The Terrorism Risk Insurance Act (TRIA), enacted to re-insure insurance companies against terrorism losses is about to sunset. Today's post is shared from insurancejournal.com/
U.S. insurance markets, like the rest of the nation, were caught off guard by the Sept.11, 2001 terrorist attacks. Loss of life and property led to an estimated $32.5 billion dollars in insured losses – $43 billion in 2013 dollars – the largest amount ever to that point. Following that, terrorism risk insurance became either extremely expensive or unavailable.
Congress responded by passing the Terrorism Risk Insurance Act (TRIA) in 2002. The act provides government support for the commercial terrorism insurance market through mechanisms for spreading losses across the nation’s policyholders and using government funds to cover the most extreme losses. This has helped keep terrorism risk insurance affordable for businesses.
Congress extended the act in 2005 and again in 2007. However, with the program set to expire this year, Congress had to revisit a crucial question: What is the appropriate government role in terrorism insurance markets? The Rand Corp., a nonpartisan, nonprofit research organization, recently identified three emerging themes:
1.) The act’s expiration could increase federal spending following terror attacks. Many experts predict that the act’s expiration would increase the price and reduce the availability of terrorism coverage, resulting in a reduction in the number of businesses with terrorism coverage. If this occurred, more attack losses would go uninsured. This would increase demand for disaster assistance in the event of an...