US lawmakers on 7 th December 2005, passed a legislation in the House of Representatives that would extend federal protection for terrorism insurance coverage for at least two years while putting more onus on the private sector in the event of a terrorist attack.

The bill to extend the Terrorism Risk Insurance Act (TRIA) follows a long-running debate in Washington over whether the insurance and re-insurance industries could withstand a catastrophic terrorist attack on US soil, and whether the government should have a role in protecting businesses that would be affected by a terrorist act.

Congress passed TRIA as a temporary measure following the September 11 attacks. The act guaranteed that the federal government would pay for up to 90 per cent of all insured losses, up to $100bn (€85bn, £58bn) a year, in the event of a nuclear, biological or chemical attack by foreign terrorists. In return, insurance companies were forced to make terrorism insurance available.

Like the Senate's TRIA bill, which was passed in November 2005, the House bill increases the losses the industry would have to suffer before TRIA was triggered, from a $5m threshold to $50m in 2006 and $100m in 2007.

The bill that passed in the House on 7 th December 2005, with a vote of 371 to 49, would also raise the deductible on all lines of insurance from their current level of 15 per cent and would mandate the creation of a commission to draft proposals to establish a programme for pooling terrorism insurance.

The White House on said it strongly opposed the House bill because it failed to substantially reform the existing programme. Instead of scaling back the federal backstop, the administration argued, the House version of the bill expanded TRIA by including life insurance provisions and by adding domestic terrorism coverage to the programme. The White House also criticized the bill for being "substantially more complex" than the original TRIA, which the administration said could lead to unintended consequences.

One new provision that was added to the House bill would prohibit insurers from denying life insurance coverage to individuals on the basis of where the individual travels, unless the insurer can prove that the denial is actuarially defensible.

The Bush administration has argued that TRIA, which expires at the end of this year, was hindering the development of the insurance market. The insurance industry has in turn said the sector should not bear the brunt of a potential terrorist attack.

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