"I'd say there has developed a fair consensus that the bill as it stands is probably not suitable and is not going forward," he added.

He noted that Congress "quite likely will, and should modify [TRIA] to some degree if it chooses to extend it." He added that "certainly, the Treasury Department has taken a strong position on that front–and I think there is a fairly broad sentiment in Congress that buys into that general idea."

However, he warned, "that doesn't mean there is a pinpoint consensus on where to go next and how fast it will happen."

Mr. Holtz-Eakin said the legislative calendar for this fall is "very busy," and that both the House and Senate are "thinking hard about where to fit [TRIA] into the floor schedule. I haven't seen any specific timetable on either side, but the committee has been looking at options. We'll do things for them on a confidential policy basis as they develop their ideas, and we'll see how it goes after that."

As for changes to TRIA, he said, "a big menu has been discussed," including increasing the industry's aggregate retention and hiking deductibles at the individual insurance company level.

Alternative market players, in particular, are "worrying about captives having a bigger deductible," he added.

Other options on the table include charging premiums for the federal terrorism coverage and possible changes to the duration of TRIA, "so that instead of a two- or three-year bill it would have longer or shorter horizons," he said.

Among the issues being discussed, he noted, "the big one that I think has jumped out is what do you do with workers' compensation?" Since workers' comp carriers cannot exclude terrorism exposures, and reinsurance in the private market is scarce or non-existent, expiration of TRIA could leave such insurers vulnerable to catastrophic losses should terrorists strike again.

VCIA President Molly Lambert said the association has urged its Congressional delegation to support extension of TRIA. "That was at the end of March, and since then the Department of Treasury has issued their report," she explained. "There are all sorts of proposals on Capitol Hill to tweak the program."

Ms. Lambert said that in addition to extending TRIA, it is "very important for some of our members that liability insurance is included in that extension, and there is some discussion on Capitol Hill of that not happening."

She noted that "there are some other provisions that might make it very detrimental for our small insurers. So, yes, we support an extension, but we still are not certain of the proposals we are dealing with right now. Those are still being considered."

Ms. Lambert said that once a proposal is put together, VCIA will do another analysis before issuing a position statement, "but the basic [policy] is that we think the extension of TRIA is very important," she noted.

VCIA's original stand for TRIA was an opt-in, opt-out provision for captives, which the U.S. Department of Treasury did not allow. Captives, consequently, "were mandated to participate," she noted.

A member survey revealed that 50 percent wanted to be part of the TRIA program, Ms. Lambert reported during an informal press briefing at the VCIA conference. Programs like United Educators, which insures the liability of 1,200 colleges and universities, and other captives with marquis properties in their portfolio for which terrorism coverage was very important wanted TRIA, she said.

Jon Harkavy, outgoing chairman of VCIA, said the organization is ambivalent about "captives covering that type of catastrophic loss. But certainly we can't conceive of any captive being able to offer that type of coverage at all without the backstop."

He emphasized that the United States is the only large industrialized nation "that does not have some form of federal backstop" for terrorism exposures.

Callout, for page 32:

"…Certainly we can't conceive of any captive being able to offer that type of coverage at all without the backstop," says John Harkavy, CICA's outgoing chairman.

Caption for Terrorism Shot:

Captive owners are concerned about having to absorb a much higher deductible before triggering TRIA's reinsurance backstop if their insured is hit by a terrorism loss.