Report: The Need to Renew TRIA ABA TIPS Task Force on Federal Involvement in Insurance Regulation Modernization

Abstract

This Report support’s the position by the ABA TIPS Task Force on Federal Involvement in Insurance Regulation Modernization that the Terrorism Risk Insurance Act (TRIA) should be renewed. Although the market for terrorism insurance has developed with the support of TRIA, the fundamental nature of terrorism risk has not changed and continues to require the Federal backstop. Because of the unpredictability of terrorism risk, without a Federal backstop many insurers will withdraw from the terrorism market, the price of terrorism insurance will rise and take-up rates will fall. Other countries facing terrorism risk, in some cases substantially less risk than the United States, have recognized the need for government involvement and have government programs. In fact, TRIA’s use of a significant insurer and industry retentions, and the role of the Federal government as a “backstop” rather than as an insurer, makes TRIA one of the most “market” oriented terrorism insurance programs.

Keywords: terrorism insurance, Terrorism Risk Insurance Act, TRIA, reinsurance, Terrorism Risk Insurance Program, TRIP, insurance modernization, federal backstop

JEL Classification: G22, G28, H56, K23