Key legislation that guarantees the US government would provide a "back stop" to insurers in the event of a future terrorist attack cleared the American Congress on Tuesday.

The insurance sector has pushed for the measure since the catastrophic September 11 terrorist attacks and at least two heads of Bermuda insurance companies - XL's Brian O'Hara and ACE's Brian Duperreault - were reportedly active in Washington on the matter, including a meeting between a number of high-profile insurers and President Bush at the White House only ten days after the attack.

Now that the legislation - which would apply to acts of terror on behalf of any foreign person or foreign interest that resulted in $5 million or more in damages - has the approval of both the House of Representatives and the Senate, President George W. Bush has said he will sign the bill into law as early as next week.

The bill got majority approval when it was passed through the Senate by a vote of 86 to 11 on Tuesday and passed by the House of Representatives last week.

Although the industry has stepped up to bat for the claims of the September 11 attacks - which was the most expensive loss in the industry's history costing more than 100 insurers a total of $40 billion or more, according to estimates from the Insurance Information Institute - the sector argued that "backstop" legislation needed to be enacted as a safeguard against the costs of another terrorist attack which would spell financial ruin for insurers.

Other sectors have also pushed for the legislation - and especially businesses involved in real estate projects, from mortgage providers to labour unions - saying certain developments had been held up because of the difficulty in securing terrorism insurance.

The bill makes the federal government responsible for paying 90 percent of each insurer's primary property-casualty losses above a set annual deductible structured to cover possible terrorist attacks through 2005 on a sliding scale over that period. The programme is designed to cover up to $100 billion in losses.

Mr. Bush, in a press statement commended the passage of the legislation saying it was vital to economic recovery and especially important for the construction industry: "Terrorism insurance will help get America's hard hats back on the job, create new jobs for America's workers and spur billions in new investment in construction projects all across the country. The bill comes at a critical time, as commercial construction is at a six-year low," he said.

Julie Rochman, senior vice-president public affairs at the American Insurance Institute, told The Royal Gazette yesterday that personnel from both ACE and XL were instrumental in getting the legislation put in place.

She called the efforts of Mr. O'Hara and Mr. Duperreault and other senior management, "indispensable", adding that as the American insurance industry was state regulated, there was no federal department to advise legislators: "This was an interesting public policy exercise, and it was very important that company people came into town. Senior level (insurance) executives were available to answer questions for the administration...," she said.

As for the response of the industry to the legislation, she said: "I wouldn't say we are thrilled as now we have to implement it but we hope and believe that the programme can live up to its billing. But we don't want to say it will. It is complex - and we don't know how it will pan out in the marketplace."

Ms Rochman added that the programme, for example, states insurers cannot price terrorism insurance at rates that are "excessive, inadequate or unfairly discriminatory," but she asked: "How is this defined? The nature of terrorism risk hasn't changed - it is an unknown. Terrorism seeks to overcome loss control mechanisms and modelling (systems) for natural disasters won't work for terrorism...There is a little science, art and guessing when pricing (terrorism coverage) for a project," she said.

Ms Rochman said Mr. Bush was expected to sign the bill into law on Tuesday after which insurers would have 90 days to notify policy holders of the terms and conditions of terrorism coverage. Policy holders have 30 days to respond and can decline coverage.

Ms Rochman concluded: "The transition is going to be very interesting to watch."

Meanwhile ACE vice-chairman Don Kramer also said yesterday that it was not clear what impact the legislation would have: "It is complicated - we really don't know how this will work."

Mr. Kramer added that there were a lot of "side issues" included in the bill - for example, each state's authority to continue to set their own legal requirements for insurance policies and the state's ability to challenge a company's rate of pricing terrorism insurance. To that end, Mr. Kramer said pricing levels could prove to be an issue and that ultimately the industry could still be left with a "fair amount of exposure".

Mr. Kramer also said it could still prove difficult for "trophy properties" such as the Empire State building, to get adequate risk protection against future acts of terrorism.

While the insurance industry waits to see what affect the bill will have on the sector, some critics of the legislation have branded it as a "rip off" for consumers.

Pacific News yesterday called the measure a "federal handout gift-wrapped by Democrats and Republicans with close ties to the industry". And Reuters yesterday reported that consumer organisations were decrying the measure as it left "taxpayers on the hook for potentially billions of dollars of claims and removes incentives for insurers to take protective measures against future attacks".

Travis Plunkett, legislative director for the Consumer Federation of America, told Reuters: "Instead of helping the relatively few businesses that can't get terror coverage, Congress is poised to give away reinsurance to a rich and politically powerful insurance industry," he said.