The federal government's terrorism insurance backstop isn't slated to expire until the end of 2014 — if it expires at all — but uncertainty over its fate caused ripples in the commercial property insurance market during the Dec. 31/Jan. 1 renewal season.

The program, initially created by the Terrorism Risk Insurance Act of 2002, has been extended twice — in 2005 and in 2007. While some market observers expect Congress to renew the program yet again before the scheduled Dec. 31, 2014, expiration date, the possibility that it won't act is raising concern.

“The TRIA issue is raising its head,” particularly for real estate owners with high-profile properties in places like New York and Washington, said Duncan Ellis, U.S. property practice leader at Marsh Inc. in New York. Mr. Ellis said the general consensus is that the program will renew, but with bigger retentions by insurers.

Alexandra Glickman, area vice chairman of Arthur J. Gallagher Risk Management Services Inc. in Glendale, Calif., said that three bills that would extend the program have already been introduced. She said that the “odds are very, very high there will be some sort of extension, but it may not bode well for those with private captives that provide the terrorism coverage; that's the real wild card.”

“Other than causing uncertainty for buyers, I don't think it's having a huge impact,” said Randy Schreitmueller, vice president and manager of broker relations at FM Global. He said that while most people hope the program will be extended, “everybody expects Congress will renew it, but as usual they'll probably wait until the last minute.”

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But what could happen if the consensus proves wrong and the program is not extended? In a market update published late last month, Lockton Cos. L.L.C. listed several possibilities.

“There may be a number of insureds that will have to retain a significant terrorism-related exposure for workers compensation coverage, as statutory coverage may be unavailable or cost-prohibitive,” said the Lockton update, adding that the greatest effect would likely to be felt in such cities as New York, Las Vegas, Los Angeles and Washington, as well as for employers with significant payroll exposure.

According to Lockton, other possible effects could include a run on the assigned risk market, increases in assessment charges that fund those assigned risk markets, a “significant increase” in the cost of catastrophic workers compensation coverage, and transfer of the catastrophic risk burden from the government to business.