In his comments, Rep. Oxley said the limited extension bill that passed “only kicked the can down the road.” Specifically, what Rep. Oxley was trying to say, the lobbyist noted, is that the extension measure “made no progress in creating some form of pooling mechanism that the industry believes is key to a long-term public/private solution to the problem of terrorism risk insurance.”

“It will also be a heavy lift, the industry believes, to get Congress to focus on the issue this year, and if there are no hearings this year, the perception is that it will be impossible to get TRIA extended again next year. The challenge for the industry is to get Congress to deal with it this year,” the lobbyist added.

The industry's concerns were voiced in a low-key, measured way through a Christmas Eve letter to President George W. Bush–a skeptic, at best, about TRIA–from the chairman and CEO of the Willis Group, Joseph Plumeri.

In his letter, Mr. Plumeri said the president should have his advisory group mandated by the TRIA extension measure to look into the issues involved, go “beyond the limited charge given to it by Congress, and seek to develop practical, long-term solutions to what is likely to be a more or less permanent problem–terrorism.”

The TRIA extension enacted by Congress is no more than a “place-holder on the path of a long-term solution,” added Mr. Plumeri. “Many other countries have developed varying public/private approaches to address this problem, and we now have two years to find a more permanent solution.” The two countries that have such programs are both experts at dealing with terrorism–the United Kingdom and Israel.

However, the industry is facing an uphill battle at best, thanks to its inability to persuade the Senate leadership and the White House to create a separate Commission on Terrorism Risk Insurance as proposed in the trashed House bill.

Instead, an existing advisory group has been assigned to look into the issue–the President's Working Group on Financial Markets. It is required to consult with the National Association of Insurance Commissioners, leaders from the insurance and securities industries, as well as policyholder representatives to analyze the long-term availability and affordability of terrorism insurance. The working group must report back to Congress by Sept. 30.

The panel is comprised of representatives of the Treasury Department, the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Board of Governors of the Federal Reserve Board.

“There is great concern that the President's Working Group will ultimately only come up with a carbon copy of the disappointing Treasury report of last year,” the lobbyist said, adding that “there is no mandate on this panel to come up with something creative to deal with the terrorism risk insurance issue.” Moreover, the lobbyist noted, “that is also a concern among some members of Congress,” including Rep. Oxley and other members of the House Financial Services Committee–Democrats as well as Republicans.

The reason the industry has not come out with guns blazing, according to this lobbyist, is that “with [Sen.] Richard Shelby, finality was the key, and we have to live with him, the industry expects, for at least the next three years.” This same lobbyist did confide, however, that “it is encouraging that Mr. Shelby has demonstrated openness to a series of broad hearings on insurance, which could include the long-term terrorism coverage issue.” That is a door the industry will work to keep open.

The industry definitely would have had a more sympathetic audience to pitch its terrorism coverage ideas to if the House extension approach had prevailed, which included creation of a separate commission of 11 members–seven from the insurance business and one policyholder representative.

Had such a panel documented a need for a federal terrorism risk insurance program by the end of this year, the members were to “make a specific, detailed recommendation for the replacement of the [TRIA] program, including specific, detailed recommendations for the creation of a terrorism reinsurance facility or facilities, or single or multiple pooling arrangements, or both.”

According to a lawyer in Washington who worked with lawyers and staffers at the House Financial Services Committee to draft the doomed House bill, “the goal of this provision was to try to put pressure on public officials and representatives of the private sector to coalesce around a private solution. The primary carrot was that if the commission satisfied its mandate and recommended that either there be no more program or specific parameters for an ongoing program, then the extension passed in December would have been a three-year extension rather than a two-year extension.”

The purpose of the House bill was to ensure that terrorism risk insurance be available at a reasonable price in the private market, something that would not be the case now without TRIA, several industry officials explained. That mission will be far harder to accomplish without the industry-friendly commission proposed by the House.

However, the industry is not prepared to concede the point that government has no place in terrorism insurance. They will keep pushing for Congress and the White House to recognize the fundamental problem, as outlined in a document submitted last September to members of Congress and the public by the National Association of Mutual Insurers.

“Terrorism insurance is a classic uninsurable risk,” NAMIC said. “There is no way to effectively quantify the potential loss cost of a terrorist event due to a total lack of empirical data, save for 9/11/2001.” The insurance industry, NAMIC added, “has no concept of the potential damage resulting from the next terrorist event, and one of the textbook requirements for an insurable peril is that it must be measurable.”

“Thus, the real challenge is to encourage the private sector to take on as much of the risk as possible by devising a plan that will encourage insurers and reinsurers to provide coverage at a reasonable cost so that insureds will be willing to purchase it,” NAMIC said.

That is quite a challenge indeed, given the less than sympathetic crowd expected to hear the industry's case for at least some form of government involvement beyond Dec. 31, 2007.