Terrorism Bill Faces Obstacle Course

One source said that at some point, the industry might have to make a decision on whether to begin challenging Senate GOP leaders directly to accept an offer made by Senate Majority Leader Tom Daschle, D-S.D., on a procedure for bringing legislation to the floor.

This source noted that Sen. Daschle has said that he would bring a bill to the floor that would bar punitive damages on claims against the federal government, but have no other tort reform measures. Republicans would be allowed to offer up to four amendments to that base text, which presumably would include more extensive tort reforms, the source said.

The problem, he said, is that Republican tort reform advocates probably do not have 51 votes for more extensive tort reforms. But at the same time, he said, it is clear that some GOP leaders really don't like the underlying bill at all.

However, the source said, there is a lot of reluctance within the insurance industry to launching a full-scale lobbying campaign directed at Republican leaders.

Meanwhile, the Congressional Joint Economic Committee released a report earlier this week, entitled "The Economic Cost of Terrorism," that touched on the issue of terrorism insurance. The report noted that it is difficult for private firms to accurately price or calculate the new risks of terrorism, and that private insurers might not be able to absorb additional catastrophic losses from another attack.

The lack of widespread terrorism insurance will entail significant costs and consequences to the macroeconomy, according to the report. Consequently, the report said, an argument can be made for a public sector role in the terrorism insurance market, particularly to facilitate the provision of private insurance.

In a related development, a leading producer group contends that the majority of commercial property-casualty risks still have trouble finding adequate terrorism insurance, despite suggestions to the contrary.

In a statement, the Washington-based Council of Insurance Agents and Brokers rebutted claims reportedly made on Capitol Hill that 75-to-85 percent of all commercial accounts have found adequate coverage. "These statements are clearly misleading," the Council said.

While small businesses outside of major metropolitan areas might comprise the largest aggregate number of commercial risks, they do not account for the majority of premiums written, the Council noted. "The areas of real distress–that is a growing and potent threat to the national economic well being–are the mid-size and larger businesses, which continue to struggle to secure terrorism coverage," the Council said.

The Council warned that the economy is at risk from the absence of a federal backstop. Noting its recent Commercial Insurance Market Index, the Council said that insurers continue to place sharp restrictions on terrorism risks, ranging from wholesale exclusions to low sublimits and high deductibles. There are also reports that some insurers are no longer offering statutory limits for mandatory coverages like workers' compensation.

"The Council deplores the implication that sufficient coverage is currently available in the market to meet the needs of 75-to-85 percent of American commercial enterprise, when construction, transportation, cargo, heavy industry, hospitals, nursing homes and housing–all precious national resources–cannot find sufficient coverage or capacity in the post-Sept. 11 market," the Council said.