President Bush signed into law on Tuesday a terrorism insurance bill that will make the government the insurer of last resort should another terror attack devastate the American economy.
"Today we are taking action to strengthen America's economy, to build confidence with America's investors and to create jobs for American workers," Bush said in an East Room ceremony where he was joined by lawmakers and several union representatives who supported the bill.
"Should terrorists strike America again, we have a system in place to address financial losses and get our economy back on its feet as quickly as possible," he said.
The White House has pushed for the legislation for months, arguing that it will rev up the economy and put 300,000 construction workers back on the job by providing security for lenders cagey about putting money into uninsured building projects.
"Across America, hospitals and office buildings and malls and museums and construction jobs and many transportation companies have had difficulty finding terrorism insurance. More than $15 billion in real estate transactions have been canceled or put on hold because owners and investors could not obtain the insurance protection they need. Commercial construction is at a six-year low and thousands of hardhat workers have been kept off the job," he said.
"By helping to insure that terrorism insurance is affordable and available, the Terrorism Risk Insurance Act will permit many construction projects to move forward and to help this economy grow," Bush added.
The Terrorism Risk Insurance Act is the second bill passed by the Senate during the lame-duck session that can be seen as a feather in the president's cap. On Monday, the president signed a homeland security bill — also passed in the lame-duck session — that will usher in the largest reorganization of federal government since 1947's National Security Act.
The terrorism insurance bill backs insurance companies to the tune of $90 billion in the event of a terrorist attack. The goal was to get insurance companies to re-insure existing buildings and arenas — like sports stadiums — and to provide insurance companies the confidence to insure new projects.
The government will not step in on any claims less than $5 million. Insurance companies would pay a deductible in 2003 equal to 7 percent of the premiums they received the previous year. The deductible would rise to 10 percent in 2004 and 15 percent in 2005. The federal government would then cover 90 percent of everything above the deductible with insurance companies paying the other 10 percent.
Federal payments would be capped at $90 billion the first year, $87.5 billion the second year and $85 billion in the final year of the program.
The measure does not cover the Sept. 11 attacks, which generated an estimated $40 billion in claims. Insurance companies will be required to pay back the government the first $10 billion.
"The good news is that it was passed. Like all legislation, it could have been better but at least it is moving in the right direction," said Thomas A. Schatz, president of Citizens Against Government Waste.
One of the major concerns of insurance companies is that individuals can sue their insured buildings and win penalties if the courts rule that the buildings did not provide enough security to prevent a terror attack.
The president did bend to Democrats in the legislation by dropping his demand that caps be placed on punitive damages. Republicans considered this provision a boon to trial lawyers who are allied with Democrats and have vowed to revisit that portion of the legislation next year.
White House spokesman Ari Fleischer said the president felt the need to step in on the issue because "terrorism, like acts of war" could affect the economy so deeply that the government must provide some relief.
"I think you can look at this in a similar way that the administration and the federal government stepped in with the airlines immediately in the aftermath of the attack. You have a free-market president who also makes certain that we can protect the American people, both in terms of their jobs and economic security as well as national security," Fleischer said.
Schatz said he hopes tort reform changes are addressed next year, as well as a provision that would allow companies to set aside reserves to pay for man-made catastrophes much the way they are allowed to set aside rainy day funds for natural disasters.
Fleischer could not say whether the legislation really would return insurers to cover the market, nor could he say whether the numbers used by the White House to justify calls for the legislation are true.
But Jay Hyde, a spokesman for the National Association of Real Estate Investment Trusts, said that insurers just needed the confidence to get back into the market.
"Without this backstop in place, there was no incentive, no reason" for insurers to take such risks, he said.
Consumer groups opposed the bill, saying insurance companies don't need a prospective taxpayer bailout despite their pleas of economic distress. "Instead of helping the relatively few businesses that can't get terror coverage, Congress is poised to give away reinsurance to a rich and politically powerful insurance industry," said Travis Plunkett, legislative director of the Consumer Federation of America.
The Associated Press contributed to this report.