Terrorism Risk Insurance Program Reauthorization Act set to expire

Terrorism Risk Insurance Program Reauthorization Act set to expire
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Terrorism Risk Insurance Program Reauthorization Act set to expire

International Terrorism remains a continued risk 13 years since Sept. 11

English: United Airlines Flight 175 crashes in...

English: United Airlines Flight 175 crashes into the south tower of the World Trade Center complex in New York City during the September 11 attacks (Photo credit: Wikipedia)

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 Insurance Information Institute (I.I.I.).

“The 13-year anniversary of the September 11, 2001, terrorist attack—coming just ahead of TRIPRA’s loomingDecember 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,” explained Dr. Robert Hartwig, CPCU, 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.

Dr. 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 explained. “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.”

Dr. 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 September 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.

The Arab Daily News

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A total of 2,976 people perished in the September 11, 2001, terrorist attacks in New York, Washington, D.C., andPennsylvania, 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.)

THE TWENTY MOST COSTLY TERRORIST ACTS BY INSURED PROPERTY LOSSES
(2013 $ millions)

Rank

Date

Country

Location

Event

Insured property loss (1)

Fatalities

1

Sep. 11, 2001

U.S.

New York, Washington, DC, Pennsylvania

Hijacked airliners crash into World Trade Center and Pentagon

$24,721

2,982

2

Apr. 24, 1993

U.K.

London

Bomb explodes near NatWest tower in the financial district

1,193

1

3

Jun. 15, 1996

U.K.

Manchester

Irish Republican Army (IRA) car bomb explodes near shopping mall

980

0

4

Apr. 10, 1992

U.K.

London

Bomb explodes in financial district

883

3

5

Feb. 26, 1993

U.S.

New York

Bomb explodes in garage of World Trade Center

822

6

6

Jul. 24, 2001

Sri Lanka

Colombo

Rebels destroy 3 airliners, 8 military aircraft and heavily damage 3 civilian aircraft

525

20

7

Feb. 9, 1996

U.K.

London

IRA bomb explodes in South Key Docklands

341

2

8

Jun. 23, 1985

North Atlantic

Irish Sea

Bomb explodes on board of an Air India Boeing 747

212

329

9

Apr. 19, 1995

U.S.

Oklahoma City, OK

Truck bomb crashes into government building

192

166

10

Sep. 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

167

0

11

Sep. 6, 1970

Egypt

Cairo

Hijacked PanAm B-747 dynamited on ground

145

0

12

Apr. 11, 1992

U.K.

London

Bomb explodes in financial district

127

0

13

Nov. 26, 2008

India

Mumbai

Attack on two hotels; Jewish center

111

172

14

Mar. 27, 1993

Germany

Weiterstadt

Bomb attack on a newly built, still unoccupied prison

93

0

15

Dec. 30, 2006

Spain

Madrid

Bomb explodes in car garage at Barajas Airport

76

2

16

Dec. 21, 1988

U.K.

Lockerbie

Bomb explodes on board of a PanAm Boeing 747

74

270

17

Jul. 25, 1983

Sri Lanka

Riot

62

0

18

Jul. 7, 2005

U.K.

London

Four bombs explode during rush hour in a tube and bus

62

52

19

Nov. 23, 1996

Comoros

Indian Ocean

Hijacked Ethiopian Airlines Boeing 767-260 ditched at sea

60

127

20

Mar. 17, 1992

Argentina

Buenos Aires

Bomb attack on Israel’s embassy in Buenos Aires

50

24

(1) Includes bodily injury and aviation hull losses. Updated to 2013 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.

With TRIPRA scheduled to expire at the end of 2014, both houses of Congress have been discussing legislation that would set out the federal government’s involvement in funding potential terrorism losses. In July, the Senate passed a bipartisan seven year TRIA reauthorization bill (S. 2244) by a vote of 93.4, but the House did not take up its version of a TRIA reauthorization bill before the August recess. Prospects are increasing that the issue of TRIA’s reauthorization will not be resolved until the Lame Duck session after the 2014 election.

RELATED LINKS

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THE I.I.I. IS A NONPROFIT, COMMUNICATIONS ORGANIZATION SUPPORTED BY THE INSURANCE INDUSTRY.

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SOURCE Insurance Information Institute

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