Duration Positives Drawbacks

Short-term

• Provides Congress near-term ability

to amend the program (either for

political- or market-based reasons)

• Policy exclusions will be

immediately impacted

• Effort to reauthorize the program

will be constant

• Capacity for long-term

construction projects could be

limited

Long-term

• Provides stability to the market

• Allows market dynamics to take

hold outside of the political

reauthorization debate

• Provides significant flexibility for

long-term construction projects

• Any change to the program to 

reflect a political or market-based 

event would need to be done in 

the middle of the reauthorization 

period

Permanent

• Provides stability to the market

• Removes political element of the

periodic reauthorization debate

• Provides maximum flexibility for

long-term construction projects

• Changes to the program would

need to pass through Congress

outside of reauthorization debate

(which has never occurred)

Draft – For Discussion Purposes Only

ACRSM August 2019
Not renewing TRIA

could lead to some 

insurers 

withdrawing from 

the market and

increasing 

insurance

premiums. 

It has been argued that TRIA imposes a burden on the federal government and 

eventually the taxpayers. According to the study by Rand Corporation, if TRIA 

were to expire, several insurers would withdraw coverage resulting in a larger

share of uninsured losses. This would increase other forms of federal assistance. 

The study finds that in absence of terrorist attack, the tax payer pays little and in 

event of terrorist attack experienced in past, including 9/11, TRIA is expected to 

save the taxpayer money. Erwann Michel-Kerjan and Howard Kunreuther find that 

under the 2015 TRIA program, tax payer is burdened only if terrorist induced

losses are greater than USD 60 billion . For losses lower than that, federal 

government has provision to recoup what it may initially pay out by imposing 

surcharges on insurance premiums. Hence, TRIA is designed in such a way that 

the insurance industry is responsible for all but extreme losses.

3

2 

The 9/11 losses amounted to 46 billion USD in 2018 prices. There have been a 

few studies which have estimated the size and impact of potential losses . The 

result of these studies can be divided into two categories: conventional terrorist

threats and those caused by NBCR. The losses estimated under NBCR scenarios

can range from 100 billion to as large as staggering USD 800 billion, which is far 

beyond the private re/insurance capacity. Swiss Re Institute estimates for the 

reinsurance market capacity for well-understood US nat cat risks are between

USD 120 and 150 billion.

4

According to the Marsh 2019 terrorism risk report, the take-up rate for terrorism 

insurance in the US has been around 60% for over several years. In 2019, 

education, media, financial institutions, and real estate had the highest take up

rates. Metropolitan areas such as New York City, Chicago, Atlanta, and San 

Francisco had much higher rates than other areas. If TRIA were to discontinue, 

surveys estimate that the take-up rate may fall anywhere from 38% to 76%

Expiration of TRIA 

would have a strong

negative impact on 

the economy.

A study by Glenn Hubbard and Bruce Deal quantified the macroeconomic 

consequences of TRIA expiring . While the estimates of the study may be dated,

we believe that the broader conclusions of the study are still valid. The report 

estimated that 5higher terrorism insurance costs resulting from non-renewal of

TRIA in 2005 would have led to 326,000 fewer jobs being created due to job

dislocation as employers reduce and relocate their work force. The GDP and net 

worth would decrease by 0.2% and 0.9%, respectively, even in absence of a 

terrorist attack and the cost would be significantly higher if a terrorist attack of 

9/11 level occurred.

6

.

Even if we were to take a decrease in the take-up rate in the lower end of the 

range, industries with a current high take-up rate in big metropolitan areas will

suffer the most as the insurers withdraw from providing coverage and/or increase 

prices. Multiline insurers offering both property and worker compensation would

be hard pressed due to the correlation in payout if a terrorist act were to occur. 

Due to the uncertainty around TRIA, Marsh is witnessing and expects more 

sunset provisions in policies and higher insurance costs as we approach 

December 2020. 

5

2 Rand Corporation, "The Impact on Federal Spending of Allowing Terrorism Risk Insurance

Act to Expire", Policy Brief, RR 661, 2014. 

3 E. Michel-Kerjan and H. Kunreuther, "A Successful Yet Somewhat Untested Case of

Disaster Financing: Terrorism insurance under TRIA 2002-2020", Risk Management and

Insurance Review, Vol. 21, No. 1, 2018,

4 See references in footnotes 2 and 3. 5

6

Rand Corporation, “Federal Role in Terrorism Insurance, Evaluation Alternatives in an 

Uncertain World”, MG-679-CTRMP, 2007

R Glen Hubbard and Bruce Deal, “The Economic effects of federal participation in 

Terrorism Risk”, Risk Management and Insurance Review, Vol. 8, Issue 2, September 

2005.

Draft – For Discussion Purposes Only

ACRSM August 2019