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Senate votes to extend program protecting insurance industry from costs of terrorist attack

WASHINGTON - The Senate voted Thursday to extend a program that would cushion the blow to insurance companies in the event of a massive terrorist attack.

The program was enacted in the aftermath of Sept. 11, when insurance companies were reluctant to provide coverage for terrorist attacks. It is due to expire at the end of the year.

The Senate voted 93-4 to extend the insurance program through 2021. Under the program, the federal government helps pay damages for attacks that cost more than $100 million.

"In a post 9-11 world, developers and business owners embarking on multi-year, multi-million or billion dollar construction projects need to be certain they can insure their investments," said Sen. Chuck Schumer, D-N.Y., who sponsored the bill. "At a time when our economy is not growing as robustly as we'd like, failing to renew (the program) would be particularly foolish. Without (the program), it's a virtual certainty that a large number of construction jobs and economic development would be lost."

President Barack Obama supports the bill, the White House said Thursday.

"Terrorism insurance is necessary for a broad range of economic activities in areas across the country, and would be prohibitively expensive or unavailable in the absence of the program," the White House statement said.

The House is considering a similar bill that treats conventional and nuclear attacks differently, providing less federal help for attacks using conventional weapons.

Rep. Randy Neugebauer, R-Texas, sponsored the House bill. He said it protects taxpayers "from further Washington-sponsored risk."

The program was first enacted in 2002. Since then, no covered events have occurred, according to the nonpartisan Congressional Budget Office.

However, supporters say the program has made it possible for commercial property owners to get coverage, especially large venues that might be more vulnerable to a terrorist attack.

Under the program, companies that sell commercial property and casualty insurance must offer coverage for terrorist attacks. In exchange for this requirement, the federal government will help insurers cover losses under certain conditions.

The government would recoup the money in the form of insurance industry surcharges.

Insurers must pay the first $100 million in total losses stemming from an attack. Individual insurers must also pay a deductible equal to 20 per cent of the premiums they collected in the previous year for certain types of insurance.

If there are additional damages above those amounts, the federal government would pay 85 per cent of an insurance company's remaining claims, and the insurance company would pay the remaining 15 per cent.

The Senate bill gradually makes private insurance companies pay a larger share, increasing the copay to 20 per cent.

The program only covers damages up to $100 billion. By comparison, insurance losses from the 9-11 attacks totalled about $40 billion, according to the Insurance Information Institute.

The House Financial Services Committee passed a bill in June that extends the program for five years and makes significant changes.

The House bill distinguishes between attacks using conventional weapons and attacks using nuclear, biological or chemical weapons.

Under the House bill, the program would still kick in at $100 million in the event of a nuclear, biological, chemical or radiological attack. But in attacks using conventional weapons, the threshold for triggering government support would gradually increase to $500 million.

Some Democrats questioned why the program should distinguish between conventional and nuclear attacks. They noted that the 9-11 attacks weren't nuclear, biological, chemical or radiological.


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