While extending the three-year-old TRIA, which is due to expire Dec. 31, the Senate bill markedly shrinks the scope of federal involvement in creating a backstop for paying terrorism insurance claims.

The Senate bill raises the "trigger" for federal involvement in paying claims for an act of terrorism from $5 million currently to $50 million in the first year and $100 million in the second year.

It also raises the retention level on claims from the current 15 percent to 17.5 percent in the first year and 20 percent in the second. In addition, it reduces the number of business lines covered by the federal backstop.

In a key point that follows the expressed desires of the Bush administration, it seeks to ensure that the federal government ends its role in providing a terrorism risk backstop after Dec. 31, 2007.

The House bill, by contrast, leaves open the possibility that the bill could be extended and adds group life to the lines covered.

Equally important, it introduces a "silo" system for federal involvement by establishing different levels of government support based on the market's perceived ability to provide reinsurance for a particular line.

For example, the government's responsibility would be greatest for claims resulting from a nuclear, chemical, biological or radiation attack. Workers' compensation would also have a high government backstop.

Sen. Richard Shelby, R-Ala., chairman of the Senate Banking Committee, noted that the bill==S. 467, the Terrorism Risk Insurance Extension Act of 2005==was the result of bipartisan efforts, and passed out of the Senate Banking Committee without objection.

"If enacted, this legislation will satisfy the short-term needs of the insurance industry while promoting the development of private market solutions," he said.

"I remain committed to working with the House and the administration to pass an extension that reflects the balanced principles outlined in this bill," he added.