Tag Archives: TRIA

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.

TRIA Renewal Essential for Continued Protection of Economy

More than a decade since 9/11, the Terrorism Risk Insurance Program continues to deliver “substantive direct benefits to millions of businesses, workers, consumers and the overall economy – all at essentially no cost to taxpayers.†

This was a key takeaway from testimony delivered yesterday by Dr. Robert Hartwig, I.I.I. president and chief economist, at a Senate Banking Committee hearing.

Dr. Hartwig noted:

The war on terror is far from over, as the recent Boston Marathon bombings attest, but TRIA by all objective measures is now a proven and unqualified success.†

Dr. Hartwig pointed out that upwards of 60 percent of businesses purchased terrorism coverage nationally in 2012, up from 27 percent in 2003.

Industries responsible for much of the country’s critical infrastructure such as power and utilities, telecommunications and healthcare, along with financial institutions and local government have take-up rates that approach or exceed 70 percent, Dr. Hartwig said.

Moreover, the take-up rate for workers compensation is effectively 100 percent, meaning that every worker in America is protected against injuries suffered as the result of a terrorist attack.

But it is important to note that the majority of coverage that exists in the market today exists because of the continued existence of the Terrorism Risk Insurance Program, Dr. Hartwig said.

He went on to warn of dire economic consequences if TRIA is not renewed:

A sharp spike in business failures, higher unemployment and reduced GDP growth are just a few of the adverse consequences that are certain to follow in the event of a major terrorist attack in the absence of TRIA.”

Dr. Hartwig noted that the unambiguous success of TRIA demonstrates that the Act has become an invaluable component of the country’s national security infrastructure, adding:

Failure to institutionalize a permanent plan to protect the nation’s financial infrastructure leaves the country unnecessarily vulnerable to economic instability and risk of recession.†

Also check out a  recently updated  I.I.I. paper on terrorism risk.

PC360 has more on this story.