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The lame duck session on Capitol Hill has given Congress an opportunity to finally pass the Terrorism Risk Insurance Act of 2002. With President George W. Bush making the legislation one of his top priorities, the yearlong efforts of insurers and a coalition of 66 companies and trade groups will likely now bear fruit.

The House made the first move, Nov. 14 with a bipartisan vote to provide insurers with federal assistance to cover up to $100 billion in losses from future terrorist attacks.

The Senate could act on the bill as early as Friday, but a vote isn’t expected until next week.

As it stands right now, the bill would establish a three-year federal backstop against acts of terrorism for commercial lines of insurance. The coverage would kick in after insurers industrywide lost $10 billion in the first year. The second year, insurers would be required to cover the first $12.5 billion and the first $15 billion for the third year.

In cases where losses exceed a specific ceiling, the Treasury would pick up 90 percent of the loss while the insurance industry would be responsible for 10 percent.

The impetus to pass this bill is twofold. One is to make sure workers’ compensation carriers who have their hands tied over terrorism and acts of war are able to cover such claims. The second reason is an economical one. The Bush administration believes it will free up as much as $15 billion in construction projects and 300,000 related jobs that are in limbo.

As reported by Reuters, House Democratic leader Richard Gephardt said, "It really is a jobs bill." He further explained, "I think it would give tremendous reassurance to the real estate industry. It would get a lot of projects that are on the drawing boards to go forward, and I know we're all committed to try to see if we can get it finally done in the next few days."

The Washington Post published an article by Edmund F. Kelly chairman, president and CEO of Liberty Mutual Group, Nov. 13. In it, Kelly said, “It is conceivable that another attack or attacks could affect large numbers of Americans in their places of work. It is also conceivable that another attack could cost the system many times the $3 billion from 9/11. Victims and their families will need a strong workers' compensation system to rebuild and renew their lives. Today that system is at risk unless Congress acts.”

In another article Paul Mattera, senior vice president of Liberty Mutual told the Washington Post, that in the event of another large terrorist attack it's likely some insurers, employers that self-insure and state guarantee funds that are already stressed, will not be able to pay out large sums of money.

The main sticking point for passage of a terrorism insurance backstop bill has been over lawsuit restrictions.

But with assurances from the White House that it would pursue tort reform changes next year in exchange for support on the terrorism insurance legislation, it looks like 2002 legislation will become a reality in 2002.