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Tuesday, March 11, 2014

RAND Study: Expiration of TRIA Could Hurt National Security

The RAND study found that terrorism remains a real — albeit uncertain — national security threat, with the most likely scenarios involving arson or explosives being used to damage property or conventional explosives or firearms used to kill and injure civilians. Terrorism has occurred persistently in the U.S. since 2001, yet complex terrorist attacks have not occurred. However, there are active terrorist groups who do aspire to conduct more complex attacks on U.S. targets, and the possibility remains that sometime in the future, one of these groups may succeed.

An examination of past attacks is only of limited use for accurately predicting the probability of future attacks or losses from attacks different than those that have occurred, Willis said. For that reason, there are limits to how terrorism risk models can be used to understand future terrorism risks.

The current terrorism risk insurance program has a $27.5 billion threshold for aggregate losses that are paid by the insurance industry and commercial policyholders before the government program begins paying.

The threshold ensures that the insurance industry, rather than the taxpayer, is ultimately responsible for paying for those incidents that are within the range of the industry's modeling capability. At the same time, that threshold permits insurance companies and policyholders to manage risks from incidents that involve deep uncertainty that cannot be adequately quantified using modeling.

Learn more and read the full study by RAND.

If you are an ABIA member and would like to learn more about ABIA's support of TRIA or join our TRIA Task Force, please contact Renee Galbraith and visit our website.