The Terrorist Risk Insurance Act (TRIA) of 2002 was enacted by the U.S. Congress more than 14 months after the September 11, 2001 attacks, as concerns mounted about the economic impacts associated with inability of businesses to purchase adequate protection against terrorist attacks. The act obligated P/C insurers to make terrorism insurance available, while providing federal reinsurance for losses arising from large-scale terrorist-related incidents. TRIA was revised and extended in 2005.

Prior to September 11, insurers provided terrorism coverage to their commercial insurance customers essentially free of charge, owing largely to the perceived unlikelihood of large-scale terrorist attacks on U.S. soil. In the immediate aftermath of September 11, insurers began to reassess the risks posed by terrorism. For the remainder of 2001 and for much of 2002, terrorism coverage was scarce, and the little coverage available was very expensive.

Because of TRIA, as of year-end 2005, nearly two-thirds of businesses had purchased terrorism risk insurance policies. Real estate firms, financial institutions, health care facilities and media companies are the most likely buyers of the coverage.

In recent testimony before a Congressional committee analyzing the long term availability and affordability of terrorism insurance, commercial insurers reiterated their belief that terrorism is uninsurable because the frequency and severity of the attacks cannot be reliably assessed. The federal government, in all likelihood, will continue to play a role in order to keep commercial insurance viable.

It’s also worth considering, however, what role the current administration has played over the last six years with its daily drumbeat on the issue, its red and orange alerts, and its use of fear as a political agent. There have been no real terrorist attacks in this country since September of 2001. That’s why insurance premiums for terrorist insurance dropped 25% in 2005, while the industry continues to claim that terrorism is uninsurable because of the daily reminder from Washington that the next strike is just around the corner.