This public/private partnership has served us well in the absence of a realistic private solution, but it is reasonable to assume that pricing for the finite amount of terrorism insurance capacity will increase in response to TRIEA's expiration, with substantially increased industry retentions.

The commercial insurance market has already made it clear that, faced with rating agency pressure, potentially devastating loss exposures and scarce (as well as highly priced) reinsurance capacity, most of the market will revert to its pre-TRIA stance and exclude the risk if not forced to offer coverage.

The less insurance risk-transfer, the greater the exposure to the economy in general if another catastrophic terrorist attack should occur.

The United States is the largest insurance market in the world, and it is arguably the largest potential target for terrorist attacks. Whether directly or indirectly, the federal government would pay the price of additional terrorism losses, so it is to everyone's best advantage to work toward a solution.

Aon Corp., working in collaboration with several industry organizations, has proposed a viable long-term solution to this complex problem, centering on a mandatory terrorism reinsurance pool.

In brief, the pool would be structured to fund up to two $40 billion events, with the U.S. government to attach 100 percent excess of $40 billion, up to $100 billion, with losses above that amount to be reviewed by Congress.

Losses up to $40 billion in excess of cash accumulated in the pool would be funded through the issuance of bonds. The bonds would be repaid by assessments levied on all polices from covered lines during the life of the bonds.

The Aon Plan shares features with the current TRIEA backstop, while addressing the need for the private insurance market to fund a substantial industry backstop to minimize taxpayer exposure to catastrophic terrorism losses.

In addition, the post-event issuance of bonds addresses one key capital market hurdle to handling terrorism risk--modeling terrorism event frequency and severity.

Further, federal government financial exposure is limited to the role of purchaser of last resort for bond issuance--the bond purchaser receives a competitive yield on a long-term financial instrument, encouraging capital market participation in the risk.

While the Aon Plan might not address every facet of the terrorism debate, it does create a conceptual platform for meaningful discussion on potential replacements for TRIA after 2007.

As with any long-term solution, many of the concept's key requirements would entail significant federal government legislative action--similar to the federal mandate and override of individual state insurance regulation introduced with TRIA.

This will take time, making it even more critical that action toward building a solution not be delayed. Using the concept outlined above, the funding cycle for the long-term pool could begin in 2006, providing the industry--and the economy--with a start toward transitioning to a permanent solution for terrorism risk in the United States.

Clearly, investigation of the alternatives must rise to full force very quickly. The risk of terrorism remains a reality, and while we cannot change that reality, we can mitigate the risk.