SECTION: BUSINESS; Pg. 1D

LENGTH: 752 words

HEADLINE: President signs bill for terrorism insurance

BYLINE: Dee DePass; Staff Writer

BODY:
The St. Paul Companies and other insurance giants received their long-awaited government safety net Tuesday as President Bush signed the Terrorism Risk Insurance Act into law, guaranteeing as much as $100 billion for claims resulting from new acts of terrorism.

    The legislation is a relief to insurance companies and policyholders that feared financial ruin in the event of another devastating terrorist attack. Without the new law, many insurance companies were refusing to provide terrorism coverage, leaving thousands of businesses bare on a critical risk. Insurers that had been offering terrorism coverage were doing so with very expensive premiums.      That stalled many construction projects nationwide as mortgage and lease agreements were suddenly out of compliance, Bush said, adding that the new law should help "get the hard hats of America back to work." The law is expected to make premiums less expensive.

     The post-9/11 coverage issue caused serious problems for owners of malls and office buildings including the Mall of America in Bloomington, City Center, the Multifoods Tower, Gaviidae Common in Minneapolis and others.

     "This is a very good day. It's a victory for the American economy," said Gary Karr of the American Insurance Association, which lobbied for the bill on behalf of 412 members.

      The law requires insurers to provide terrorism coverage to policyholders. That's prompting companies such as the St. Paul, which has provided only limited terrorism insurance during the past year, to bolt into action.

     "We are working like dogs" to notify agents and policyholders and to address the underwriting issues, said Mark Hamel, spokesman for the St. Paul.    "The impact of the law is something we are grappling with. We have to notify everyone. We have to offer the coverage, but the policyholder doesn't have to accept it."

      The pricing for the coverage will be incorporated into the regular property-casualty and workers' compensation policies and will not be separately billed, as some other insurers did before the new legislation.

     The government created a three-year program in which the Treasury will pay 90 percent of property-casualty terrorism losses above a deductible that each insurer will pay. The deductibles will rise each of the three years, from 7 percent of premiums in the first year to 15 percent of premiums by the third year.

     The law also mandates that lawsuits that arise after a terrorist attack will automatically go to federal court. No government funds can be used to pay punitive damages.

     In March, Mall of America owner Simon Property Group faced a sticky situation when its mortgage company, GMAC Mortgage, demanded that it buy terrorism insurance from a company with high premiums. The case ended up in court but was resolved when Simon Property found cheaper coverage.

     The new law "has no impact at all to Simon Property Group's existing terrorism insurance," said Les Morris, a spokesman for the Indianapolis-based mall company.

     Added Morris, "It's unclear what the true impact of the bill will be until the private insurance companies set their premiums for terrorism insurance." That will happen in the next 90 days, he said.

    Bush had made a terrorism insurance bill one of his top priorities immediately after the Sept. 11, 2001, attacks, which caused insurance losses estimated at more than $40 billion.

    The law Bush signed Tuesday does not cover losses sustained in those attacks.

    Retiring Sen. Phil Gramm, R-Texas, was the bill's main opponent, arguing that it lacked punitive-damage limits, left taxpayers overexposed to losses and aborted development of a private terrorism insurance market.

    Consumer advocates, who termed it a bailout for the insurance industry, opposed the legislation, as did some economists who contended that lack of insurance was not the only reason for lagging construction.

    "It's shocking that Congress and the president accepted the wild claims made by insurance and real estate lobbyists at face value," said J. Robert Hunter, director of insurance for the Consumer Federation of America. "These special interests stretched the truth in order to get taxpayers to subsidize insurance rates."

   _ Staff Writer Janet Moore and Star Tribune Washington Bureau correspondents Michael Bold and Greg Gordon contributed to this report.

    _ Dee DePass is at ddepass@startribune.com.



LOAD-DATE: November 27, 2002