Greenspan made his comments concerning the federal backstop measure that is due to expire this year, during testimony before the House Financial Services Committee

Mr. Greenspan said he has "yet to be convinced" that a private market for terrorism insurance can be made to work.

His remarks came in response to questions from Rep. Sue Kelly, R-N.Y., who has voiced strong support for renewal of TRIA.

Answering a question from the congresswoman about the viability of a private market for terrorism insurance separate from TRIA, Mr. Greenspan responded, "There are instances in which markets do not or cannot work, and?I have not been persuaded that this market works terribly well."

Later in the day, Sen. Richard Shelby, R-Ala., chairman of the Senate Banking Committee, confirmed that a hearing on TRIA will be held by his panel March 3. He did not name any witnesses.

Carl Parks, senior vice president, federal government affairs for the Property Casualty Insurers Association of America(PCI) reacted that, "Chairman Greenspan stated what insurers have known for years: a private market for insuring inherently unpredictable risks of catastrophic size, such as terrorist attacks, cannot be made to work without some level of federal involvement."

Mr. Parks added that, "Terrorism is a national economic security problem. It requires a long-term, national response, which includes a federal role. PCI continues to work diligently with our member companies and members of Congress to find an appropriate solution to the risk terrorism poses to our economy."

Dennis Kelly, a staff official at the American Insurance Association, said that AIA is working with its members, congressional leadership and the Bush administration to fashion legislation that can be completed this year extending TRIA, which expires Dec. 31.

"We are urgently calling for an extension of the federal backstop for terrorism insurance after Dec. 31, 2005," Mr. Kelly said. "We just can't get to Dec. 31 and face a cliff."

An extension of TRIA, he said, would "allow time for public policymakers to determine the most appropriate long-term solution to the terrorism insurance crisis."

Charles E. Symington Jr., senior vice president of federal government affairs, at the Independent Insurance Agents of America, said, "Chairman Greenspan's comments reflect what we have been saying all along, that terrorist attacks of this nature remain uninsurable and the private marketplace has not developed."

Mr. Symington said it is "crucial that we renew this important federal backstop that would insure against these types of losses in a way that the private sector, at this time, simply cannot do."

Businesses and insurers are starting to make decisions that impact operations beyond the potential sunset of the language and the expiration of TRIA, Mr. Symington said.

He continued, "The lack of terrorism insurance would impact our economic security by potentially threatening billions of dollars in commercial property financing,"

If there ultimately is no federal backstop in place, Mr. Symington said, there is concern that adequate markets will not exist for this coverage and/or companies could not bear the high costs that likely would be necessary to purchase this type of coverage, and thus would go uninsured,

He said this could "create serious exposure issues in the event of a catastrophic terrorist attack. Such an event's effects would be likely to go well beyond the businesses affected and in fact could have serious repercussions for the nation's economy."

It is also difficult for insurers to assess and adequately insure this type of risk, given its unpredictable nature, he noted.

"Chairman Greenspan's comments highlight our primary concern that the market can't reasonably assess where a catastrophic terrorist attack may occur, and this uncertainty makes it nearly impossible to insure against it, leaving a serious void in the private marketplace. That is why we ask Congress to extend TRIA as soon as possible and continue to explore long term solutions," Mr. Symington