WASHINGTON — Much to the relief of retailers, the Senate on Tuesday approved a measure for the federal government to subsidize business terrorism insurance.
Since the Sept. 11 terrorist attacks, insurance companies have either canceled terrorism insurance or drastically increased the cost, forcing some companies to do without. Commercial mortgage companies also have withheld loans for construction, including shopping malls and stores, because of the insurance squeeze. The bill is meant as a backstop for insurance companies worried about having to pay out huge terrorism claims and to encourage them to lower premiums.
The terrorism insurance situation threatens to have a “a ripple effect” by depressing new store openings, said Mallory Duncan, vice president and general counsel at the National Retail Federation. Terrorism insurance, said Kathryn Lavriha, senior vice president of government affairs at the International Mass Retail Association, “in terms of the bottom line is one of the top three issues” mass merchants are concerned about. Employee and energy costs are the other two.
Under the Senate bill, the government would pay 80 percent of claims exceeding $5 million for future terrorist attacks. Subsidies would increase to 90 percent for claims more than $10 billion. The government’s total payout per attack would be $100 billion. Coverage would last for one year and could be renewed another year. The Senate bill would also cover the cost to companies for relocating a business because of a direct attack or fallout from one nearby.
The House has already passed a similar bill, but it offers government loans instead of insurance company subsidies. A House-Senate committee will negotiate a compromise measure, which would then be voted on by each chamber. The Bush administration supports government-backed terrorism insurance as a hedge against harming the economy.”