A man passes by the skyline of New York's Lower Manhattan and One World Trade Center as he walks through Liberty State Park in Jersey City, NJ

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June 19, 2014

RAND Research Influences Debate on Terrorism Insurance

A man passes by the skyline of New York's Lower Manhattan and One World Trade Center as he walks through Liberty State Park in Jersey City, NJ

photo by Reuters/Gary Hershorn

In the wake of the attacks on September 11, 2001, terrorism insurance became unavailable or, when offered, extremely costly. To address this problem, Congress enacted the Terrorism Risk Insurance Act (TRIA) in 2002, creating an incentive for a functioning private terrorism insurance market by providing a government reinsurance backstop for catastrophic terrorist attack losses. Since TRIA was passed, terrorism insurance has remained widely available and in recent years, prices have fallen. However, challenges remain from both a social and an insurance point of view. Roughly 40 percent of policyholders still do not purchase terrorism coverage, and uncertainty persists regarding whether government involvement in this market continues to be warranted.

To inform the debate on whether TRIA should be continued or allowed to expire and with the support of a coalition of generous donors, RAND prepared policy briefs on three topics that are, or should be, of central concern to policymakers. They are:

  1. The National Security Perspectives on Terrorism Risk Insurance in the United States
  2. The Impact on Federal Spending of Allowing the Terrorism Risk Insurance Act to Expire
  3. The Impact on Workers' Compensation Insurance Markets of Allowing the Terrorism Risk Insurance Act to Expire

RAND's research on TRIA has already attracted positive attention from lawmakers on both sides of the aisle. RAND also convened two events this month in Washington, D.C., designed to highlight RAND's research findings and address additional facets of this complex issue.

The June 10 conference event, The Future of the Terrorism Risk Insurance Act: Expiration, Reauthorization, Modification, brought together more than 100 participants, with expert panelists leading discussions on topics such as the pros and cons of proposed modifications to the current version of TRIA, and considerations for TRIA's long-term future. Audience members hailed from the insurance and reinsurance industries, policyholder organizations and companies, the Congressional Budget Office, the U.S. Treasury's Federal Insurance Office, the U.S. Government Accountability Office, Congressional Research Service, credit rating agencies, Bloomberg media, and more. A conference proceedings document is forthcoming.

A June 11 event found RAND researchers presenting their work on Capitol Hill to a standing-room-only crowd that included congressional staffers; individuals representing the House Financial Services, House Homeland Security, and Senate Banking Committees; and stakeholders from the private sector.

As Congress again considers the appropriate government role in terrorism insurance markets, RAND is helping policymakers make better decisions by offering reasoned, empirical analysis and forums for discussion and debate.

For more of RAND's research on TRIA and related issues, visit RAND's Center for Catastrophic Risk Management and Compensation.