National Security and Compensation Policy for Terrorism Losses

by Lloyd Dixon, Robert T. Reville

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Abstract

Much research and policy on terrorism insurance compares terrorism to natural catastrophes, but this obscures the national security dimension of terrorism insurance. In this paper, we argue that government support of terrorism insurance and compensation can impact national security in several ways. It can increase resilience after terrorist attacks, demonstrate solidarity with victims, and affect incentives for security precautions. Thus terrorism insurance policy may be an important element of the strategy against terrorism, particularly as terrorists increasingly focus on economic targets.

Originally published in: Catastrophic Risks and Insurance: Policy Issues in Insurance, no. 8, November 2005, pp. 1-10.

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