A major terrorist attack could kill thousands and result in insurance claims as high as $450 billion. Sobering projections like this have been pulled together in support of an industry-wide call on the US government to extend legislation that makes it an 'insurer of last resort' in the event of major terrorist attack.

The worst-case scenario, a nuclear attack, has been projected to kill up to 300,000 people and could fell the insurance industry with predictions of claims that would exceed the industry's current combined capital of $412.5 billion.

The figures , compiled by experts in a recent study, are hypothetical but the numbers are being taken to heart by an industry coming to grips with the reality that it could, by January 1, be responsible for the full cost of a terrorist attack on US soil.

"The last time I looked it was not the responsibility of companies to defend against war ? in any country," said Pete Thomas, an industry expert who's concerned that a major terrorist attack could cripple commerce, wherever it took place.

Mr. Thomas, a senior vice president and managing director with Willis Re USA, supports the broad industry call for a renewal of US legislation due to expire on December 31.

Under the existing act, the US government steps in to help pay claims from a terrorist attack once US insurers pay out $30 billion in claims, and up to a maximum of $100 billion. Other nations have similar public-private partnership schemes: A UK scheme is called Pool Re, and partnerships also exist in Australia, France, Germany, the Netherlands and Spain.

At issue, however, is that the US programme, the Terrorism Risk Insurance Act, or TRIA, was only enacted as a temporary federal 'backstop'.

Many proponents of its extension say it should be more permanent, like the schemes in other nations.

TRIA was enacted in 2002, following the September 11, 2001 terrorist attacks on New York and Washington.

The 9/11 disaster left the insurance industry to shoulder $32.5 billion in claims, according to an estimate from a New York-based trade group, the Insurance Information Institute. More recently, the Madrid and London bombings served as a poignant reminder that the threat of terrorist attacks remains.

The subject is pressing enough to have drawn former presidential envoy to Iraq, Ambassador L. Paul Bremer, to Bermuda to take part in a panel discussion at the Hawksmere International Reinsurance Congress taking place on the Island this week. Mr. Bremer and other experts, spoke to how insurers can evaluate risk "in an age of global terror".

The event was not open to the media, but interviews with Mr. Thomas, a panellist, and earlier with panel moderator, Paul Horgan, revealed a broad industry push for the US government to extend some form of the terror risk act.

In the end, it could be a natural catastrophe ? Hurricane Katrina ? that helps push legislators into action.

For one, the devastating August 29 hurricane could cost the industry up to $60 billion.

That will put some pressure on the industry's capital position. It isn't serious enough to undermine financial stability but it does call into question how much a cost can be borne by private industry, from one event.

Mr. Horgan, who is a partner with PricewaterhouseCoopers and heads the firm's US insurance advisory unit, said: "Many individuals are trying to understand whether the federal government has responsibility for terrorism and other types of catastrophes: What should be borne by the private insurance industry versus the federal government."

The debate is a very real one for residents in the four states affected by the flooding that followed Hurricane Katrina. While flooding is excluded from most standard insurance policies, political pressures could force the industry to cover the cost anyhow.

Insurers have cried foul because they say they need to know what they'll be paying when they price the policies for sale ? not after the event that triggers a loss.

"The debate it is leading to is the participation of the federal government (in insuring against catastrophic risk)," said Mr. Horgan.

And, he said: "Katrina issues play into the whole terrorism discussion" because again the question is does the government have a responsibility to help pay the cost of catastrophes, whether natural or man-made.

Mr. Thomas said it was "beyond the scope" of private industry to handle the full cost of a serious terrorist attack.

A September study by Newark, California-based Risk Management Solutions, an insurance modelling firm, supports that view in finding that the risk of terrorist activity continues to increase globally.

The RMS report revealed that, since 9/11, terrorists have been detected planning 18 attacks including plots to blow up a mid-west power grid, and to assassinate President George W. Bush.

By modelling the potential cost of different scenarios, RMS found that the cost of a major terrorist attack could be between $28 billion (for a Sarin gas attack on the ground) and $450 billion, in the event of a tactical Nuclear bomb attack.

Not all support TRIA's extension. Some in the industry believe a free-market approach to terror risk should be allowed to develop ? but supporters strongly outnumber critics.

Mr. Thomas said a free-market approach may be a viable partial approach, but some form of government-sponsored insurance should remain in place.

He said this was particularly true in the event of "a super catastrophe", for example, an attack that involved weapons of mass destruction ? nuclear, biological, chemical and radiological.

Mr. Thomas said by number crunching alone, as the RMS report shows, one could argue for the US government retaining some responsibility.

He predicts US legislators will agree, and table draft legislation by the end of this month.

The Hawksmere International Reinsurance Congress concludes today at the Fairmont Hamilton Princess.