In his assessment, Mr. Crerar also said, "While the recommendations from the administration present new challenges, it is important to keep in focus the fact that they are not opposed to a federal role in providing a terrorism reinsurance backstop."

The Treasury report mandated by Congress to assess TRIA's effectiveness put forward an administration position that in the future any TRIA legislation should place greater limits on the amount of federal support.

That position drew the fire of the real estate industry, which called the department's study containing such a recommendation "flawed," and asked for prompt work by Congress to extend the present program.

The Treasury study "does not present an accurate picture of the current terrorism insurance marketplace and fails to acknowledge that the risk of terrorism is unknowable," said Martin DePoy, vice president for government relations at the National Association of Real Estate Investment Trusts.

Mr. DePoy is also a spokesman for the Coalition to Insure Against Terrorism (CIAT), an ad-hoc coalition of real estate and business interests working to persuade Congress to extend the current federal program.

Reflecting comments by the Risk Insurance and Management Society as well, Mr. DePoy said that "policyholders remain convinced that a federal terrorism insurance program of some kind must be in place next year to help protect the U.S. economy and American jobs."

He added, "Treasury's flawed treatment of the issue reinforces the urgency of Congress reopening the debate so that the American people better understand TRIA's role and importance. The House and Senate should schedule hearings immediately."

Unless extended, TRIA expires Dec. 31, and while most insurance trade groups were publicly optimistic, privately they are telling their members that the Treasury report means that there will be "long odds to an extension," as stated by one trade group lobbyist. "It is possible, but not likely, that TRIA will be extended," the lobbyist added.

Sen. Richard Shelby, R-Ala., a key figure as chairman of the Senate Banking Committee, will hold a hearing on July 14 and draft legislation on the measure, it was learned.

In the House, response to the report came from Rep. Mike Oxley, R-Ohio, chairman of the House Financial Services Committee. He said his committee will start work soon on a revamped program that will serve as a transition from the current program but be narrower in scope than TRIA. "Any revamped terrorism insurance program must encourage greater private-sector involvement and must improve the insurance marketplace," Mr. Oxley said.

"Any successful package must include full payback of claims, narrowed taxpayer exposure to insurance risk, narrowed federal involvement in order to allow development of the private market, and private sector layers of coverage," Rep. Oxley added.

But Democrats on the committee issued a statement calling for immediate action on their legislation, which would extend the current bill for two years. "It is imperative that American business have this needed insurance available to protect their businesses from terrorism-related incidents," said Rep. Barney Frank, D-Mass., ranking minority member of the House Financial Services Committee.