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HEADLINE: House Devises Aid Package for Insurers; Government Would Be Reimbursed for Paying Terrorism Claims

BYLINE: Jackie Spinner, Washington Post Staff Writer

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House lawmakers are drafting their version of a federal aid package for the insurance industry that would require insurers to reimburse the government for assistance covering terrorism claims.

Under the framework of a proposal put together by Reps. Michael G. Oxley (R-Ohio) and Richard H. Baker (R-La.), the insurance industry would have to pay an unspecified deductible before the government would step in to help cover claims. Although the amount of the deductible has not been determined, congressional aides said it would be much lower than the $ 10 billion proposed in a Senate plan.

Insurance companies and the Bush administration are pushing Congress to adopt a funding mechanism to help insurers pay claims if there is another terrorist attack.

Although insurers have said that they can pay the estimated $ 30 billion to $ 50 billion in claims resulting from the Sept. 11 attacks, terrorism coverage might not be widely available after the end of the year because insurance companies have said they cannot put a price on it.

"There is an availability problem," said John T. Sinnott, chairman and chief executive of insurance brokerage Marsh Inc. "Consumers will not have coverage."

Unlike the Senate plan, the House version would lend the insurance companies money to help pay claims that exceeded a certain amount. The House plan also would require insurers to assess a surcharge on policyholders for the most expensive terrorist disasters.

"We want to be certain the taxpayer gets paid back," said a source with the House Financial Services Committee.

The Senate plan would offer assistance to insurers but would not require reimbursement.

Baker, chairman of the House Financial Services subcommittee on insurance, said yesterday that the $ 10 billion deductible in the Senate plan is too high and would contribute to significant spikes in insurance premiums.

The Bush administration also has a problem with the $ 10 billion deductible, although it is working with key Senate lawmakers on a consensus plan that would require the industry to pay that amount before receiving help from the government.

The insurance subcommittee met yesterday for what was billed as a "roundtable discussion" on the various insurance proposals.

Industry groups say time is running out for Congress to act. Many commercial policyholders are already starting to receive non-renewal notices. About 70 percent of reinsurance policies -- which cover insurance companies -- expire at the end of the year.

Julie A. Rochman, senior vice president for the American Insurance Association, said both the Senate and House proposals are problematic.

The loan proposal offered by the House "doesn't offer the certainty and stability we need right now," she said. Rochman added that any surcharge would have to be tacked on to a policyholder's bill for 10 to 30 years, which would put companies willing to cover terrorism risk at a price disadvantage.

She said neither plan addresses how to charge an industry deductible to thousands of competing insurance companies.

"You can't do a group deductible," Rochman said.

LOAD-DATE: November 01, 2001