A U.S. Senate committee voted to extend the federal terrorism insurance program for seven years, less than half the period approved by the House, while excluding coverage of nuclear, biological and chemical attacks.

The same committee approved a bill to reform the federal flood insurance program without considering a House plan to extend coverage to protect against wind damage.

The Terrorism Risk Insurance Act, first passed after the Sept. 11 attacks made private policies scarce, promises to reimburse insurers if another major attack occurs. The Senate bill, approved Wednesday by the Banking Committee, 20-1, would extend the law until 2014 and include acts of domestic terrorism. The Bush administration said it would back the Senate bill after threatening to veto the House version.

“This bill will address the long-term security needs of our people and our economy,” said Senate Banking Committee Chairman Christopher Dodd, D-Conn. “The need to extend this program is clear. Nearly all the experts say that the insurance industry alone cannot insure against this risk.”

The House version also covers attacks by homegrown extremists while extending the subsidy for 15 years. Insurers would be required to sell protection against nuclear and other unconventional attacks and would qualify for partial reimbursement if they had to pay large enough claims on the policies. The Senate bill requires the Government Accountability Office to study whether the government should offer the coverage.

U.S. Treasury Secretary Henry Paulson said in a letter that the administration would not veto the Senate bill, though it favored a shorter extension and wanted the federal program “phased out in favor or a private market for terrorism insurance.”

The current terrorism-risk insurance law, renewed for two years in 2005, expires Dec. 31. Under it, the government covers 85 percent of losses from a terrorist attack for an insurer after it pays deductibles equal to 20 percent of its annual commercial insurance premiums. This year, that’s estimated at $35 billion to $40 billion across the industry.

The federal program “has made it possible for insurers to cover an otherwise uninsurable risk,” said David Sampson, president of the Des Plaines, Ill.-based Property Casualty Insurers Association of America.

The trade group opposed the House mandate that the industry cover unconventional attacks, saying such policies would be too difficult to price given the uncertainty over possible damage.

Sen. Wayne Allard, R-Colo., the only lawmaker to vote against the bill, said the private market will never develop unless the government stops subsidizing the program.

“Unless they are forced to come up with a solution, they will simply continue to rely on the federal government. I believe we can do better,” Allard said.

The Sept. 11 attacks resulted in about $32.5 billion in insured losses, according to the Insurance Information Institute.

Acting on the flood insurance program, Sens. Charles Schumer, D-N.Y., and Mel Martinez, R-Fla., pulled an amendment that would have reduced the role of private insurers in coastal areas. Dodd said it was unclear how much the provision would cost the government.

“I really couldn’t in good conscience add something like this without understanding the implications,” Dodd said at a hearing in Washington before the committee unanimously approved a bill without the provision.

Supporters in the House say expanding the National Flood Insurance Program would make coverage more widely available in coastal regions and eliminate disputes over the cause of damage.

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