Businesses all across America breathed a collective sigh of relief in December 2005 when the federal Terrorism Risk Insurance Act was extended for two more years–only days before its year-end expiration date. Had TRIA expired, the insurance industry would have seen another market failure such as occurred after Sept. 11, when insurers stopped offering terrorism coverage.

For months, insurers and commercial policyholders urged lawmakers to maintain federal backstop protection for catastrophic terrorist-related losses. They succeeded in getting TRIA extended, but clearly the time has come to develop a long-term solution to terrorism risk.

Although many in Congress were skeptical of the industry's dire warnings about the affordability and availability of terrorism coverage should TRIA be allowed to lapse, federal lawmakers and the White House eventually did the right thing.