Terrorism Risk and Economic Stability

The April 2013 Boston bombing may have marked the first successful terrorist attack on U.S. soil since the September 11, 2001 tragedy, but terrorism on a global scale is increasing.

Yesterday’s attack by the Al-Shabaab terror group at a university in Kenya and a recent attack by gunmen targeting foreign tourists at the Bardo museum in Tunisia point to the persistent nature of the terrorist threat.

Groups connected with Al Qaeda and the Islamic State committed close to 200 attacks per year between 2007 and 2010, a number that grew by more than 200 percent, to about 600 attacks in 2013, according to the Global Terrorism Database at the University of Maryland.

Latest threats to U.S. targets include calls by Al-Shabaab for attacks on shopping malls.

And a recent intelligence assessment circulated by the Department of Homeland Security focused on the domestic terror threat from right-wing sovereign citizen extremists.

On January 12, 2015, President Obama signed into law the Terrorism Risk Insurance Program Reauthorization Act of 2015.

A new I.I.I. white paper, Terrorism Risk Insurance Program: Renewed and Restructured, takes us through each of more than eight distinct layers of taxpayer protection provided under TRIA’s renewed structure.

While TRIA from its inception was designed as a terrorism risk sharing mechanism between the public and private sector, an overwhelming share of the risk is borne by private insurers, a share which has increased steadily over time.

Today, all but the very largest (and least likely) terrorist attacks would be financed entirely within the private sector.

Enactment of the 2015 reauthorization legislation has brought clarity and stability to policyholders and the insurance marketplace once again, the I.I.I. notes.

In the week before Christmas when Congress adjourned without renewing the Terrorism Risk Insurance Act (TRIA), Jeffrey DeBoer, president and CEO of The Real Estate Roundtable, a trade group representing real estate industry leaders, said:

This law does not stop terrorist attacks. But it does disrupt terrorists’ goals of damaging our economy.”

The I.I.I. paper makes a similar point:

Since its creation in 2002, the federal Terrorism Risk Insurance Act, and its successors, have been critical components of America’s national economic security infrastructure. TRIA has cost taxpayers virtually nothing, yet the law continues to provide tangible benefits to the U.S. economy in the form of terrorism insurance market stability, affordability and availability.”

For a federally backed program, that is quite a success story.

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