The US Treasury Department has recommended the Terrorism Risk Insurance Act (TRIA) not be extended in its current form.

The Treasury Department report on TRIA says the US federal terrorism insurance program enacted in the wake of the September 11 attacks has been effective in achieving its temporary objectives, but the economy is more robust today than when it was enacted.

While the decision was anticipated, it still makes insurers uncertain about the way the changes to the law might affect commercial lines premiums.

Though US Treasury Secretary John Snow says extending TRIA “is likely to hinder the further development of the insurance market by crowding out innovation and capacity building”, anxiety remains about whether property and casualty insurance policies will increase because insurers will potentially be taking on a greater risk.

Lobby group Coalition to Insure Against Terrorism spokesman Martin DePoy says the treasury study is flawed and “does not present an accurate picture of the current terrorism insurance marketplace”.

“The study’s assertion that the now partial presence by reinsurers will somehow grow stronger in the absence of a federal backstop defies logic,” Mr DePoy said. 

“Even Federal Reserve Chairman Alan Greenspan has questioned the ability of the private market alone to insure against terrorism.”