Why do so many people still believe TRIA is nothing but a handout to the insurance industry, when it is so obvious that the market cannot function without Uncle Sams support?

Oh, sure, insurers were able to come up with over $20 billion to cover World Trade Center losses, making it one of the worst insured disasters ever, but the private terrorism insurance market promptly dried up. Theres no way anyone would have written the coverage if Congress hadnt passed TRIA, and then extended it until the end of 2007other than workers comp carriers, of course, who have no choice in the matter.

However, even with the Terrorism Risk Insurance Act providing a federal reinsurance backstop, private carriers arent exactly being left off the hook here.

Indeed, the individual insurer deductible to trigger coverage under TRIA this year is 17.5 percent of 2005 direct earned premiumsjumping to 20 percent of 2006 premiums next year.

And the industry retention triggerjust $10 billion in 2003–is now $25 billion, rising to $27.5 billion next year.

That doesnt sound like a bailout to me! The industry must lose a fortune before Uncle Sam comes to the rescue. Thats not a bad deal to force carriers to write this still very unpredictable, high-severity exposure.

Thanks to TRIA, coverage is available, and more and more buyers are taking carriers up on the offerwhile premiums for the risk are falling, as we reported last week. (Click here for the full story.) But if TRIA is allowed to expire, the rug will be pulled out of the market so quickly, the entire economy could be sent tumbling.

Hopefully, the report on the terrorism market due from the Presidents Working Group on Financial Markets by Sept. 30 will reflect these realities and serve as a wakeup call to the Feds, but I am not overly confident that the Bush Administrationnot exactly known for its policymaking integritywill back up the industry on this critical point.

What will it take to convince Congress and an extremely skeptical White House to get on board once and for all on the need for federal terrorism reinsurance? What are your thoughts???