The US Terrorism Risk Insurance Act (TRIA) has been an “unqualified success” and should be extended, global broker Aon says.

The legislation’s impending expiry, set for the end of next year, has already caused “dislocation” in the commercial property and casualty market, it told a government working group on terrorism reinsurance.

The government-backed reinsurance program was launched in 2002 after terrorism cover fell away following the September 11 attacks the previous year.

TRIA has ensured cover is available and affordable, and negotiations on contracts beyond next year show the insurance market cannot replace its coverage, Aon says.

Pricing has started to rise, reflecting rate cycles and “insurance markets beginning to adjust their portfolios of risk to manage the potential expiration of TRIA”.

“TRIA’s reauthorisation… is essential to keep the terrorism risk insurance marketplace stable,” Aon says.

Marsh & McLennan EVP and General Counsel Peter Beshar last week told the US House of Representatives committee inquiry into TRIA that the cover “continues to be the backbone of a healthy terrorism insurance market”.

Marsh says that in 2012 62% of its clients bought property terrorism coverage backed by TRIA.

Mr Beshar says cyber terrorism should be added to TRIA.

The International Underwriting Association says without TRIA private provision of terrorism insurance may disappear.

The London-based group has written to the US Federal Insurance Office saying this will expose taxpayers to significantly higher costs in any attack.

CEO Dave Matcham says the unpredictability of terrorism attacks mean they are unlike any other insurable events.

“The insurance market has certainly made progress towards better understanding of terrorism risks in recent years and there is more private coverage available since 2001,” he said.

TRIA requires insurers to make terrorism cover available for commercial property and casualty insurance, in return for $US100 billion ($106.7 billion) of annual aggregate reinsurance for terrorist acts.

Opponents of an extension say the (re)insurance industry is well capitalised, but Aon says this argument ignores whether the industry is willing to cover terrorism, and without TRIA insurers will not be obliged to offer the protection.