The Terrorism Risk Insurance Act is set to sunset at the end of 2014 unless Congress reauthorizes the program—something not expected to be considered until spring. Meanwhile, a new report indicates that the threat of a large-scale terrorist attack in the US is still high, particularly in five urban areas.
New York, Chicago, Los Angeles, San Francisco and Washington, D.C. are at the greatest risk for terrorism, “and will remain so for the foreseeable future,” according to the white paper from Risk Management Solutions.
Damages from attacks on those five cities comprise 75% of the nation’s “expected annual loss,” researchers said.
The paper assessed risk based on 35 recent terrorist plots and estimated damages with terrorism-modeling software that simulated attacks on 9,800 global targets. A five-kiloton nuclear device activated in downtown San Francisco, for example, would kill nearly 150,000 people and cause more than a quarter trillion dollars in losses.
RMS said such attacks would result in insured damages that could bankrupt the nation’s entire insurance industry. To protect against such an outcome, the group pushed for TRIA’s reauthorization.
Unlike natural disasters, RMS noted, terrorist attacks are difficult to underwrite as they target specific centers of financial and political power.
This argument has been made by several people in the industry in favor of the program’s reauthorization.
“Mother Nature doesn’t sit down with a map of existing defenses and figure out how to get around them,” said Julie Rochman, CEO of the Institute for Business and Home Safety. “Terrorists’ aims are to maximize pain, maximize harm and maximize loss. That’s a very different type of hazard.”
Rochman added that while it’s possible to put loss control practices into place, “there are limitations to what you can do if the people you’re trying to protect against have got your playbook.”
Reauthorization for TRIA may be an uphill battle, however, as House Republicans express reservations on taxpayer costs.
“The program remains largely unchanged in nearly 12 years,” Rep. Randy Neugebauer said during a November hearing. “Unfortunately, the slow evolution of the program hindered the growth of the private market for terrorism risk insurance, thus resulting in a bad deal for US taxpayers.”
