Terrorism Risk Insurance Program Reauthorization Act set to expire
International Terrorism remains a continued risk 13 years since Sept. 11
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.
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)
Insured property loss (1)
Sep. 11, 2001
New York, Washington, DC, Pennsylvania
Hijacked airliners crash into World Trade Center and Pentagon
Apr. 24, 1993
Bomb explodes near NatWest tower in the financial district
Jun. 15, 1996
Irish Republican Army (IRA) car bomb explodes near shopping mall
Apr. 10, 1992
Bomb explodes in financial district
Feb. 26, 1993
Bomb explodes in garage of World Trade Center
Jul. 24, 2001
Rebels destroy 3 airliners, 8 military aircraft and heavily damage 3 civilian aircraft
Feb. 9, 1996
IRA bomb explodes in South Key Docklands
Jun. 23, 1985
Bomb explodes on board of an Air India Boeing 747
Apr. 19, 1995
Oklahoma City, OK
Truck bomb crashes into government building
Sep. 12, 1970
Zerqa, Dawson’s Field (disused RAF airstrip in desert)
Hijacked Swissair DC-8, TWA Boeing 707, BOAC VC-10 dynamited on ground
Sep. 6, 1970
Hijacked PanAm B-747 dynamited on ground
Apr. 11, 1992
Bomb explodes in financial district
Nov. 26, 2008
Attack on two hotels; Jewish center
Mar. 27, 1993
Bomb attack on a newly built, still unoccupied prison
Dec. 30, 2006
Bomb explodes in car garage at Barajas Airport
Dec. 21, 1988
Bomb explodes on board of a PanAm Boeing 747
Jul. 25, 1983
Jul. 7, 2005
Four bombs explode during rush hour in a tube and bus
Nov. 23, 1996
Hijacked Ethiopian Airlines Boeing 767-260 ditched at sea
Mar. 17, 1992
Bomb attack on Israel’s embassy in Buenos Aires
(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.
- White Paper: Terrorism Risk: A Constant Threat – 2014
- Presentation: Terrorism Risk & Insurance Update
- Issues Update: Terrorism Risk and Insurance
- Facts and Statistics: Terrorism
- Video: Dr. Hartwig Speaks About Terrorism Risk Insurance at Ground Zero (May 2011);Ten Years Later: Insurance Impact of 9/11
THE I.I.I. IS A NONPROFIT, COMMUNICATIONS ORGANIZATION SUPPORTED BY THE INSURANCE INDUSTRY.
Insurance Information Institute, 110 William Street, New York, NY 10038; (212) 346-5500; www.iii.org
SOURCE Insurance Information Institute
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