Who should pay for the economic consequences of a terrorist attack in the United States?
This week, the Wharton Risk Management and Decision Processes Center publishes TRIA and Beyond, an analysis of the Terrorism Risk Insurance Act of 2002 (TRIA), which will expire December 31, 2005, if not renewed. The Risk Center's report offers policymakers, key industry representatives and other interested parties an analysis of what roles the public and private sectors should play with respect to terrorism risk coverage in the United States. The report was produced by a nine-person team, led by Howard Kunreuther, co-director of the Center, and Erwann Michel-Kerjan, a senior research fellow at the Center. The other authors include Neil Doherty, Wharton professor of insurance and risk management; Paul Kleindorfer, Wharton professor of operations and information management; Mark V. Pauly, Wharton professor of health care systems and business and public policy; Scott Harrington, Wharton professor of health care systems; Center research associate Esther Goldsmith, and senior fellows Irv Rosenthal and Peter Schmeidler.
TRIA's primary goals, according to language in the act itself, are to protect consumers by maintaining "widespread availability and affordability of property and casualty insurance for terrorism risk" and to allow a transitional period during which private markets can adjust to the new risk environment. Before TRIA expires, the U.S. Congress must decide what, if anything, should replace it.
As the insurance industry, government and modelers try to manage the risks of terrorism, they face a number of challenges -- including continuing terrorist attacks abroad (most recently, the July 7 bombings in London), fear of reprisals for the U.
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