The Terrorism Risk Insurance Act was approved in the wake of the attacks of 2001, when many insurers stopped providing terrorism coverage or made it extremely costly. Scheduled to expire at the end of this year, it requires the federal government to cover 90 percent of combined damages in excess of $15 billion and up to $100 billion.
In a letter delivered to Congressional leaders, Treasury Secretary John W. Snow said the law had achieved its "temporary objectives" of stabilizing the private insurance market during a period of economic uncertainty. Now that the economy has improved, Snow said, the administration will not support a backstop unless the insurance industry is willing to shoulder more of the risk.
In an assessment of the law, also released yesterday, the Treasury acknowledged that eliminating the backstop was likely to result in "less terrorism insurance written by insurers, higher prices and lower policyholder take-up." But in time, it said, the industry could increase its capacity to insure terrorism risk.
Martin L. DePoy, a spokesman for the Coalition to Insure Against Terrorism, made up of trade associations, corporations and nonprofit groups, called this reasoning "flawed." No one, he said, could predict the losses and other economic repercussions from an attack.
Kevin J. Madden, managing director of the real estate practice for Aon, the global insurance brokerage company, said that without the government backstop, insurance premiums for owners of big office buildings in high-risk cities like New York, Washington and Chicago could double or triple.
