Terrorism risk insurance affordability has improved over the past five years, according to a new report.

New York-based reinsurance broker Guy Carpenter & Co. said in the study put out today that despite increases in risk retentions required under the 2002 Terrorism Risk Insurance Act, insurers have allocated additional capacity to terrorism risk, prices have declined and take-up rates by policyholders have increased.

The report cites better risk management and modeling for terrorism attacks with greater reinsurance capacity as factors improving the market climate.

There remains little coverage for chemical, nuclear, biological and radiological risks. “This has less to do with terrorism specifically than with the nature, scale and uncertainty of the damage and losses from these events,” the report said.

The future climate for terror risk coverage hinges for the most part on the success of efforts to extend TRIA, which expires this year, according to the study.

“With the change in Congress back to control by the Democrats last year, the outlook is more likely for an enactment of a federal backstop for terror cover, probably modeled on the current program,” the report said.

More Democrats tend to represent urbanized areas and are therefore more likely to view the issue as a high priority, the report added.

The insurance industry expects the House to take the early lead on considering proposals for a long-term solution. “The Senate’s timetable is unclear at this point, but it is not likely to move before the House does,” Guy Carpenter said.

The industry expects any legislation will look a lot like the current law, rather than a complete rewrite of the program. “Some in the industry believe the TRIA debate will drag out until the fall,” the report noted.