The Insurance Information Institute said this week that the threat of terrorist attack remains real and that the 13-year anniversary of the Sept. 11 terror attack is a reminder of the urgent need for federal lawmakers to reauthorize the terrorism risk insurance program.
The year-end expiration of the federal Terrorism Risk Insurance Program Reauthorization Act (TRIPRA), and its uncertain future, is creating capacity and pricing issues for terrorism insurance buyers, according to the I.I.I.
“The 13-year anniversary of the September 11, 2001, terrorist attack — coming just ahead of TRIPRA’s looming December 31 expiration date — is a reminder of the urgent need for Congress to swiftly reauthorize this vital Act, which has proven itself to be a critical component of the country’s national economic security infrastructure,” said Robert Hartwig, economist and president of the I.I.I.
“Moreover, recent and explicit threats to American interests around the world from new terrorist organizations, including Islamic State (ISIS), demonstrate that the need for the program is greater than at any time in the past several years,” he added.
Hartwig also pointed out that TRIPRA is sound fiscal and economic policy. “TRIPRA costs taxpayers virtually nothing, yet it continues to provide tangible benefits to the U.S. economy in the form of terrorism insurance market stability, affordability and availability,” he said.
“The availability and pricing of terrorism insurance is currently tightening given uncertainty over reauthorization, and because of the unique nature of terrorism risk and the possibility for virtually unlimited losses, private insurance markets do not have the capacity to cover terrorism losses to the extent possible under TRIPRA,” said Hartwig.
Hartwig noted that, in the absence of TRIPRA, terrorism risk insurance would be less available to businesses of all sizes who want, and need, these policies. “Without the federal government’s insistence that insurers make terrorism coverage available to all who want it, terrorism risk insurance policies will be more costly and/or limited in scope,” he warned. “TRIPRA is a critical part of the U.S. economy’s security infrastructure and would ensure a swift recovery in the event of significant terrorist attack.”
In the wake of the terrorist attacks of Sept. 11, 2001, terrorism risk insurance quickly became either unavailable or very expensive. Congress reacted by passing the Terrorism Risk Insurance Act in 2002, which provides an assurance of government support after a catastrophic attack. This has helped keep terrorism risk insurance available and affordable for businesses.
For property/casualty insurers and reinsurers, the impact of the 9/11 terrorist attacks was substantial, producing insured losses of about $32.5 billion, or $42.9 billion in 2013 dollars — the largest insurance loss in global history at the time. Losses were paid out across many different lines of insurance, including property, business interruption, aviation, workers compensation, life and liability.
A total of 2,976 people perished in the Sept. 11, 2001, terrorist attacks in New York, Washington, D.C., and Pennsylvania, excluding the 19 hijackers. Total insured losses (including liability losses) from the terrorist attacks on the World Trade Center and the Pentagon were about $39.4 billion (in 2009 dollars), including property, life and liability insurance claim costs. The total loss does not include the March 2010 settlement of up to $657.5 million announced by New York City officials and plaintiffs’ lawyers, which was designed to compensate about 10,000 workers whose health was damaged during the rescue and cleanup at the WTC. (Loss estimates may differ from estimates calculated by other organizations.)
Source: The Insurance Information Institute
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