Report Confirms Terrorism Risk Insurance Act’s Effectiveness

Nov. 1, 2005

Study urges Congress to extend TRIA

The Terrorism Risk Insurance Act (TRIA) is set to expire in December, and a study by the RAND Corp. is among the many documents urging Congress to grant an extension. A report issued on Oct. 25, 2005, with findings from the organization’s study, conveyed the effectiveness of TRIA in sharing the financial risk that businesses face from terrorism. Additionally, the report notes that less than half of businesses have purchased terrorism insurance and urges the federal government to encourage them to do so.

According to the RAND Corp.’s news release, “the study says that terrorism insurance provided under TRIA would not require federal subsidies unless there is a very large terrorist attack on the scale of Sept. 11, 2001, terrorist strike on the World Trade Center, or a series of large terrorist attacks within a year. This is because federal subsidies to insurance companies are only triggered if TRIA-covered insured losses exceed $15 billion.”

Most significant is the study’s prediction of the pattern of payments for insured losses that occur under TRIA in the event of three kinds of terrorist attacks (a hijacked aircraft hitting a major office building, anthrax being released inside a major office building, and an outdoor anthrax release in an urban area). In each of these situations, TRIA-covered financial losses would not be significant enough to result in federal subsidies to insurers.

The report recommends a few changes to TRIA, including recommending businesses purchase terrorism insurance as part of commercial insurance policies.

To learn more about the RAND Corp. report, visit (www.rand.org/news/press.05/10.25.html) or to find out about efforts to extend TRIA, visit the Coalition to Insurance Against Terrorism website (www.insureagainstterrorism.org).

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