Time is running short to pass terrorism insurance bill.

For evidence of the need for terrorism insurance legislation, look no further than... the small California town of Tulelake?

According to published reports, the town was shut down after losing its liability coverage. City officials were reportedly informed by a subsidiary of Kemper Insurance Companies that their liability policy would not be renewed because the insurer couldn't get a waiver to exclude acts of terrorism.

The town's three police officers stopped patrolling and public works vehicles were pulled off the road. Garbage collection ceased Aug. 7, according to public reports.

The difficulty faced by Tuletake is just one example of the impact that the lack of terrorism insurance is having across the country. As the one-year anniversary of the Sept. 11 attacks being marked, Congress is considering a bill that would provide a federal backstop for insurance. In a speech delivered Sept. 3 in Pittsburgh, President George Bush urged passage of the bill.

"There's been over $8 billion worth of projects that have been delayed because they can't get insurance. That means 300,000 workers aren't working" Bush said. "If we want to do something to make sure the job base continues, Congress needs to get moving on a terrorism insurance bill."

Although the House and Senate have both passed versions of a terrorism insurance bill, the two houses are meeting in conference to work out differences in the bill. But with time on the Congressional calendar dwindling and many politicians facing reelection, the clock is ticking. In fact; one industry group called for the work on the legislation to be completed before Sept. 11.

"The Coalition to Insure Against Terrorism welcomes the appointment of House and Senate conferees and is hopeful they can complete their work on the legislation prior to the first anniversary of the Sept. 11 attack on America," said coalition spokesman Martin DePoy.

Insured losses from the World Trade Center attacks are expected to total $40 to $50 billion, more than twice the cost of any other disaster in U.S. history. Before Sept. 11, the largest loss stemming from a disaster occurred in 1992 when Hurricane Andrew caused an estimated $20 billion in losses.

As a result, building owners across the country have been having difficulty obtaining terrorism insurance. If it is available, owners must pay exorbitant rates for coverage. As an example, the MTA recently had to pay $6 million for $1.5 billion of coverage that included a terrorism provision. The Golden Gate Bridge in San Francisco, which has a replacement cost of $2 billion, currently has no terrorism insurance coverage.

The issue is also having a damaging impact on real estate transactions, such as the sale and refinancing of buildings. The Mortgage Bankers Association has estimated that, so far, the issue has killed $3.7 billion in real estate deals. Locally, sales of 1515 Broadway and 450 Lexington Ave. were hampered by the issue.

Edward LaGrassa, manager of commercial business development at Rose Associates, said the cost of terrorism insurance is typically 1 to 2% of the building's value. For example, if a building is worth $100 million, then the insurance would cost $1 to $2 million.

"The question in the market now is, 'who will pay for the higher premium?"' LaGrassa said. "There will be tension in he market until this issue is resolved."

Ultimately, tenants are likely to bear the added cost of the premiums, but how that issue is resolved varies between leases. "Bigger and mid-sized tenants may have bargaining power, more clout, than smaller tenants when they sign a lease," he said.