How TRIA Would Handle Another 9/11: A Deep Dive into Terrorism Insurance

The Evolution of Terrorism Insurance Market

Since the 2001 terrorist attacks, the market for terrorism insurance has evolved significantly. Initially, insurers avoided covering terrorism risks, leading to an effectively non-existent market. However, today, the market is stronger but still heavily reliant on the government backstop provided by the Terrorism Risk Insurance Act (TRIA).

Financial Impact of a Repeat 9/11 Event

If a similar event were to occur today, the government's net payout under TRIA would be less than zero, as it would recover more from mandatory surcharges than it would reimburse insurers. Meanwhile, insurance companies would face a net payout of nearly $20 billion. As the law is renewed, insurer contributions would steadily grow, with policyholder surcharges increasing more dramatically.

Future Scenarios and Policy Implications

By 2030, a repeat 9/11 event would result in $58 billion in losses, with insurers bearing 49% of the total insured loss. The main drivers of these changes include the growth of industry marketplace retention and the shrinking federal co-payment. The RAA model, widely regarded as credible, can simulate various scenarios and proposed changes to the program, providing valuable insights for stakeholders.

For readers, it's crucial to understand the evolving dynamics of terrorism insurance and the potential financial impacts on both the government and insurers. Staying informed about such policies can help in making better-informed decisions regarding insurance purchases and risk management strategies.