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The Bush administration is likely to support a modified version of the multi-billion dollar terrorism risk insurance programme enacted following the September 11 2001 terrorist attacks, as long as US insurers agree to bear more of the cost of funding it, a senior lawmaker said on Thursday.
Senator Richard Shelby, the Alabama Republican who chairs the Senate banking committee, said the Bush administration was willing to design “a targeted, short-term programme” that would transform the Terrorism Risk Insurance Act (Tria) from a “taxpayer-supported system”.
“We need a [terrorism insurance] programme, narrow in scope,” Mr Shelby said. “Tria has provided limited short-term benefits. But it has also impeded the development of broader solutions for the larger problems confronting the insurance marketplace …We must look to ways to restructure Tria to avoid these negative consequences.”
Congress enacted Tria in 2002 as a temporary measure to protect insurance companies in the event of another terrorist attack by non-Americans.
The Act guaranteed that the federal government would pay 90 per cent of all insured losses up to $100bn (€83bn, £57bn), after payment of an initial deductible sum of as much as $15bn. In exchange, insurers had to keep terrorism coverage in their policies.
Last month the Treasury department warned that Tria's continuation would hinder the development of the insurance market. The insurance industry had lobbied vigorously for an extension of the Act, which expires at the end of the year.
John Snow, Treasury secretary, told senators on Thursday that the administration would support an extension of Tria on condition that it recognised an increase in the dollar deductibles and percentage co-payments, and that it eliminated some types of insurance, such as coverage for commercial vehicles and general liability.
“Extending Tria in its current form is likely to discourage the private market development needed to deal with the risk of terrorism,” Mr Snow said. “The administration cannot support a straight extension of Tria.”
US insurance companies have seized on last week's bombings in London as evidence that the need for a federal risk insurance programme has not subsided, nearly four years after the September 11 terrorist attacks on New York and Washington.
The American Insurance Association trade organisation said on Thursday that Tria had helped make terrorism insurance broadly available to businesses, and warned that its expiry could leave companies with a hole in their coverage.
“Tria has stabilised the private marketplace, guaranteed insurance availability for all businesses wanting it, and improved affordability,” the AIA said.