- including consumer groups and free market advocates -- characterized the program as a giveaway to the insurance industry, saying the market would adjust over time.

Nicholas J. Perna, an economic adviser to Webster Bank in Waterbury, said the program will be helpful but is unlikely to have a major immediate effect.

"It is really more important down the road," Perna said. "It could be important to particular industries or activities, but it is not a big macro issue."

Building projects and commercial real estate sales have been halted for a range of issues, including the overall economy, the glut of available space and the economic viability of the specific project.

The legislation also provides no guarantee that rates won't continue to rise.

Dodd agreed that pricing could prove to be an issue, adding that he hopes the Senate watch what is happening in the marketplace.

Now that the bill has been signed into law, businesses that had terrorism coverage will see it automatically reinstated, though only for the next 90 days. Within that time, insurers must notify business customers about what it will cost to continue coverage. Customers will then have 30 days to accept the price, refuse coverage or bargain for price and terms.

The legislation puts a cap on insurers' liability from a terrorist attack. The government would cover 90 percent of terrorism claims after insurance companies pay deductibles amounting to 7 percent of their annual premiums in 2003; that portion increases to 15 percent in 2005.

Standard & Poor's, which rates the insurance companies, said Tuesday that the measure creates uncertainty for insurers that had successfully reduced their risks following 9/11.

"The legislation amounts to a command from government for insurers to get back into the pool of terror risk," said Steve Dreyer, managing director for Standard & Poor's insurance ratings. "Compared to where they were, which was on dry land, the risk profile has to be worse with them in the water."



GRAPHIC: PHOTO: 1 color; REUTERS; PRESIDENT GEORGE W. BUSH signs the Terrorism Insurance Act of 2002 in a White House ceremony Tuesday. The bill provides backing for insurance companies in the event of a terrorist attack. Looking on, from the left, are Sen. Christopher Dodd, D-Conn.; Rep. Sue Kelly, R-N.Y.; Rep. Mike Oxley, R-Ohio; and Sen. Paul Sarbanes, D-Md. Several union members stand in the background.

LOAD-DATE: November 27, 2002