Three days before Christmas, President Bush signed into

law an extension of the Terrorism Risk Insurance Act (TRIA) of 2002. Passed in the tumultuous months following the attacks on the World Trade Center and Pentagon, TRIA was to be a temporary federal measure to help the private insurance industry cope with the threat of terrorism in the U.S.

Despite the victory, the insurance industry was disappointed. After two tough years of lobbying Congress, insurers were only able to come away with a watered-down version giving them two more years to develop a private market that absorbs terrorism exposures. While they preferred this to no extension at all, insurers had hoped for much larger federal funding. Under TRIA II, the trigger for payment of federal monies to the industry was increased to $50 million this year, effective March 31, and $100 million next year, from the original $5 million. The federal share of losses, paid when insured losses exceed the trigger, remains at 90% in 2006 and drops to 85% next year. Insurers' deductibles will continue to be calculated as a percentage of an insurer's earned premium the previous year, but will increase to 17.5% in 2006 and 20% in 2007 from the current 15%.