Washington==President George W. Bush this afternoon signedwithout comment or fanfare a two-year extension of the TerrorismRisk Insurance Act, just over a week before the controversialfederal reinsurance program was due to expire.

The bill signed by the President virtually tracked a scaled-downversion of TRIA extension passed by the Senate the week beforeThanksgiving, backed by the White House. The House ofRepresentatives passed a much more ambitious approach that wouldhave expanded TRIA's coverage and established different "silos" ofinsurer retentions depending on the line of business, but that billwas virtually dismissed out of hand in limited negotiations betweenHouse and Senate leaders.

The legislation will extend TRIA until Dec. 31, 2007, whilecutting the scope of its coverage.

Commercial auto, burglary/theft, surety, professional liabilityand farmowners multiple-peril will no longer be covered under theprogram. The negotiators did agree to include general liability,which was left out of the original Senate bill, but group life–abig addition in the original House version==was not included in thefinal product.

Insurers will also have to shoulder a bigger portion of thelosses from any future terrorism event, as the industry's retentionlevel will rise from the current 15 percent to 17.5 percent nextyear, and 20 percent in 2007.

In addition, the law raises the program's trigger from an eventof $5 million in insured losses, to one of $50 million effectiveApril 2006, and $100 million in 2007.

In addition, a "President's Working Group" will be appointed toreview how the program works and make recommendations for alonger-term solution.

The American Insurance Association said earlier in the week thatone of the top issues on the industry's agenda next year would beto get involved with the working group.

Dennis Kelly, director of federal media relations at the AIA,said the purpose of the group is to do an analysis of marketconditions for terrorism insurance. They will do this analysis inconsultation with the National Association of InsuranceCommissioners, representatives of the insurance and securitiesindustries, and policyholder representatives, he noted.

The AIA, Mr. Kelly added, "will continue our focus and attentionon analyzing potential long-term solutions. We're looking forwardto engaging the President's Working Group as soon as possible. Theproblem has not been solved for the long term. As far as we areconcerned, there should be a continuing federal role in dealingwith catastrophic terrorism, especially when it comes toNCBR==nuclear, chemical, biological and radiation==events.Catastrophic terrorism remains uninsurable by the privatemarket."

"This bill won't make terrorism risk disappear or make it anyeasier to insure without the participation of the federalgovernment," according to Joseph Annotti, vice president of publicaffairs at the Property Casualty Insurers Association of America."This extension gives us some breathing room that allows us to keepmaking this coverage available while we continue to work on along-term, market-driven solution."

He also predicted that even though Congress just enacted atwo-year extension, the issue will be back on the congressionalagenda in the second half of 2006.