Issues and Options for Government Intervention in the Market for Terrorism Insurance

摘要

The threat of terrorism poses a challenge for the U.S. insurance system: How can the system best insure against potential losses and compensate victims of attacks. Following the 9/11 attacks, the federal government adopted the Terrorism Risk Insurance Act (TRIA), which requires insurers to make terrorism coverage available to commercial policyholders. In return, TRIA guarantees that the public (i.e., the government) will reimburse insurers for 90 percent of losses from terrorism above certain thresholds. TRIA was intended to bolster the insurance industry against catastrophic payouts while the industry developed strategies and mechanisms to cope with the threat of terrorism. TRIA expires on December 31, 2005, but insurance policies (which typically last one year) will soon begin to be written that will expire after TRIA does. This paper has a dual purpose: to help frame the central issues that should be considered in the debate over whether to extend, modify, or end TRIA, and to explore the broader issue of the appropriate role of disaster insurance within a system for managing risks created by the possibility of terrorist attacks and compensating losses caused by terrorist attacks. The paper also discusses options that policymakers might consider in addressing these issues and goals against which various options can be evaluated. Although this paper focuses on insurance, it is important to note that insurance is only one part of an overall system for managing risks created by the possibility of terrorist attacks and compensating losses caused by terrorist attacks. Direct government compensation, the tort system, and charities can also play a role in this system.