The US Government is moving to enact legislation in a matter of weeks that would normally take years - in a bid to avert the economic fall-out of an insurance industry that can no longer take on the full risk of terrorism.

And at least two senior executives, from Bermuda-based companies ACE and XL - Brian O'Hara and Brian Duppereault - are at the front of the push on the US Government.

Following last month's terrorist attacks, the US Government is being asked to provide a "back stop" for the insurance industry, which is now operating against a changed landscape where the threat of terrorism on US shores is all too present.

This according to a Washington D.C. organisation which lobbies the US Government on behalf of its more than 400 members - including several Bermuda-based insurers - from the property and casualty insurance industry.

Julie Rochman, spokesperson of the American Insurance Association (AIA), said there was a pressing need for the US Government to move forward on what would amount to the Government stepping in as an "insurer of last resort," when it comes to terrorism.

And Ms Rochman said local insurance giants ACE and XL had been very active in Washington D.C., attending a meeting with George Bush on September 21, as well as other meetings "in town", she said.

Ms Rochman told The Royal Gazette, with the complexity of the issue it would normally take eight to 12 years to get passed through Government. But, she said it was compacted public policy at work, as the issue must be resolved on a short time line - before the end of the year, when a large percentage of insurance policies become renewable.

The fact that senior insurance executives have come on board, Ms Rochman said, was a testament to the current pivotal position of the insurance industry.

The need to act before the end of the year is urgent as reinsurers have said that they will no longer cover acts of terrorism, leaving insurers fully exposed to any further acts of terrorism.

Ms Rochman told The Royal Gazette that the industry was accountable and paying all claims - but it had been the most expensive insurance event in world history, and that companies could not face further hits of such magnitude.

Ms Rochman said the risk of terrorism on US shores before September 11, was considered so remote that "gratis" coverage was written into policies. This meant, she said, that although insurers were well-capitalised, this has amounted in general terms to "free coverage, with insurers paying claims out of their pockets".

Ms Rochman said reinsurers had also been hard hit, and as more loosely regulated bodies, reinsurers have said: "We won't do terrorism."

Insurers, according to Ms Rochman fall under greater regulation, but if reinsurance is not available that leaves insurers 100 percent responsible if there are acts of terrorism.

Ms Rochman added that the risk cannot be quantified after September 11. "It is potentially infinite," she said.

The AIA, as an advocacy organisation at both the federal and state levels, is lobbying the US Government on behalf of its members and Ms Rochman said what was being looked for really is a "back stop not a bail out - as with other industries, such as the airlines".

Ms Rochman clarified that a bail out is "money in pocket", whereas the insurance industry is not looking for any government funding to meet existing claims, but is seeking a means to enable the continuation of business - and the writing of terrorism coverage into policies. But as this is no longer a risk that can be reasonably assessed, the US Government is being asked - over a defined period of time - to be the "insurer of last resort", which would leave insurers only partially exposed to terrorist acts with Government picking up the difference.

"We have asked the Government to draw a line, and let us know where our responsibility lies," she said.

Ms Rochman said the "back stop" being sought was not permanent, but over a period of time - three years is being discussed - to allow the insurers to "get back on their feet".

Ms Rochman said it was appropriate to lobby the Government as acts of terrorism are generally intentional acts afflicted against the Government, and as such it is appropriate for the Government "to share the risk with us".

When asked how broad the definition of terrorism was, and if it, for example, would include anthrax attacks - Ms Rochman said that is another thing that must be defined so that there is a single, national definition of terrorism.

Previously insurers did not cover acts of war, but Ms Rochman said the lines between an act of war and act of terrorism had now been blurred, and that there had to be an across the board definition, not something that changes state to state.

Ms Rochman said there were several hearings taking place this week and next week, in the US capital, but that it is key that a bill - as a vehicle for legislation - be introduced, and she hoped that would happen this week.

Wendy Davis Johnson, director of global communication at ACE, said: "Regarding the terrorism insurance proposal currently being considered by the US Government, it has been clear from industry meetings that there is widespread recognition among the US administration and Congress, as among the National Association of Insurance Commissioners (NAIC), the American Insurance Association (AIA) and the Reinsurance Association of America (RAA) of the scale of the problem created for US insurance consumers as a result of the September 11 tragedy.

"The government-private sector proposal addresses the new reality of the insurance marketplace that has resulted from the events of September 11. The purpose of insurance is to spread risk on a predictive loss basis, but terrorism risks are inherently unpredictable and it is virtually impossible to assess their severity and frequency - ever more so since September 11. In order to meet the insurance needs of US customers, a plan along the lines of the ones being considered by the US Congress is essential. Otherwise, coverage for terrorism simply won't be available," Ms Davis Johnson said.

XL spokesperson Roger Scotton declined to comment on how the company would be affected by a decision by the US Government. Mr. Scotton also declined to comment on whether or not XL would be excluding terrorism from future policies.

Both ACE and XL have US subsidiaries that write insurance in the American marketplace.

According to the New York Times, the insurance industry is receiving support from the financial services sector, with a leading executive, in a letter this month to George Bush, stating: "This is not an issue only for insurers...rather, it is an economic issue. The US economy cannot possibly recover without the full availability of insurance."