The extension is a scaled back version of legislation that passed the House earlier this year and maintains the current program with some minor tweaks.
The law, first enacted in 2002, creates a federal backstop for insurance companies in the wake of a major terrorist attack in which the total damage exceeeds $100 billion.
House Financial Services Chairman Barney Frank (D-Mass.) had pushed for a 15-year, industry-backed overhaul of the current program but ran into resistance in the Senate.
Conservative opponents of the Terrorism Risk Insurance Act, particularly Alabama Sen. Richard Shelby, the ranking Republican on the Banking Committee, eventually forced House legislators to accept a shorter extension and a more modest bill.
But the current bill extends the program longer than the five-year extension opponents were pushing and ensures the program will stay alive well into the next administration.