It is likely to take a terrorist attack of the magnitude of 9/11 to bring US government financial "backstop" support to group life insurance policies for victims caught in such an event.

That is the view of rating organisation AM Best, which has released its analysis on the debate for an extension and expansion to the current Terrorism Risk Insurance Act (TRIA).

Since 2002 the US government has been providing the promise of a financial aid "backstop" to step in to assist with insurance losses from acts of terrorism in the US that cause losses above a certain level, currently the trigger would be $100m of losses.

New legislation before the House of Representatives seeks to extend the Act by 10 years, lower the trigger event to $50m of losses and provide coverage should the attack include nuclear, chemical, biological or radiological agents.

Among the other changes proposed is to include group life as a covered line.

The AM Best report, written by vice-presidents Daniel Ryan and Matthew Mosher, states: "If group insurance were to be added to TRIA, it certainly would be a positive for the life industry, as finding adequate, affordable cat coverage has been challenging since 9/11.

"However, given that numerous attempts to include group life have failed to date, most writers of this business are not overly optimistic that it will happen this time.

"It might take another attack like 9/11 to generate the support needed to get group life included."

In its analysis, AM Best said it believes terrorism is a risk very few insurers are willing to cover and are only doing so with government intervention.

"Although the goal of TRIA was to create a 'temporary' programme, AM Best is sceptical of the private sector's willingness to fill this void. AM Best believes that, if not for the 'make available' provisions set forth under TRIA, most insurers would not make this coverage available to their insureds."

The unpredictable nature and scope of a terrorist attack is what makes it so difficult for insurers to price the risk accurately to set premiums, and until a time comes when it is possible to do so with accuracy the organisation believes TRIA should remain in force.

TRIA is currently due to expire on December 31 this year. The Bush administration last week indicated unwillingness to see the Act extended.

AM Best warns: "If TRIA were not extended, another affordability or availability crisis likely would emerge as was seen shortly after 9/11. This likely would spark another real estate crisis and cut off major lending programmes in major cities and higher-risk locations."

The rating agency said it will continue to assess insurers' capitalisation by stress-testing for terrorism, looking at individual company's loss exposure to terrorism, the number of exposures above 20 percent of capital and surplus, single largest locations "at risk", exposure to the top-tier of cities likely to be primary terrorist targets in the US (11 have been named), and the insurance of so-called "trophy" buildings.