Despite an ever-changing terrorism risk insurance market, businesses from every industry sector continue to purchase coverage—more than 60 percent of organizations surveyed by Marsh bought coverage in 2009.
Terrorism insurance and associated risk management strategies are dynamic and complex issues, with many interdependent factors contributing to managing the risk. Foreign relations, the effectiveness of homeland defense, and the ambiguous nature of the risk make terrorism losses extremely challenging to predict and quantify. It is difficult for insurers to effectively price and reserve capacity for their otential exposure to catastrophic terrorism losses.
U.S. insurers are backed by the commitment of the United States federal government to provide reinsurance relief to help them manage the ongoing risk of terrorism. In 2007, President Bush signed the Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA), extending the program through December 31, 2014. The original legislation — the Terrorism Risk Insurance Act of 2002 (TRIA) — was a direct response to the attacks of September 11, 2001, and part of a concerted effort to keep the American economy strong.
Like the original legislation, the two extensions were intended as short-term solutions. Congress passed TRIPRA in part because the insurance industry had not amassed enough capital to insure catastrophic terrorism losses without a federal backstop.
Since the original legislation in 2002, the standalone terrorism market has grown and evolved and now offers a number of viable program solutions for companies in the United States and abroad to mitigate their terrorism risks.