Despite the negative tone of the U.S. Treasury's June re- port on the federal terrorism backup, the debate at this point is not whether the Terrorism Risk Insurance Act (TRIA) will be extended, but on what terms. In his testimony on Capitol Hill in July, Treasury Secretary John Snow made it clear that the Bush administration will accept an extension of TRIA–as long as Congress goes along with some changes, including a big increase in the level of losses that is required to trigger the use of the federal backstop.

Insurance experts say that the London terrorist bombings, which occurred a week after Treasury's report was released, contributed to the administration's willingness to extend TRIA. Robert Hartwig, chief economist for the Insurance Information Institute, credits the bombings with influencing not only the administration, but legislators as well. "Now, it looks like there's bipartisan support for bills in both houses," he says.

Another factor was a report from the Organization for Economic Co-operation and Development (OECD), a group of 30 industrialized nations, also issued the week after the Treasury's report. The OECD report says another major terrorist attack could reveal shortfalls in terrorism coverage and argues that at this point, the insurance industry doesn't have the capacity to provide all the terrorism coverage that's needed.