The Risk and Insurance Management Society (RIMS) has renewed its call for the US Terrorism Risk Insurance Act (TRIA) to be renewed before it expires at the end of next year.

TRIA was introduced in 2002 as terrorism cover fell away following the September 11 2001 attacks. The government program, which has already been extended twice, provides reinsurance coverage in the event of major losses.

If it is not renewed many companies will be forced to self-insure, putting their businesses and the wider economy at risk, RIMS says.

In a report called Terrorism Risk Insurance Act: The Commercial Consumer’s Perspective, the society tackles some of the criticisms levelled at the program.

It says much of the scepticism stems from comparisons with government bailouts of financial institutions in 2008/09.

But with TRIA the Government is acting as reinsurer, not creditor, and will pay out only if the $US100 million ($111.48 million) plus 20% deductible threshold is reached.

RIMS says the Government is yet to spend anything beyond the “minimal” costs of setting up the program.

The report also explains why insurers cannot model for terrorism as they do other risks.

It is “inherently unpredictable”, with attacks planned and executed by people whose motives, targets and actions are constantly changing. There is a lack of historical experience and data, and insurers are not privy to classified information on “near misses”.

“The challenge of predicting the extent of damages that could result from terrorism prevents insurers from providing their clients with adequate and affordable insurance,” RIMS board director Carolyn Snow said.

“This uncertainty has forced organisations to rely on TRIA to fulfil those coverage gaps.

“With no indication from the Government as to its plans for the future of TRIA, risk professionals and insurance providers will run into major roadblocks when developing suitable risk financing programs, especially during the renewal process.

“RIMS’ external affairs committee has developed this comprehensive resource to help risk practitioners better understand the implications of TRIA’s expiration, encouraging them to join our fight for a long-term TRIA resolution.”

Bills have been introduced to Congress proposing five and 10-year extensions to the Act.