The UK International Underwriting Association (IUA) has urged the US government to keep providing its support for writing of terrorism insurance.
"Without a renewal of the Terrorism Risk Insurance Act (TRIA), private provision of terrorism insurance may disappear entirely in some areas and would almost certainly be much more expensive than it is today," IUA said in a statement.
In a letter written to the US Federal Insurance Office, the IUA said that terrorism risk is unlike other insurable events due to the unpredictable nature of its occurrence both in frequency and in severity.
IUA chief executive Dave Matcham said the insurance market has certainly made progress towards better understanding of terrorism risks in recent years and there is more private coverage available since 2001.
"By providing a backstop in the event of a catastrophic terrorist event the US government has provided the economic security to insure investment in the country, particularly in real estate and construction activities."
The organization has requested the US government to extend the backstop beyond 2014 provided under TRIA.
If such an action is not taken, or even slightly delayed, then private provision of terrorism insurance would likely be reduced, which will expose taxpayers to significantly higher costs in the event of any attack, the association claimed.
The IUA represents international and wholesale insurance and reinsurance companies operating in or through London and promotes as well as enhances the business environment for its members.