A bipartisan group of senators announced a deal Thursday to reauthorize and extend the country's terrorism risk insurance program, which is expected to be taken up by the Banking Committee in coming weeks.

Sens. Charles Schumer, D-N.Y., Mark Kirk, R-Ill., Dean Heller, R-Nev., and Chris Murphy, D-Conn., unveiled the plan, which would extend the Terrorism Risk Insurance Act for an additional seven years. The program provides a federal backstop to insurance and reinsurance companies in the event of a catastrophic terrorist event.

"With its private-public partnership, TRIA will better protect the economy from terrorist harm while protecting taxpayers from financial risk," said Kirk in a press release.

Schumer, Kirk and Heller are all members of the banking panel, which has jurisdiction over TRIA and is expected to take up reauthorization soon.

"Today's introduction of the bipartisan Terrorism Risk Insurance Act reauthorization bill is a positive step forward and Chairman Johnson and Ranking Member Crapo intend to move it through the Banking Committee in the coming weeks," said Sean Oblack, a committee spokesman.

The deal also includes several modest changes to the design of the program to increase private sector involvement, increasing insurers' co-pay to 20% from 15% and raising the threshold under which the government is mandated to recoup federal payments to $37.5 billion from $27.5 billion.

Scaling back the government backstop for terrorism insurance could create havoc in the market for commercial real estate, and, by extension, commercial mortgage-backed securities. Ever since the Twin Towers attack nearly 13 years ago, most commercial real estate financings have required property and casualty policies that cover terrorist events. The legislation is likely to make this insurance more expensive.

While capital markets investors may be interested in taking on some of the risk that the government is shedding, via catastrophe bonds, for example, modeling this kind of risk is challenging.

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