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Maryland Programs Proceed, With or Without Terrorism Insurance Protection Bill

By David M. Pittman
Capital News Service
Friday, Nov. 22, 2002

WASHINGTON - When Congress this week pledged up to $100 billion to support insurance companies in case of future terrorist attacks, the measure was aimed at spurring huge construction projects that had been stymied by a lack of coverage.

But Maryland officials were hard-pressed to find even one project delayed for that reason.

They said no economic development or construction projects have been hurt by unavailable or unaffordable terrorism coverage, and they could not think of a business that has been deterred from settling or expanding in the state.

"That has not come up as an issue of concern," said Tori Leonard, a Maryland Department of Business and Economic Development spokeswoman. "The outlook is positive for planning and adding jobs."

Critics of the bill had made that argument all along, saying the legislation was useless and wasteful and that large insurance firms should be able to cover the costs of an attack.

"The bill never started as a bill to help the problem," said Bob Hunter, director of insurance for the Consumer Federation of America. "It's a bailout for the insurance industry. It's not affecting construction anywhere."

But a spokesman for the Alliance of American Insurers praised the bill.

"This is not a give away. This is not a buyout. This is a shared program," Roger Morris said.

The Senate gave final approval to the bill late Wednesday and sent it to President Bush, who has promised to sign. It marks the end of a yearlong battle to protect insurance companies from potential bankruptcy in the wake of another massive terrorist attack.

After Sept. 11, the foreign "reinsurers" that provide backing for many American insurers withdrew support for terrorism coverage, forcing many companies to dramatically increase premiums on coverage they used to toss in to policies for free.

The bill puts the federal government in the role of reinsurer, committing it to footing up to 90 percent of the claims from terrorist attacks, up to $100 billion. It would only apply when an attacks caused at least $5 million in damage.

Morris said the bill is needed because there are so many problems with the business of terrorism insurance. While health and flood insurance can use risk models to determine eligibility and premium rates, there is no way to predict terrorism.

"You can model those fields and predict your losses. There's none of that for terrorism. It's totally unexpected," Morris said.

But opponents said insurance companies are getting help for a problem they can afford to fix themselves. Hunter said insurers will get rich off the premiums they collect, while absorbing none of the costs.

"For them, that's pretty cool. But for taxpayers and businesses paying premiums, it's not," he said.

There have not been any delays linked to terrorism insurance at the Washington region's highest-profile construction project, replacement of the Woodrow Wilson Bridge. But a spokesman for the project welcomed the insurance legislation anyway.

"There are so many factors that go into a bid, but it (the bill) can only have a positive effect," said John Undeland, spokesman for the Wilson Bridge Project. "It's just an element of risk that we have to look out for."

Terrorism coverage has not been a problem for the State Highway Administration, which self-insures its bridges, tunnels and roads, said spokeswoman Kelly Boulware.

"Because we have so many miles, it would incur a great cost to try and insure them with a separate policy," she said.

Boulware said that none of the state's current projects have been postponed because of lack of terrorism coverage.

Copyright 2002 University of Maryland College of Journalism

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