(Bloomberg) -- The Senate voted to extend through 2021 the U.S. government’s financial backing for insurance to protect companies against losses from acts of terrorism.
The bill, passed 93-4 today in Washington, now goes to the House, where Republican leaders propose cutting back the reimbursement for attacks involving conventional weapons.
“Time is of the essence,” bill sponsor Charles Schumer, a New York Democrat, said on the Senate floor today. “Insurance policies for 2015 are already being written. Each day that goes by without” passage of the measure “creates more uncertainty in the market.”
Insurers including ACE Ltd. and Hartford Financial Services Group Inc. have said their businesses could be wiped out by a terrorism attack unless the U.S. government reauthorizes the program before it expires Dec. 31. Commercial banks, the National Football League, universities, realtors and insurance brokerages also have urged reauthorization.
Property/casualty insurers are required to make terrorism insurance available to businesses, though companies aren’t required to purchase it.
Four Republicans voted against the measure: Tom Coburn of Oklahoma, Pat Roberts of Kansas, Marco Rubio of Florida and Jeff Sessions of Alabama.
The Terrorism Risk Insurance program was first enacted in 2002 to jump-start the property and casualty market after insurers incurred $32 billion worth of claims from the Sept. 11 attacks that killed almost 3,000 people. Congress renewed the law in 2005 and in 2007.
Current law guarantees government reimbursement to insurers that cover terrorism-related injuries and property damage after the industry’s combined losses exceed $100 million. The government’s annual liability is capped at $100 billion.
The Senate bill would preserve those levels, while raising insurers’ co-payments to 20 percent from 15 percent.
President Barack Obama’s administration supports “swift passage” of the Senate measure, according to a statement today.
In the House, Representative Randy Neugebauer, a Texas Republican, proposed a bill that would extend the program for five years while restricting payouts for losses from attacks made with conventional weapons. The measure would raise the “trigger” for government payouts for those attacks to $500 million from $100 million.
The bill, drafted with Financial Services Committee Chairman Jeb Hensarling of Texas, would preserve the current reimbursement level for losses from attacks waged by nuclear, chemical, biological and radiological weapons.
Hensarling and Neugebauer have said they would prefer to abolish the terrorism insurance program and replace it with private insurance.
The House bill is opposed by Representative Peter King, a New York Republican, who is urging members to vote against it in an attempt to pressure leaders to move the measure closer to the Senate proposal.
An advocate of anti-terrorism legislation, King represents a Long Island district that was home to many victims of the Sept. 11 attack on the World Trade Center in New York.
Schumer has said the House bill is a “backwards approach” that will make it tougher to guarantee financing for building projects across the country.
Before 2001, damage from terrorism was typically covered in policies without additional charges because the possibility of an attack was seen as remote. After that, providers excluded acts of terror from commercial contracts and coverage became expensive if it was offered at all, according to a March report from the Congressional Research Service.
The Senate before passing the measure adopted an amendment offered by Louisiana Republican David Vitter that would require the Federal Reserve to have at least one member with community banking experience.
The Senate bill is S. 2244. The House measure is H.R. 4871.
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