The September 11, 2001, terrorist attacks resulted in nearly 3,000 deaths and roughly $44 billion of insured losses (in 2014 dollars). In light of the unexpected and unprecedented losses from the attacks, as well as the heightened uncertainty surrounding future losses, private insurers subsequently sharply reduced the availability of terrorism coverage for businesses and commercial properties.
Policymakers were concerned that without terrorism insurance, financing for commercial development projects in highrisk areas would be unavailable and that new construction and job creation would be reduced, thereby slowing economic growth. (Estimating how large those effects would have been is difficult, in part because some construction and job creation would probably have shifted to lower-risk areas; such shifts might have reduced losses in the event of future attacks.)
In response, lawmakers enacted the Terrorism Risk Insurance Act (TRIA) in 2002 as a temporary measure to provide catastrophic federal reinsurance for terrorism risk without charging premiums up front. Although no major terrorist attacks have occurred in the United States since 9/11 and thus the government has paid no claims, the threat of terrorist attacks persists. Lawmakers reauthorized TRIA in 2005 and 2007 and again in January 2015 for six years, just days after the program lapsed at the end of 2014. The law requires primary insurers to offer terrorism coverage on business and commercial policies (including workers' compensation insurance). By coupling that requirement with a federal reinsurance program, which protects insurers against large losses, TRIA helps to ensure the availability of insurance coverage and might reduce insurers' insolvencies and economic disruption after a large terrorist attack. But, as structured, the program exposes the government to a significant amount of financial risk and subsidizes policyholders (many of which are large businesses).
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