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Terrorism backstop ‘vital for US market’

Affordable insurance coverage for major US events such as the Super Bowl, the Summer Olympics and large construction projects may be threatened unless government policy brought in after the September 11 2001 terrorist attacks 18 years ago is reinstated.

The Insurance Information Institute (III) says the current version of the US Terrorism Risk Insurance Act (TRIA), a federal law since 2002, is set to expire at the end of 2020.

While the US terrorism insurance market is more robust than in the immediate aftermath of September 11, it “does not appear to have the ability to bear all terrorism risk,” according to an III white paper.

“Without a federal backstop, insurance markets could be disrupted,” says James Lynch, the III’s Chief Actuary and Senior VP, Research and Education.

“In a world without TRIA, it looks like terrorism insurance would be less available to businesses of all sizes who want, and need, these policies.”

The paper concludes that it is uncertain exactly how the marketplace might change if the TRIA program were to disappear in 2021, but “that it will be significantly disrupted seems likely”.

“Uncertainty around the future of [the] Terrorism Risk Insurance Program (TRIP) imposes costs on its own, as insurers and reinsurers begin to renegotiate with the possibility that TRIP may not be re-authorised,” the paper says.

“Acts of terror are unpredictable. Uncertainty regarding government support and the regulatory environment complicate the issue.”

TRIA has made terrorism insurance available and affordable by agreeing to reimburse insurers for certain losses which result from a certified act of terrorism.

No act of terrorism in the US has triggered TRIA, which only the US Treasury Department can do, so the law has so far not required any expenditure of federal taxpayer dollars.

The September 11 terrorist attacks in 2001 resulted in insured losses of about $US47 billion ($68.47 billion) in 2019 dollars.