If TRIA expires Dec. 31, "any policy that we wrote after the first of January is exposed without benefit of the TRIA reinsurance," he said, referring to the federal backstop provision in the act. "There is an embedded urgency that I don't think is being recognized."

With respect to higher-valued property--"target risks"--and workers' compensation risks where there are concentrations of employees, "we could conceivably see availability problems," he said.

Brian O'Hara, president and CEO of XL Capital, noted that Republicans in Washington advocate a free-market solution to terrorism exposure.

"A lot of us would gladly [agree to] that if this were a free market," he said, noting that insurance statutes prohibit insurers from excluding terrorism from workers' comp policies. And in New York, insurers can't exclude "fire-following" property exposures arising from terrorist acts.

Noting that a Nevada Democrat is leading the push for TRIA's extension, likely pushed by casino-owner constituents, Mr. O'Hara said there is a "rural-urban" divide that adds to the problems of getting TRIA extended.

"Most of rural America is saying, 'What problem?'" he said, while employers in New York, Chicago and other areas with other workers' comp and property exposures have the opposing view. "There's a real split politically in terms of urgency."

Agreeing with Mr. Lilienthal, he said that as the TRIA expiration gets closer without a solution, "what there is of the free market will react. The only way to do it in workers' comp is to stop taking the risk; in property, raise prices or withdraw."

Asked specifically how the insurers are currently handling the terrorism risk exposure that they are potentially taking on now with every policy they write, Mr. O'Hara said that XL is already pulling the plug on some risks.

"We are not writing any large workers' comp programs centered in high urban" settings, and XL has identified property risks with high urban exposures for non-renewal or price increases.

"One way to reduce your portfolio is to raise prices until the risks go out the door," he said.

Mr. Lilienthal said, "There is no way to hedge this, move it, shift it--and you can't price for it." He said he communicates his company's level of risk exposure to the board of directors, noting that communication includes a discussion of model results and the political landscape.

He said it's up to the board to instruct him on whether the level of risk is beyond their tolerance. "Then we'll take it down," he said, noting that he also communicates the implications of taking it down. "There are going to be mayors around the country saying you're bad guys," he said.

Turning to some other legislative issues, Mr. O'Hara said that while getting class action reform passed "was helpful," it's not a solution to rising civil litigation costs for insurers.

"What is illustrative of the real issues is the impasse at the Senate over President Bush's appeals court nominees," he said. Noting that his own informal study of loss cost trends has found falling casualty loss costs under Republican administrations and rising costs under Democrats, he asserted that plaintiffs' attorneys are big contributors to Senate Democrats, who are now blocking conservative appellate justice appointments.

"Those [judges] are very important people in the judicial process, particularly in our business where you have large awards" that go to appeal.

On a separate issue, asbestos claims reform legislation, Mr. Lilienthal said CNA believes a trust fund approach is the best way to do it--putting finality on the exposure and removing the clouds over the balance sheets of insurers.