In a huge win for the business lobby, Congress on Tuesday passed a lengthy extension of the federal backstop to terrorism risk insurance, vaulting what was first conceived as a temporary measure to shore up the insurance markets after the Sept. 11 terror attacks closer to the status of a permanent government program.

The legislation renews the Terrorism Risk Insurance Act (TRIA) for seven years — more than triple the two-year extension that Congress passed in 2005 — and adds coverage for domestic acts of terrorism to the program, which was on track to expire Dec. 31 failing congressional action.

Rep. Barney Frank (D-Mass.), the chairman of the House Financial Services Committee, hailed the bill’s passage but criticized the Senate for forcing the lower chamber to accept its version: “I do regret the breakdown of the U.S. Senate on the legislative process.”

The legislation was applauded by insurance trade groups and large policyholders, which had worked feverishly all year to secure a lengthy extension of TRIA over the Bush administration’s insistence that the program be phased out.

“A seven-year extension gives the marketplace the necessary certainty and will bolster the U.S. economy,” the senior vice president of government affairs for the Independent Insurance Agents & Brokers of America, Charles Symington, said.

“It’s a tremendous victory for the commercial real estate sector and our overall economy at a time of much-needed stability in our markets,” senior vice president of government relations for the Commercial Mortgage Securities Association, Brendan Reilly, said.

The legislation had a tumultuous ride in Congress, punctuated by a veto threat on an earlier House-passed 15-year extension of the program that the Congressional Budget Office had estimated would cost the government more than $8 billion over 10 years.

The House and Senate also wrangled over the legislation, with Frank accusing the Senate at one point of adopting a “take it or leave it” approach when it refused to conference with the lower chamber on the bill.

The Senate’s strategy prevailed in the end, with the final legislation reflecting a deal struck between Sens. Chris Dodd (D-Conn.) and Richard Shelby (R-Ala.), the Banking Committee’s chairman and ranking member, respectively, on a substantially scaled-back version of the House-passed legislation.

House lawmakers had initially balked at accepting the Senate bill without engaging in a conference, expressing their frustration to the press. When the Senate wouldn’t budge, Frank last week pushed a compromise bill through the House, which lawmakers approved on a 303-116 vote.

Yet the Senate declined to take up that bill, leaving the House few options other than to pass the upper chamber’s version lest the program be allowed to expire.

Speaking from the House floor Tuesday, Rep. Gary Ackerman (D), a member of the New York delegation and one of the most vocal proponents of a robust federal backstop, expressed bitterness over the Senate’s changes to the House bill.

“The Senate amendments come from a naive world where there is no real risk of terrorism, and another attack like 9/11 is impossible,” he said.

In particular, he lamented senators’ rejection of a “reset mechanism” that he argued would prevent disruptions to the marketplace after a terror attack.

Frank vowed to “begin early next year to get this back on the Senate agenda.”

Aside from extending the program for seven years, the final bill keeps the current program trigger, or the cost of an event’s damage before TRIA kicks in, at $100 million. The House had voted to lower it to $50 million.

The final bill adds coverage for domestic acts of terrorism and authorizes a study on the effect of including nuclear, biological, chemical and radiological (NBCR) attacks in the program.

However, the bill stopped short of adding such doomsday attacks to the program, despite an aggressive lobbying campaign by the American Insurance Association (AIA), one of the largest insurance trade groups, and a group of large policyholders, the Coalition to Insure Against Terrorism (CIAT).

The House had included coverage for NBCR in its bill. But the issue had split the insurance industry, pitting many large workers’ comp insurers that are already on the hook for such risks due to state laws against smaller insurers that did not want to be forced to cover doomsday attacks.

In particular, the National Association of Mutual Insurance Companies (NAMIC) and the Property Casualty Insurers Association of America (PCI), which represent many of the smaller insurers, teamed up to fight the effort to include NBCR risk.

“The reality is that these events are uninsurable and including that provision in the legislation would have forced many insurers out of the program,” the NAMIC’s president, Charles M. Chamness, said.

The final legislation also did not include a House-approved provision to add group life insurers to the program.

Trade groups representing property casualty insurers were able to win such a lengthy extension of TRIA despite a record of tilting their political action committee (PAC) donations sharply toward Republicans. Of the trade groups lobbying the hardest for the program’s renewal, only the AIA has shifted toward giving a greater share of its PAC dollars to Democrats in the current election cycle, according to CQ MoneyLine.