WASHINGTON--An Obama administration proposal to scale back the federal terrorism insurance backstop program has prompted concern among risk mangers, but there's little appetite in Congress to change the existing program, according to Washington observers.

The proposal would, among other things, end the program's coverage of acts of domestic terrorism, raise insurer terrorism deductibles, and allow the program to expire in 2014 (see box, page 26).

But after lawmakers went through the lengthy process of consensus building to pass the original program, created by the Terrorism Risk Insurance Act of 2002, and then to renew the program in 2007, Congress is unlikely to scale back the backstop, observers say.

The administration's proposal is part of a broader budget proposal issued earlier this month.

According to administration budget documents, the federal terrorism backstop is in part unnecessary because "prior to the 2007 reauthorization, coverage of domestic terrorism was widely available even in the absence of government support."

The proposal dismayed risk managers.

"We are struggling with these proposed changes and asking ourselves what has changed in the insurance market since 2007 that necessitates modifying TRIA," said Brad Wood, senior vp-risk management at Marriott International Inc. in Bethesda, Md. "By all accounts, insurers continue to rely on the federal reinsurance to make available their capacity to policyholders at a reasonable cost."

In addition, finding coverage for domestic acts of terrorism before its inclusion in the federal program "was hit and miss," he said. "There was uncertainty in the insurance markets about what constitutes a domestic act of terrorism," because that determination would be left up to the Treasury secretary. "All policyholders would be one event away from the entire market collapsing," he said.

The Risk & Insurance Management Society Inc. "is very disappointed in the Obama administration's proposal to decrease federal support for the terrorism insurance market," said Deborah Luthi, RIMS director-external affairs, in an e-mail.

Without the federal backstop it would be extremely difficult, if not impossible, to obtain terrorism insurance, said Ms. Luthi, who is director-enterprise risk management at Matheson Inc. in Sacramento, Calif.

But supporters and critics of the terrorism insurance program questioned the political viability of the administration's call.

"Having been through this TRIA process three times now, I am 100% convinced that there is no congressional appetite for reopening the act before 2014 or in the absence of a triggering event," said Joel Wood, senior vp of the Council of Insurance Agents & Brokers in Washington.

"It would take authorization legislation, and I have heard nothing that would suggest that this is a real live debate in the Congress," said Mr. Wood.

Neither insurers nor most lawmakers in Congress want to reopen the debate on TRIA until 2014, when the program is slated to expire, said Marliss McManus, senior federal affairs director in the National Assn. of Mutual Insurance Cos. in Washington. "This program shouldn't be in the budget proposal to begin with."

There does not appear to be much support of scaling back TRIA, said Eli Lehrer, a senior fellow who directs insurance studies at the Competitive Enterprise Institute in Washington and who has been critical of TRIA at times.

"I think, in many ways, the administration's proposal is a step in the right direction. That said, it's going to be very hard to do, and I wonder if this is more political theater than a serious proposal," he said.

Administrations occasionally make budgetary proposals that they know are not politically viable, "and this may very well be on this list," Mr. Lehrer said.