Policy Watch: Challenges for Terrorism Risk Insurance in the United States
This paper examines the role that insurance has played in dealing with terrorism before and after September 11, 2001, by focusing on the distinctive challenges associated with terrorism as a catastrophic risk. The Terrorism Risk Insurance Act of 2002 (TRIA) was passed by the U.S. Congress in November 2002, establishing a national terrorism insurance program that provides up to $100 billion commercial coverage with a specific but temporary risk-sharing arrangement between the federal government and insurers. TRIA's three-year term ends December 31, 2005, so Congress soon has to determine whether it should be renewed, whether an alternative terrorism insurance program should be substituted for it, or whether insurance coverage is left solely in the hands of the private sector. As input into this process, the paper examines several alternatives and scenarios, and discusses their potential to create a sustainable terrorism insurance program in the Unites States.
|Date of creation:||Nov 2004|
|Date of revision:|
|Publication status:||published as Kunreuther, Howard and Erwann Michel-Kerjan. "Challenges For Terrorism Risk Insurance In The United States," Journal of Economic Perspectives, 2004, v18(4,Fall), 201-214.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Erwann Michel-Kerjan & Burkhard Pedell, 2005. "Terrorism Risk Coverage in the Post-9/11 Era: A Comparison of New Public–Private Partnerships in France, Germany and the U.S.*," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 30(1), pages 144-170, January.
- Lee, Dwight R, 1988. "Free Riding and Paid Riding in the Fight against Terrorism," American Economic Review, American Economic Association, vol. 78(2), pages 22-26, May.
- Kent Smetters, 2005. "Insuring Against Terrorism: The Policy Challenge," NBER Working Papers 11038, National Bureau of Economic Research, Inc.
- Kunreuther, Howard & Heal, Geoffrey, 2003. "Interdependent Security," Journal of Risk and Uncertainty, Springer, vol. 26(2-3), pages 231-49, March-May.
- Lapan, Harvey E. & Sandler, Todd, 1988.
"To Bargain or Not to Bargain: That is the Question,"
Staff General Research Papers Archive
10817, Iowa State University, Department of Economics.
- Lapan, Harvey E & Sandler, Todd, 1988. "To Bargain or Not to Bargain: That Is the Question," American Economic Review, American Economic Association, vol. 78(2), pages 16-21, May.
- Doherty, Neil A & Lamm-Tennant, Joan & Starks, Laura T, 2003. "Insuring September 11th: Market Recovery and Transparency," Journal of Risk and Uncertainty, Springer, vol. 26(2-3), pages 179-99, March-May.
- Sandler, Todd & Enders, Walter, 2004. "An economic perspective on transnational terrorism," European Journal of Political Economy, Elsevier, vol. 20(2), pages 301-316, June.
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