By Jackie Spinner
Washington Post Staff Writer
Saturday, November 17, 2001; Page A08

The House will move quickly after the Thanksgiving recess to pass a terrorism insurance bill aimed at preventing an economic crisis if coverage is not available after Jan. 1, Majority Leader Richard K. Armey (R-Tex.) said yesterday.

Although House Republicans and Democrats have not resolved all of their differences, including disagreement on a provision in the legislation to limit liability, Armey said he is confident a new federal system for backing up the insurance industry can be in place "in a very, very few short weeks."

The Senate is considering other proposals.

The House plan would provide billions of dollars in loans to help pay terrorism claims resulting from a future attack. The insurance industry would be required to pick up the first $1 billion in losses, and the government would pay 90 percent of any additional claims. The industry and its policyholders would have to repay the money.

A provision that would have allowed insurers to use tax-free reserves to build resources to pay terrorism claims was eliminated yesterday after the Ways and Means Committee called for a study of the issue instead.

"It offers a hand up, not a handout, and only if we suffer another terrorist attack," said Rep. Michael G. Oxley (R-Ohio), chairman of the Financial Services Committee. "There's no bureaucracy created, and the government would not be in the insurance business."

The House leaders sought to ease concern among regulators, insurers and businesses over whether Congress could act quickly enough to resolve a crisis looming over the insurance industry.

Reinsurance companies, which provide insurance to primary insurance companies, have already indicated that they will not cover terrorism after Jan. 1 because of uncertainty over how to price the risk. About 70 percent of reinsurance policies expire at the end of the year.

As a result, primary insurers have begun petitioning state regulators to allow them to exclude coverage for losses due to terrorism from commercial and personal policies.

"This isn't an insurance bill. This is a bill to keep the economy going," said Rep. John J. LaFalce of New York, the top Democrat on the House Financial Services Committee. "This is far more important than the economic stimulus package."

Julie A. Rochman, senior vice president for the American Insurance Association, a trade group of many large U.S. primary insurers, said yesterday that Congress appears to be making progress but that time is running out.

"Every day that passes there's going to be increased instability in the marketplace as more and more people receive cancellation and non-renewal notices," she said.

Senate leaders are still trying to work out jurisdictional and substantive conflicts in two competing insurance proposals, one offered by the Banking Committee and the other by Commerce Committee. Senate leaders met Thursday to try to reconcile them.

The White House also hosted a meeting yesterday with several dozen business groups to talk about the problems facing the insurance industry.

The Bush administration has supported a plan that was used as a basis for the Senate Banking Committee proposal, under which the government would pay the first 80 percent of claims resulting from a terrorist attack next year.

Unlike the House proposal, the Bush plan would not require insurers or policyholders to reimburse the government.