WASHINGTON—The insurance industry remains united in its desire to extend the federal terrorism insurance backstop despite an internal spat over a set of "common principles" drafted by an insurer group and a policyholder organization, say industry insiders.

At issue is a document released last week by the Coalition to Insure Against Terrorism and the American Insurance Assn.

Two other insurer groups—the Property Casualty Insurers Assn. of America and the National Assn. of Mutual Insurance Cos.—sent a letter criticizing the proposal to AIA President Marc Racicot, holding that the plan would harm smaller insurers because of the size of the loss required to trigger access to the federal backstop.

The insurer groups also criticized the proposal for raising the possibility that insurers could be required to cover some nuclear, chemical, biological and radiological losses caused by terrorist attacks.

The CIAT and AIA proposal supports a trigger no higher than the current $100 million, while the PCI and NAMIC support a lower trigger no higher than $50 million—if that high.

The CIAT/AIA proposal "didn't reflect with what we thought was industry consensus, specifically we were most concerned about the trigger," said Ben McKay, senior vp in PCI's Washington office. "We had agreed internally that we would ask for a lower trigger because data shows that an increasing trigger serves only to exclude smaller companies from accessing the backstop."

Other industry observers downplayed the seriousness of the disagreement, regretting that it had become public.

"We are working together and AIA is doing what is consistent with the guidance of our board of directors and expects to continue to work with the industry," said Leigh Ann Pusey, AIA chief operating officer.

"It's definitely a minor disagreement," said Jimi Grande, vp in NAMIC's Washington office. "I look at the insurance industry as a broader family. I think this was an internal family discussion that found its way into the public domain, which is unfortunate. We don't think this is threatening at all to industry unity."

"Since this debate began in the immediate aftermath of Sept. 11, (2001,) there have been honest disputes among insurers over how Congress should devise the best program," said Joel Wood, senior vp at the Council of Insurance Agents & Brokers in Washington, which is not a party to the dispute.

"Where you stand depends much on where you sit—both in the marketplace, and with your own balance sheet. A vigorous debate on these subjects isn't a bad thing, and I remain optimistic that congressional leaders on both sides of the aisle and both sides of the Capitol will reach a good conclusion," Mr. Wood said.