Private market appetite to cover US terrorism risks has returned, but this does not mean the Federal Government’s backstop is now surplus to requirements, global reinsurance broker Guy Carpenter says.

Congress passed the Terrorism Risk Insurance Act (TRIA) after the $US20 billion ($21.31 billion) loss from the September 11 2001 attacks led to the standard exclusion of terror cover in catastrophe reinsurance programs.

TRIA, which has been reauthorised twice, has gradually required the private market to assume a larger share of the risk.

Other factors, such as the flow of alternative capacity and a soft market for catastrophe programs, have further increased the private market’s ability and willingness to cover terrorism risks.

However, if TRIA is not renewed “capacity required and sought from the private market would rise significantly”, Guy Carpenter says.

This would lead to higher prices and make coverage harder to obtain.

The TRIA legislation is due to expire at the end of the year. Proposed extensions are before the US Senate and House of Representatives, but time is running out to implement them.