"Now, less than two months before its scheduled expiration, we urge you to act quickly and ensure that our businesses can continue to be protected against the threat of terrorist attacks," the governors said.

Without the federal backstop for terrorism coverage provided under TRIA, the governors said business would likely face market conditions such as those in the months after the terrorist attacks of Sept. 11, 2001. "Policyholders will likely pay exorbitantly high premiums for terrorism insurance, or simply be unable to secure it," they said in the letter.

Additionally, the governors noted the findings of the Treasury Department's report on the TRIA program, which predicted that if TRIA were allowed to expire as scheduled, in the short term there would be less coverage available, very high premiums and a low purchase rate, meaning many businesses would be uninsured for the risk.

Recovery Imperiled

"In the absence of any financial protection, a future terrorist attack will have a significant impact on our nation's ability to recover as businesses find themselves without the necessary resources to rebuild their operations," the governors said.

A lack of federal backing for terrorism insurance could prove damaging to the economy on the international stage as well, the governors said, noting that without TRIA the United States would find itself "at a competitive disadvantage against countries with a terrorism insurance program, such as the United Kingdom or Germany, when attempting to attract international private investment."

Meanwhile, the Mortgage Bankers Association also called on lawmakers to ensure that some form of federal backstop for terrorism insurance remains available in 2006, or risk a serious disruption of the commercial real estate finance industry.

In a letter to House Financial Services Committee Chairman Mike Oxley, R-Ohio, and Ranking Member Barney Frank, D-Mass., the association said Congress must act to ensure the continued availability of terrorism coverage and not allow the process to be slowed by attempts to improve the TRIA program.

The MBA pointed to the results of a study it conducted in 2004, which found that 94 percent of commercial real estate financing included a requirement for terrorism coverage.

"The lack of availability of terrorism insurance in a post-TRIA environment would catch a wide range of borrowers, servicers, rating agencies and others between obligations to have terrorism insurance in place and a lack of available and affordable coverage," the MBA warned.

"Given these continuing uncertainties, the expiration of TRIA in the short term will result in the commercial real estate investment markets becoming more dysfunctional," the group added.