updated 6/18/2004 3:20:06 PM ET 2004-06-18T19:20:06

Demand for terrorism coverage by businesses is rising again, according to a new study by Marsh, the U.S. insurance broker.

In the first quarter of this year, more than 44 percent of US businesses took out insurance to cover terrorism risk.

That is the highest pick-up rate seen for this coverage since 2002 when the government passed the Terrorism Risk Insurance Act (TRIA), which provides a federal back-stop to cover insurers' losses.

As the cost of property insurance has started to drop, demand for terrorism coverage has jumped.

Insurers are offering more affordable rates and many have expanded coverage to include risks outside the US, according to Marsh.

The broker surveyed more than 600 businesses.

On Capitol Hill, insurers are pressing Congress to extend TRIA as concerns grow that the industry might collapse without it.

The bill, passed by Congress in the wake of the September 11 attacks, specifies that the government must pay all insured losses greater than $12.5 billion in the aftermath of a nuclear, biological or chemical attack by non-Americans.

In exchange, the government forced insurers to stop stripping terrorism coverage from their policies.

But TRIA guarantees its support only until the end of next year. It must be reapproved by the U.S. Treasury and fears are growing that its passage could be derailed.

The Treasury is gathering information from insurers and policyholders to evaluate the effectiveness of TRIA. It will report its results to Congress by June 2005.

As the debate gathers steam, the insurance industry is trying to increase awareness of the risks of terrorism.

Estimates suggest that insurers could face more than $250 billion in losses if another attack were to happen on U.S. soil.

The bombings in Madrid earlier this year have raised new fears.

The fact that most reinsurers are no longer writing policies to cover insurers' exposure to terrorist attacks is aggravating insurers' worries.

Copyright The Financial Times Ltd. All rights reserved.


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