Policy Watch: Challenges for Terrorism Risk Insurance in the United States

Howard Kunreuther and Erwann Michel-Kerjan

No 10870, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

JEL-codes: G22 G28 H56 (search for similar items in EconPapers)
Date: 2004-11
New Economics Papers: this item is included in nep-ias
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Citations: View citations in EconPapers (23)

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.

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