the webmaster notes: as in the case where the government gave the nuclear power generating industry free insurance this bill will cause more problems than it solves
Bush OKs legislation to limit insurers' terrorism liability
By Elisabeth Bumiller
New York Times
Nov. 27, 2002
WASHINGTON - President Bush signed legislation Tuesday requiring that the federal government pick up most of the insurance losses in a catastrophic terrorist attack, a move that represented a political triumph for the White House and some relief for the ailing real estate and construction industry in New York.
In a ceremony at the East Room of the White House attended by Bush's senior political aides and the labor leaders the White House is courting, the president said that the Terrorism Risk Insurance Act would restart construction projects that have been suspended because of the difficulty in getting terrorism insurance since the Sept. 11 attacks.
"With this new law, builders and investors can begin construction in real-estate projects that have been stalled for too long, and get our hard hats back to work," said Bush, who was flanked on the stage by construction workers. Bush asserted that a lack of terrorism insurance had held up or canceled more than $15 billion in real estate transactions.
And should terrorists strike America again, Bush said, "we have a system in place to address financial losses and get our economy back on its feet as quickly as possible."
The law requires all commercial insurers of buildings to begin offering terrorism coverage immediately. Such coverage had been routinely provided until the Sept. 11 attacks caused losses of more than $40 billion and prompted the industry to withdraw the coverage and ask the White House for help. Some insurers did eventually reintroduce terrorism insurance, but at high cost and in limited amounts.
The law requires the federal government to pay 90 percent of the cost of an attack by foreign terrorists after losses are greater than $10 billion, up to a total of $100 billion. The government will pay a smaller amount for losses less than $10 billion.
The legislation was welcomed Tuesday by the New York real-estate industry, which had lobbied extensively for it in Washington. The industry has seen the credit rating lowered on some of the city's most prominent buildings because of inadequate terrorism coverage. Other buildings could not get terrorism insurance at all.
But the law does not set the price of terrorism insurance, which industry experts said was likely to remain high. "The risk is still astronomical," said Gary Karr, the spokesman for the American Insurance Association. "It's going to be a very difficult challenge for companies to figure out the underwriting rules for this. Terrorism is still an extremely difficult risk to predict."