Schumer: Senate Ignores Reinsurance

"It is a steep hill, but it is not insurmountable," Sen. Schumer said.

Sen. Schumer spoke before the joint legislative conference of the Council of Insurance Agents and Brokers, the Reinsurance Association of America and the American Insurance Association, all of Washington.

He also said that he is developing his own plan, although the details he released were vague. Sen. Schumer said only that it would be a simple bill under which the federal government would step in to pay losses if private insurance is not available.

This approach, Sen. Schumer said, would solve the problem of tort reform, which delayed the legislation in the Senate last year, as well as the question of how much the industry would retain.

He also quoted Treasury Secretary Paul O'Neill as saying this approach is the "way to go," adding that the Senate leadership seems interested.

It was not clear from his description of the proposal whether there would be any incentive for businesses to purchase private insurance at all if they know the federal government will guarantee payment of uninsured losses.

Sen. Schumer did not say when further details of his proposal would be available.

He noted that the terrorism reinsurance issue is bipartisan. The Senate came close to moving legislation last year but it died at the last minute due to disputes over tort reform, he said.

This year, he said, supporters of creating a federal backstop are facing a "chicken little" problem.

Sen. Schumer said there were those who said the sky would fall on Jan. 1, 2002 if the legislation did not pass.

When the world did not collapse, a lot of people asked, "why bother?" he said.

But Sen. Schumer likened the current situation to an open wound, in which a little more blood flows out each day.

Many real estate deals are not being done, he said, and many other projects are not even being considered.

Moreover, he said, there are even fears that corporate bonds will be downgraded to reflect the risk.

"We can't continue to live with this situation," Sen. Schumer said.

Nonetheless, he said, there are skeptics on Capitol Hill and they need proof of the impact of the lack of terrorism reinsurance.

The industry must make its case to these skeptics, he said, but he cautioned against hyperbole.

"The truth is sufficient," he said.

In addition to broadening the business coalition supporting the legislation, Sen. Schumer said, President Bush must get involved personally.

He said that Secretary O'Neill has been leading the effort, but it might require the personal attention of the president to regain momentum for the legislation.