Syrian Air Strikes Focus Attention on U.S. Terrorism Risk Insurance Market

Federal Law, Expiring on December 31, Has Made Terrorism Coverage Available, Affordable

FOR IMMEDIATE RELEASE
New York Press Office: (212) 346-5500; media@iii.org

NEW YORK, September 23, 2014 — The year-end expiration of the federal Terrorism Risk Insurance Program Reauthorization Act (TRIPRA), and the uncertain future of the law, is creating problems in the U.S. terrorism insurance market, according to the Insurance Information Institute (I.I.I.).

 

“The private sector does not have the capacity to provide insurance or reinsurance for terror risk to the extent currently provided by TRIPRA,” said Dr. Robert Hartwig, CPCU, economist and president of the I.I.I. “In the absence of the act, terrorism risk insurance would be less available and less affordable,” he continued, “And coverage for terrorist-caused economic damages would likely be more costly, or limited in scope, if the federal government played no role in this market.”

 

In a press briefing today, President Barack Obama warned that the Islamic State of Iraq and Syria (ISIS), and the Khorasan, an Al Qaeda splinter group, are severe threats to the American people. “Airstrikes in Syria against the extremist Khorasan group were prompted by planning for an ‘imminent’ terror attack on U.S. soil, the Pentagon said. The militant group is made up of a “network of seasoned Al-Qaeda veterans” preparing to attack “United States and Western interests,” the Defense Department said in a statement.

 

Moreover, an ISIS fighter has vowed that ISIS—which is responsible for savagely beheading three Western hostages on camera—would avenge the Syrian strikes undertaken this week by the U.S. military.

 

“The recent intensification of threats to American interests around the world from new terrorist organizations, including ISIS and Khorasan, demonstrate the need for TRIPRA’s extension,” said Dr. Hartwig. “Since its creation in 2002, the federal Terrorism Risk Insurance Act, and its successors, have been critical components of the U.S.’s national economic security infrastructure.

 

“TRIPRA 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,” he explained. “The availability and pricing of terrorism insurance is tightening given the uncertainty over TRIPRA’s reauthorization, and because of the unique nature of terrorism risk.”

 

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. 9/11-related claims were paid out across multiple lines of insurance, including property ($24.7 billion of the total, in 2013 dollars), business interruption, aviation, workers compensation, life and liability.

Top 20 Costliest Terrorist Acts by Insured Property Losses

(2021 $ millions)

Rank Date Country Location Event Insured property
loss (1)
(2021 $ millions)
Fatalities
1 September 11, 2001 U.S. New York, Washington DC,
Pennsylvania
Hijacked airliners crash into
World Trade Center and Pentagon
$28,862 (2) 2,982
2 April 24, 1993 U.K. London Bomb explodes near NatWest tower
in the financial district
1,394 1
3 June 15, 1996 U.K. Manchester Irish Republican Army (IRA) car bomb
explodes near shopping mall
1,143 0
4 April 10, 1992 U.K. London Bomb explodes in financial district 1,031 3
5 February 26, 1993 U.S. New York Bomb explodes in garage of World Trade Center 961 6
6 July 24, 2001 Sri Lanka Colombo Rebels destroy 3 airliners, 8 military aircraft and
heavily damage 3 civilian aircraft
612 20
7 February 9, 1996 U.K. London IRA bomb explodes in South Key Docklands 398 2
8 June 23, 1985 North Atlantic Irish Sea Bomb explodes on board of an Air India Boeing 747 249 329
9 April 19, 1995 U.S. OK, Oklahoma City Truck bomb detonates outside government building 223 166
10 September 12, 1970 Jordan Zerqa, Dawson's Field
(disused RAF airstrip in desert)
Hijacked Swissair DC-8, TWA Boeing 707,
BOAC VC-10 dynamited on ground
195 0
11 September 6, 1970 Egypt Cairo Hijacked PanAm B-747 dynamited on ground 170 0
12 April 11, 1992 U.K. London Bomb explodes in financial district 147 0
13 November 26, 2008 India Mumbai Attack on two hotels; Jewish center 130 172
14 March 27, 1993 Germany Weiterstadt Bomb attack on a newly built, still unoccupied prison 108 0
15 December 30, 2006 Spain Madrid Bomb explodes in car garage at Barajas Airport 89 2
16 December 21, 1988 U.K. Lockerbie Bomb explodes on board of a PanAm Boeing 747 87 270
17 July 25, 1983 Sri Lanka   Riot 73 0
18 July 7, 2005 U.K. London Four bombs explode during rush hour in the London Underground and bus 72 52
19 November 23, 1996 Comoros Indian Ocean Hijacked Ethiopian Airlines Boeing 767-260 ditched at sea 69 127
20 March 17, 1992 Argentina Buenos Aires Bomb attack on Israel's embassy in Buenos Aires 58 24

(1) Includes bodily injury and aviation hull losses. Updated to 2021 dollars by the Insurance Information Institute using the U.S. Bureau of Labor Statistics CPI Inflation Calculator.
(2) Differs from inflation-adjusted estimates made by other organizations due to the use of different deflators.

Source: Swiss Re, U.S. Bureau of Labor Statistics, Insurance Information Institute.

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