WASHINGTON (AP) -- Treasury Secretary Paul O'Neill on Wednesday presented to Congress the administration's proposal to have the government pay a major share of insurance costs from future terrorist attacks. He said the White House is willing to work with lawmakers to find a solution.
"The terrorist attacks of Sept. 11 created widespread uncertainty about the risk and potential costs of future terrorist acts," O'Neill said in testimony to the Senate Banking Committee. "Continued economic activity is dependent on well-functioning financial markets -- where the lifeblood of capital is provided to business enterprises."
U.S. insurance companies that write policies protecting property could face payouts of $30 billion to $50 billion for the terror attacks on the World Trade Center towers and the Pentagon -- the biggest insured loss ever. Major reinsurance companies, which assume part of the risk covered by insurance firms, have said they won't renew terrorism coverage after Dec. 31, when many contracts expire.
Without terrorism coverage, it would be very difficult if not impossible to get bank loans for building construction, pipelines, bridges and other projects, putting a damper on the economy and the rebuilding effort, administration officials have warned.
The administration proposal would split between the government and the insurance industry the costs of property claims from future terror attacks. Taxpayers would pick up 80 percent of the first $20 billion in costs next year and insurers the rest.
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