Mr. Kelly explained that a plausible terrorist attack scenario shows insured losses exceeding $250 billion. "Yet commercial property-casualty insurers have approximately $169 billion of capital surplus correlated to TRIA-related coverage.

This coverage, he said, also covers losses from risks such as hurricanes and, "That is why the federal government has to play a role in providing a backstop – for the economic and national security of our nation."

NAMIC and other industry representatives have voiced concern about the tone and substance of the Treasury Report, believing it will make it more difficult to persuade Congress to extend TRIA in its present form for two years- an industry objective.

When the Treasury Report was released June 30, Robert Detlefsen, NAMIC Director of Public Policy, expressed "dismay" at the report's unduly optimistic conclusion that "over time, we expect that the private market will develop additional terrorism insurance capacity."

Mr. Detlefsen said that Treasury's expectations are based on the authors' belief the lack of available and affordable terrorism coverage caused by TRIA's expiration will "spur the buildup of surplus as insurers tap into capital markets; the development of private reinsurance and other risk-shifting mechanisms; and additional mitigation and terrorism deterrence efforts by policyholders."

The report is silent as to what the capital market solutions and "other risk-shifting mechanisms" might be, or how they would work, Mr. Detlefsen said.

As for "development of private reinsurance," that market already exists under TRIA," he said.

The Treasury report acknowledges that primary insurers' deductibles under TRIA have steadily risen to several billion dollars in the case of some large insurers.

Mr. Detlefsen said that reinsures could theoretically offer coverage for these deductibles, but few have done so because they lack the capacity for covering the risk.

Mr. Detlefsen said that the large deductibles under TRIA have likewise created–again, in theory–a demand for the creation of capital market risk-bearing instruments such as terrorism-related catastrophe bonds. "To date, however, only two such bonds have been issued, but both are multi-peril bonds rather than pure terrorism bonds tailored to a specific type of attack," he said.