Gaps in the safety net of terrorism insurance coverage have left the country economically vulnerable, according to a study from the RAND Corporation, and lawmakers should work to improve and expand coverage.
In a report issued late last week, the RAND corporation said the U.S. terrorism insurance system is not up to the task of responding to a rapidly evolving terrorist threat.
"America's economy does not have adequate financial protection from terrorist attacks," said Peter Chalk, a RAND terrorism expert and lead author of the report. "Protecting businesses against the economic impact of a terrorist attack should be part of a robust homeland security effort." Bruce Hoffman, Robert Reville and Anna-Britt Kasupski, all of the RAND Corp., also contributed to the report.
The report notes that current terrorism insurance only provides coverage for attacks by foreign terrorist groups, and that most insurance policies now exclude coverage for attacks involving chemical, biological, radiological and nuclear weapons. Additionally, many businesses throughout the country are not opting to purchase terrorism coverage, increasing the potential for economic damage.
In response, the report advises Congress to consider proposals aimed at increasing the take-up rate of terrorism coverage by lowering the price of coverage.
The report also advises not only extending the Terrorism Risk Insurance Act, which provides the "safety net" for insurers offering terrorism coverage and is set to expire at the end of the year, but also expanding the program to include domestic terrorist acts and requiring coverage for attacks involving CBRN. To cover CBRN attacks, the researchers acknowledged, lawmakers may have to consider a direct government insurance program rather than the "safety net" reinsurance guarantee provided under TRIA.
The report also suggested that lawmakers establish a board of governors to assess the performance of the TRIA program as well as that of any subsequent program created to replace or expand it.
Several lawmakers have already called for a proposed two-year extension of the TRIA program, and the issue will likely gather more momentum with the release of a Treasury report surveying the primary and reinsurance markets for terrorism coverage.
That report, which was mandated by the original TRIA legislation, is required to be presented to Congress no later than June 30. Currently, it is anticipated Treasury could release the report as early as June 28.
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