The rise of Islamic State shows the continued need for a federal terrorism insurance backstop in the US, Insurance Information Institute (III) President Robert Hartwig warns.

The Terrorism Risk Insurance Act (TRIA) was established following the September 11 2001 attacks, as terrorism cover became unavailable or very expensive.

It has been extended twice but is due to expire at the end of the year.

Renewal proposals are before both the Senate and House of Representatives, but time is running out for them to be implemented.

“Recent and explicit threats to American interests around the world from new terrorist organisations, including Islamic State, demonstrate that the need for the program is greater than at any time in the past several years,” Dr Hartwig said.

He says the scheme “costs taxpayers virtually nothing”, yet provides terrorism insurance stability, affordability and availability.

Global reinsurance broker Guy Carpenter says in 2012 more than 850 insurers participated in the scheme, writing $US183 billion ($200 billion) in premiums.

It says any increase in the current 20% deductible would have most impact on small and medium insurance carriers.

Meanwhile, more than 400 businesses, including many insurers, have signed a letter from the US Chamber of Commerce to the House of Representatives, urging swift passage of the legislation.

“Without the backstop TRIA provides, the private insurance market would simply be unable to provide adequate levels of terrorism risk insurance,” the letter says.