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Federal Terrorism Risk Insurance

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  • Jeffrey R. Brown
  • Randall S. Kroszner
  • Brian H. Jenn

Abstract

The terrorist attacks of September 11, 2001 represented a loss for commercial property & casualty insurers that was both unprecedented and unanticipated. After sustaining this record capital loss, the availability of adequate private insurance coverage against future terrorist attacks came into question. Concern over the potential adverse consequences of the lack of availability of insurance against terrorist incidents led to calls for federal intervention in insurance markets. This paper discusses the economic rationale for and against federal intervention in the market, and concludes that the benefits from establishing a temporary transition program, during which the private sector can build capacity and adapt to a dramatically changed environment for terrorism risk, may provide benefits to the economy that exceed the direct and indirect costs.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9271.

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Date of creation: Oct 2002
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Publication status: published as Brown, Jeffrey R., Randall S. Kroszner and Brian H. Jenn. "Federal Terrorism Risk Insurance," National Tax Journal, 2002, v55(3,Sep), 647-657.
Handle: RePEc:nbr:nberwo:9271

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  1. Randall S. Kroszner, 1998. "On the political economy of banking and financial regulatory reform in emerging markets," Proceedings 605, Federal Reserve Bank of Chicago.
  2. Dwight M. Jaffee & Thomas Russell, 1996. "Catastrophe Insurance, Capital Markets and Uninsurable Risks," Center for Financial Institutions Working Papers 96-12, Wharton School Center for Financial Institutions, University of Pennsylvania.
  3. Howard Kunreuther & Geoffrey Heal, 2002. "Interdependent Security: The Case of Identical Agents," NBER Working Papers 8871, National Bureau of Economic Research, Inc.
  4. Edward J. Kane & Asli Demirguc-Kunt, 2001. "Deposit Insurance Around the Globe: Where Does it Work?," NBER Working Papers 8493, National Bureau of Economic Research, Inc.
  5. Kenneth A. Froot, 1997. "The Limited Financing of Catastrophe Risk: An Overview," NBER Working Papers 6025, National Bureau of Economic Research, Inc.
  6. Federico Sturzenegger & Mariano Tommasi (ed.), 1998. "The Political Economy of Reform," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262194007, December.
  7. Kenneth A. Froot, 1999. "The Evolving Market for Catastrophic Event Risk," NBER Working Papers 7287, National Bureau of Economic Research, Inc.
  8. Paul Kleindorfer & Howard Kunreuther, 1999. "Challenges Facing the Insurance Industry in Managing Catastrophic Risks," NBER Chapters, in: The Financing of Catastrophe Risk, pages 149-194 National Bureau of Economic Research, Inc.
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Cited by:
  1. Friedrich Schneider & Tilman Brück & Daniel Meierrieks, 2010. "The Economics of Terrorism and Counter-Terrorism: A Survey (Part I)," CESifo Working Paper Series 3011, CESifo Group Munich.
  2. Andrés Solimano, 2003. "Prevention and Insurance of Conflict and Terrorism: Issues and Evidence for Latin America," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(121), pages 617-625.
  3. Barker, David, 2003. "Terrorism insurance subsidies and social welfare," Journal of Urban Economics, Elsevier, vol. 54(2), pages 328-338, September.
  4. Raj Chetty & Amy Finkelstein, 2012. "Social Insurance: Connecting Theory to Data," NBER Working Papers 18433, National Bureau of Economic Research, Inc.
  5. Howard Kunreuther & Erwann Michel-Kerjan & Beverly Porter, 2003. "Assessing, Managing, and Financing Extreme Events: Dealing with Terrorism," NBER Working Papers 10179, National Bureau of Economic Research, Inc.
  6. Lakdawalla, Darius & Zanjani, George, 2005. "Insurance, self-protection, and the economics of terrorism," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1891-1905, September.
  7. Amegashie, J.A. & Kutsoati, E., 2003. "Optimal Terror Alerts Under Asymmetric Information," Working Papers 2003-6, University of Guelph, Department of Economics and Finance.
  8. Jeffrey R. Brown & J. David Cummins & Christopher M. Lewis & Ran Wei, 2004. "An Empirical Analysis of the Economic Impact of Federal Terrorism Reinsurance," NBER Working Papers 10388, National Bureau of Economic Research, Inc.

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