Due to the difficulty in predicting terrorist attacks and the possibility of huge losses, a private terrorism insurance market has had difficulties in forming.  As is the case with flooding, the government acts as the insurer of last resort.  The current federal program, the Terrorism Risk Insurance Act is set to expire at the end of the year.

The Senate and House are having difficulties compromising on a bill to reenact the program.  President Bush favors the Senate version and threatens a veto if the final bill differs greatly from how it is currently constituted.

What was at the heart of the matter was the number of years for the program.  The Senate wants the program to be extended for seven years which the Bush Administration agrees with in that it wants a private market to build up in that time frame.  The House originally sought a fifteen year extension but has since acquiesced to the Senate’s length.

The Senate version calls for the program to trigger at $100 million in losses while the House sets it at $50 million.  For a $100 Billion program it seems a bit misguided to argue over such a relatively small difference but nonetheless that is the case.

If they can’t agree on a bill that is acceptable to the Administration before the program is set to expire, they will more than likely pass a mini bill to reenact the program for a few months so that can have this same political battle again next year.  That’s our tax dollars working hard for you.