Although it is coming down to the wire, there seems to be little doubt that negotiators in the House and Senate will hammer out a compromise on the reauthorization bill for the Terrorism Risk Insurance Act (TRIA) in the next few days or weeks. Despite the fact that the House and Senate versions of the bill differ substantially and the White House has threatened to veto any bill that veers far from TRIA in its current form, industry and government insiders expect compromise legislation to emerge that extends TRIA for at least another seven years, similar to the Senate version, without some of the more expansive changes passed by the House in September–such as expanding TRIA coverage to nuclear, biological, chemical and radiological acts of terrorism–which currently are not part of the existing law.

“It's absolutely critical that TRIA pass,” says Janice Ochenkowski, president of the Risk & Insurance Management Society (RIMS) and a managing director at Chicago real estate and financial services firm Jones Lang LaSalle. “We had a taste of what it was like not having a viable [terrorism] insurance market shortly after 9/11.” That was a time, she recalls, when construction projects had to be postponed because they could not buy either property or workers compensation coverage and companies struggled with sizable in hikes in almost every line of insurance–all factors that led to TRIA's initial passage in 2002. “Given the state of the economy currently, we need this,” adds Ochenkowski.

Born from the 9/11 terrorist attacks, TRIA established a federal backstop for insurance policies covering catastrophic losses from terrorist attacks. Without it, there is agreement that insurance companies would be unwilling to cover such risks, leaving the market and insurance buyers without coverage options. Part of the problem with the extensions of TRIA–this would be the second–is that the program was not meant to be a permanent solution to catastrophic terrorist losses. Even sponsors of the expansive House bill, which calls for a 15-year extension, claim that the long extension is meant to “help spur the further development of a private market for terrorism risk insurance,” something that has yet to happen. Insurance industry advocates call such a private sector solution fantasy. “Large-scale terrorist attacks are not an insurable risk. You don't know where the risks are, and there is no information on which to base rates,” says Robert Hartwig, president and chief economist at the Insurance Information Institute in New York. “Most would view a permanent TRIA as ideal, but the political reality is that it is not going to happen.”