Under TRIA, Treasury covers 90% of terrorism losses over a deductible, which this year is 15% of an insurers 2004 premiums. It caps combined federal and insurance industry liability at $100 billion a year. Real estate, construction and insurance groups want TRIA extended two years. But in a June 30 letter to House and Senate committee leaders, Snow said the Bush administration "opposes extension of TRIA in its current form." Continuing the present program "is likely to hinder the further development of the insurance market by crowding out innovation and capacity building," he says. The administration would back an extension only if the size of a terrorist event requiring federal coverage were hiked to $500 million, from $5 million, he says. Treasury also wants insurers deductibles and co-payments raised.
Snows letter accompanied a long-awaited Treasury report on TRIA. It says the law has been effective overall, providing a transition in which insurers increased resources to write terrorism risk coverage. If the program expires, "it is reasonable to expect that the removal of the subsidy will result in a short-lived adjustment in coverage and pricing," the report concludes.