Terrorism Insurance 2005

Abstract

The insurance industry can play a key role in contributing to social and economic continuity should a large-scale terrorist attack occur. There have been debates here and abroad on the role and responsibilities of the federal government and the private sector in providing adequate insurance protection against terrorism. In the United States, this led to the passage of the Terrorism Risk Insurance Act of 2002. One question that needs to be thoroughly examined is whether and how the public sector could partner more systematically with the private sector to create a large and sustainable insurance market for terrorism risk. Such a policy may mean providing some degree of government reinsurance and possibly covering certain losses from terrorism where the private sector may not have sufficient capacity. The public sector may also facilitate the linkage of terrorism insurance with private expenditures to better prepare the nation by reducing interdependent risks of terrorism.

Keywords: Terrorism insurance, insurance industry, terrorism, terrorist attack, insurance, Terrorism Risk Insurance Act of 2002, terrorism risk, TRIA

JEL Classification: G2, G22, G28