President Bush has signed into law a bill to continue the federal terrorism insurance program for two years. The program had been set to expire Dec. 31.

The bill, which the Senate approved on Dec. 16 and the House the following day, extends the 2002 Terrorism Risk Insurance Act through December 2007, assuring that federal "backstop" coverage for major terrorism-related claims will continue. But the new measure requires insurers to pick up a larger share of the risk.

Construction, real estate and insurance industry groups had been lobbying for the extension. Martin L. DePoy, steering committee coordinator of the Coalition to Insure Against Terrorism, said the two-year continuation "is welcomed and necessary." He added, "it would have been difficult, if not impossible, for policyholders to obtain affordable terror coverage in the absence of such a program. Construction and hiring would have slowed. The nation's economic security would be in jeopardy."

The legislation increases the size of a terrorist event that activates the federal coverage from the current level of $5 million in insured claims to $50 million in 2006 and then to $100 million in 2007 The measure also hikes the amount of claims that insurers would have to cover, from 15% of premiums now, to 17.5% in 2006 and 20% of premiums in 2007.

Moreover, the legislation eliminates some insurance lines from potential backstop coverage, including commercial automobiles, professional liability, burglary and theft, surety, multiple peril and farm owners.

Senate banking committee Chairman Richard Shelby (R-Ala.) said that "it is my hope that the program will no longer be necessary when it sunsets in two years." But House Financial Services Committee Chairman Michael Oxley (R-Ohio) was more skeptical, saying that the bill "is bereft of any reforms." He said that unless a presidential working group established by the bill comes up with ideas for a long-lasting way to cover terrorism risks, "the industry will be back at the federal trough seeking yet another extension of this program; and make no mistake about it, whatever its is, Congress will respond."

The final bill represents a compromise between the Senate and House versions, but is much closer to the Senate measure. Oxley, a lead House negotiator, dropped provisions, including one that would have expanded the federal program to include group life insurance.