The Senate voted to extend through 2021 the U.S. government'sfinancial backing for insurance to protect companies against lossesfrom acts of terrorism.

The bill, passed 93-4 in Washington today, now goes to theHouse, where Republican leaders propose cutting reimbursement forattacks involving conventional weapons.

“Time is of the essence,” Senator Charles Schumer, a New YorkDemocrat and bill sponsor, said on the Senate floor today.“Insurance policies for 2015 are already being written. Each daythat goes by without” passage of the measure “creates moreuncertainty in the market.”

Insurers including ACE Ltd. and Hartford FinancialServices Group Inc. have said their businesses could be wiped outby a terrorism attack unless the U.S. government reauthorizes the program before it expires Dec. 31. Commercialbanks, the National Football League, universities, real estategroups, and insurance brokerages also have urgedreauthorization.

Property and casualty insurers are required to make terrorisminsurance available to businesses, though companies aren'trequired to purchase it.

Four Republicans senators—Tom Coburn of Oklahoma, Pat Roberts ofKansas, Marco Rubio of Florida, and Jeff Sessions of Alabama—votedagainst the measure.

The Terrorism Risk Insurance program was enacted in 2002 tojump-start the property and casualty market after insurers faced$32 billion of claims resulting from the Sept. 11 attacks thatkilled almost 3,000 people. Congress renewed the law in 2005 and in2007.

Current law guarantees government reimbursement to insurers thatcover terrorism-related injuries and property damage after theindustry's combined losses exceed $100 million. The government'sannual liability is capped at $100 billion.

The Senate bill would preserve those levels, while raisinginsurers' 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.

Reimbursement Level

In the House, Representative Randy Neugebauer, a TexasRepublican, proposed a bill that would extend the program for fiveyears while restricting payouts for losses from attacks made withconventional weapons. The measure would raise the “trigger” forgovernment payouts for those attacks to $500 million from $100million.

The bill drafted with Representative Jeb Hensarling, the TexasRepublican who leads the House Financial Services Committee, wouldpreserve the current reimbursement level for losses from attackswaged with nuclear, chemical, biological, and radiologicalweapons.

Hensarling and Neugebauer have said they would prefer to abolishthe terrorism insurance program and replace it with privateinsurance.

The Senate bill is “essentially a status quo” that can't come tothe House floor as written, Hensarling said today.

“It has become very clear this week that the process is going totake several more months before there is a resolution,” Hensarlingsaid in a statement. “We have a diverse Republican caucus in theHouse. We have some members who believe the reforms go too far, andwe also have a host of conservatives who feel the reforms don't gofar enough.”

The House bill is opposed by Representative Peter King, a NewYork Republican, who is urging members to vote against it in anattempt to pressure leaders to move the measure closer to theSenate proposal.

King represents a Long Island district that was home to manyvictims of the Sept. 11 attack on the World Trade Center in NewYork.

The House bill is a “backwards approach” that will make ittougher to guarantee financing for building projects across thecountry, Schumer has said.

Before 2001, damage from terrorism was typically covered inpolicies without additional charges because the possibility of anattack was seen as remote. After that, providers excluded acts ofterror from commercial contracts and coverage became expensive ifit was offered at all, according to a March report from theCongressional Research Service.

The Senate before passing the measure adopted an amendmentoffered by Louisiana Republican David Vitter that would require theFederal Reserve to have at least one member with community bankingexperience.

The Senate bill is S. 2244. The House measure is H.R. 4871.

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