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Businesses brace for end of federal terrorism insurance

Insurance and real estate firms are preparing for the expiration of a federal terrorism insurance program at the end of the month, warning that construction projects could be stalled and commercial loans on shopping malls, utilities and skyscrapers could be in jeopardy.

The federal program, created to encourage insurers to continue offering coverage on office buildings, sports stadiums and other potential targets after the Sept. 11, 2001, terrorist attacks, had bipartisan support in Congress but stalled during the political bickering at the end of this month’s lame-duck session.

One of the biggest concerns, analysts said, is that an unknown number of loans could go into technical default when the program expires. Lenders often require developers and building owners to carry the coverage. But many of those policies are effective only if the government program is running.

Supporters said the program revived commercial development after the 2001 attacks, when terrorism policies became scarce and expensive. In 2002, Congress enacted the Terrorism Risk Insurance Act, intended to be a temporary program in which the government shared the cost of large insurance losses. Lawmakers extended the program in 2005 and 2007.