If another catastrophic terrorism attack were to occur, in the absence of TRIA, tens of thousands of jobs would be lost due to lack of insurance coverage and thousands of additional commercial bankruptcies could occur, according to the study. Even without another major attack, the economic drag produced by the lack of a federal terrorism insurance backstop would cost Americans in several ways, Hubbard and Deal warn. The nation's gross domestic product may be $53 billion lower, household net worth may be $512 billion lower, and roughly 326,000 fewer jobs may be created. The authors credit this to the uncertainty of policies that extend into 2006, and will be negotiated as early as this fall.

Estimated insured losses from another catastrophic terrorist attack on U.S. soil could exceed $250 billion, according to a 2004 study by Tillinghast Towers Perrin. John J. Degnan, vice chairman and chief administrative officer of the Chubb Corp., cited the Tillinghast report in his written statement to the Senate Committee on Banking, Housing and Urban Affairs. “For example,” he said, “if the World Trade Center attack had occurred later in the day at lower floors, the losses could have been two to three times as severe.”

Issues specific to terrorism make the related risks difficult for private insurers to absorb, the study noted, especially as insurers' financial resources to cover catastrophic terrorism events are limited, and estimating the likelihood and location of such events is impossible. “In light of these realities, the authors do not believe that TRIA has prevented the development of additional private sector insurance or reinsurance coverage by 'crowding out' such capacity,” wrote Hubbard and Deal. “In fact, most participants in the system feel that without TRIA, insurers would be forced to reduce, rather than increase, their exposure to terrorism risk, thus leaving substantial and growing gaps in coverage.

“The U.S. economy will be stronger with TRIA than without it,” they concluded. “Over time, it may be possible to develop alternative approaches to TRIA. However, while several alternatives have been suggested, they are not in place today and we do not believe that any of them is viable in the near term.”