Download

Download eBook for Free

Full Document

FormatFile SizeNotes
PDF file 0.5 MB

Use Adobe Acrobat Reader version 10 or higher for the best experience.

Summary Only

FormatFile SizeNotes
PDF file 0.2 MB

Use Adobe Acrobat Reader version 10 or higher for the best experience.

Purchase

Purchase Print Copy

 FormatList Price Price
Add to Cart Paperback152 pages $20.00 $16.00 20% Web Discount

Following the 9/11 attacks and the substantial losses incurred, insurers questioned their ability to pay claims in future attacks and began to exclude terrorism coverage from commercial insurance policies. The fear that a lack of insurance coverage would threaten economic stability and growth, urban development, and jobs led the federal government to adopt the Terrorism Risk Insurance Act (TRIA) of 2002. The pending expiration of TRIA requires that policymakers assess the effectiveness of TRIA and decide whether to extend, modify, or terminate it. A central issue for this assessment is how TRIA will redistribute losses among the different parties under different circumstances. To provide an accurate basis on which to determine the effects of TRIA, the authors simulate the expected losses and the distribution of losses among stakeholder groups for each of three attack modes: an aircraft impact on a major office building, an indoor anthrax attack on a major office building, and an outdoor anthrax attack in a major urban area. The study's results show that the ultimate distribution of losses under TRIA depends on the attack mode and cumulative annual losses. The authors also estimate the loss distribution that would result when different provisions of TRIA are changed. Based on this analysis, overall, the role of taxpayers is expected to be minimal in all but very rare cases, such as serial large attacks on major buildings, highly effective large outdoor anthrax releases, or nuclear detonations. In addition, while TRIA helps reduce uninsured terrorism losses by making coverage available and by limiting target insurers' exposure, the analysis in this study shows that, even with TRIA in place, a high fraction of losses would go uninsured in each of the attack scenarios examined.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    The Terrorism Risk Insurance Act

  • Chapter Three

    Terrorist Attack Scenarios

  • Chapter Four

    The Distribution of Terrorist Attack Losses Under TRIA

  • Chapter Five

    Distribution of Losses Under Possible Modifications to TRIA

  • Chapter Six

    Conclusions and Implications for TRIA

  • Appendix A

    Estimating Losses and Insurance Compensation for Large Terrorist Attacks

  • Appendix B

    The RAND Anthrax Casualty Model and Casualty Distributions in the Indoor and Outdoor Anthrax Attacks

  • Appendix C

    Derivation of Equations (4.3) and (4.6)

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.

Permission is given to duplicate this electronic document for personal use only, as long as it is unaltered and complete. Copies may not be duplicated for commercial purposes. Unauthorized posting of RAND PDFs to a non-RAND Web site is prohibited. RAND PDFs are protected under copyright law. For information on reprint and linking permissions, please visit the RAND Permissions page.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.