Issue Brief: Terrorism InsuranceUpdated April 2009
Background
The September 11, 2001 terrorist attacks resulted in an estimated $40 billion in insurance claims. This prompted property and casualty insurers to warn that because of difficulties associated with predicting the upper bounds of terrorism exposure government backing would be necessary to avoid enormous premiums, dramatic cuts in coverage, or outright refusals by insurers to provide insurance coverage to structures such as skyscrapers, stadiums and shopping malls against future terrorist attacks. In order to help stabilize the property and casualty insurance market, and to provide a transitional period during which the industry could develop pricing and risk models so that it was more prepared to offer terrorism coverage, Congress passed the Terrorism Risk Protection Act (TRPA) in November 2002. The legislation helped to ensure that government, including municipalities, as well as businesses would be able to purchase terrorism insurance at affordable rates. The 109th Congress extended the TRPA through 2007, at which time it was set to expire.
Extension of the Act in 2007
In the 2007 legislative session, President Bush signed the Terrorism Risk Insurance Program Reauthorization Act of 2007
(Public Law # 110-160), a seven-year extension of the TRPA. The law, which will be effective though December 31,
2014, provides that the federal government will help pay claims arising from terrorist attacks once costs for insurers have exceeded $100 million. This federal backstop also applies to states and localities thereby providing the certainty of
insurance at reasonable rates. The legislation also requires continued studies into the development of a private market for terrorism risk insurance.
Additional Resources
GFOA • Federal Liaison Center • (202) 393-8020 • (202) 393-0780 FAX • Email
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