Following the September 11th, 2001, terrorist attacks Congress passed the Terrorism Risk Insurance Act. TRIA, which provides a backstop for the government and the economy in the event that national security fails and terrorism risk materializes, has faced criticism despite these positive functions. Some think of TRIA as corporate welfare while others see government involvement in the insurance industry as inappropriate and unwelcome. As TRIA’s 2014 sunset date approaches, lawmakers must put these criticisms aside and recall what is different about this piece of legislation. It works.
The scope of TRIA is vast and it extends beyond skyscrapers in major cities. Hospitals, universities, schools, theme parks, stadiums and museums all benefit from the partnership between the federal government and the insurance industry. TRIA makes property and casualty insurance available for the risk of terrorism and also creates an environment where the losses are shared when they exceed the $100 million trigger. The private sector is therefore able to create some capacity for the risk of terror allowing for better and faster recovery if the risk materializes.
Leigh Ann Pusey, President and CEO of the American Insurance Association, agrees that TRIA should be extended past 2014. She explained at a National Journal conference in November that in this case terrorism insurance is not about the insurer. It is about the economy. She also explains that basic terrorism risk knowledge is in the government, not the private sector. For this reason there is a necessary marriage between the insurance industry and the government.
Terrorism insurance is often thrown into the same stew as other insurance policies that protect policy holders in the event of concentrated losses. But unlike some insurance policies that are priced according to modeled risk, there is no science from which insurers can model terrorism risk. A flood can be predicted and prepared for but not prevented; terrorism can only be prepared for. (This assumes that if terrorism is predicted it is thusly prevented.) TRIA is crucial to this preparation.
Representative Michael Grimm (R-NY) supports extending TRIA saying, “if it isn’t broken, don’t fix it.” He explains that the patterns of unknown terrorists are unpredictable because most of their activity occurs underground. Grimm believes that terrorism has evolved but he also thinks that the United States has been admittedly lucky that terrorism has not, at least to our immediate knowledge, become any worse or graver.
This is not a situation where there old adage ‘what we don’t know can’t hurt us,’ applies.
Acts of terror are not meant to simply affect the American economy and cause wide-spread death; the intent of terror is to disrupt the American way of life. Terrorism targets our government by seeking to impose insurmountable change on the institutions of democracy, law and order. Those who think TRIA is corporate welfare or an unnecessary government overreach seem to have forgotten this. Terrorism does not target individual insurance companies. TRIA’s innate partnership between insurance companies and the government enables us to better guarantee that the intent of terrorism never fully manifests.
TRIA allows the government to work effectively with the insurance industry and the private sector to protect national security. Without TRIA our economy is at a greater risk in the event of terrorism but more importantly, so is our way of life. The Terrorism Risk Insurance Act works.
Daisy Letendre is an intern in Washington, DC, and a graduate of Trinity College in Connecticut.
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