White House mulls insurance aid

White House: plans to be insurer of last resort

The White House is planning to ask Congress to back a plan which would relieve US insurers of some of the financial burden they would face in any future terrorist attack.

But the package on offer - a three-year programme - stops short of the full-scale government-backed terrorism insurance pool the industry had hoped for.

White House insurance plan

US government to cover:

2002:
$0-20bn: 80% of claims
Above $20bn: 90% of claims

2003:
$0-10bn: nothing
$10-20bn: 50% of claims
Above $20bn: 90% of claims

2004:
$0-20bn: nothing
$20-40bn: 50% of claims
Above $40bn: 90% of claims

Maximum liability: $100bn

In effect, US insurers wanted the government to become an "insurer of last resort", backing up a multi-billion dollar private sector fund to be raised by insurers themselves.

But the White House is thought to have considered that option would take too long and be too complex to be regulated properly.

Instead, the administration's plan offers to pay 80% of claims up to $20bn (£13.8bn) and 90% of claims above that in the first year.

The amount on offer would taper after that until it lapses in 2005, while the total liability is capped at $100bn. Any cover beyond that is being left up to congressional legislation.

Heavy burden

The insurance industry has told the Bush administration that it can meet the $40bn cost in insurance claims of the 11 September attacks.

But further claims could cause problems, it says, especially since reinsurance companies - which insure the primary insurance companies themselves - are widely expected to stop offering terror cover from the beginning of 2002.

"If there are other incidents, we want to make sure there is an insurance market out there to cover them," one White House official told Reuters.

"We also want to make sure, while there is a government role, that there is also a role for the private sector."

Congressional leaders have already poured cold water on the industry's own ideas, and will be meeting White House staffers later this week to consider their proposal.