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Abstract

The Terrorism Risk Insurance Act (TRIA) requires insurers to offer commercial insurance that will pay on claims that occur from a terrorist attack, and for losses on the scale of 9/11, TRIA provides a "backstop" in the form of free reinsurance. The authors describe the evolving terrorist threat with the goal of comparing the underlying risk of attack to the architecture of financial protection that has been facilitated by TRIA, which will "sunset" in December 2005. While TRIA was originally justified primarily as a measure to stimulate the economy, insurance also has the effect of promoting resilience in the aftermath of an attack. Thus, a functioning terrorism insurance system, at least in the context of economic targeting by al Qaeda, should be thought of as not just an economic development mechanism but also as a counterterrorism tool.

The research described in this report was conducted by the RAND Center for Terrorism Risk Management Policy.

This report is part of the RAND Corporation monograph series. RAND monographs present major research findings that address the challenges facing the public and private sectors. All RAND monographs undergo rigorous peer review to ensure high standards for research quality and objectivity.

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