Featured Research

from universities, journals, and other organizations

Extending terrorism insurance program could lower federal costs, study finds

Date:
April 10, 2014
Source:
RAND Corporation
Summary:
After the attacks of Sept. 11, 2001, the US Congress passed legislation to help support the market for terrorism risk insurance -- a program that will expire this year. A new study finds that federal spending after future terrorist attacks on the United States could be higher if lawmakers choose not to extend the program.

Federal spending after future terrorist attacks on the United States may be higher if the nation's terrorism risk insurance program is allowed to expire, according to a new RAND Corporation study.

The analysis finds that in a terrorist attack with losses up to $50 billion, the federal government would spend more helping to cover losses than if it had continued to support a national terrorism risk insurance program.

In the wake of the terrorist attacks of Sept. 11, 2001, terrorism risk insurance quickly became either unavailable or very expensive. Congress reacted by passing the Terrorism Risk Insurance Act, which provides an assurance of government support after a catastrophic attack. This has helped keep terrorism risk insurance affordable for businesses.

The program will expire at the end of this year and Congress is considering the appropriate government role in terrorism insurance markets.

"One important dimension of the debate about whether to reauthorize the act is its impact on government spending," said Tom LaTourrette, lead author of the study and senior physical scientist at RAND, a nonprofit research organization. "If, as many expect, allowing the program to expire causes a sharp decline in the number of businesses with terrorism coverage, we find that the federal government could spend billions more in disaster assistance after an attack than it would with the program in place."

The act creates an incentive for a functioning private terrorism insurance market through the promise of government support for losses that exceed a specified amount. This keeps terrorism insurance available with essentially no government spending unless terrorism losses reach catastrophic levels. Without the program, terrorism insurance would become less available and more attack losses would go uninsured, increasing demand for disaster assistance, said LaTourrette, who wrote the report with Noreen Clancy.

For simulated attacks with losses ranging from $14 billion to $26 billion, the RAND study estimates that the federal government would spend from $1.5 billion to $7.2 billion more without the program than with it.

The federal government makes no net expenditures through the program until the insured loss reaches at least $27.5 billion. For comparison, at current terrorism insurance coverage rates, an attack equivalent to the 9/11 attacks would have an insured loss of about $30 billion today. Taxpayers would therefore only contribute through the program in an attack comparable in magnitude to the 9/11 attacks, which is the second most costly insurance event in United States history, exceeded only by Hurricane Katrina.

When considering both disaster assistance and spending through the program, the impact of the program on federal spending reverses when total losses exceed about $50 billion. For losses below this amount, the federal government would pay more without the program; for larger losses, the federal government could pay less without the program, according to the study.

Access to the study can be found online at: http://www.rand.org/pubs/research_reports/RR611.html


Story Source:

The above story is based on materials provided by RAND Corporation. Note: Materials may be edited for content and length.


Cite This Page:

RAND Corporation. "Extending terrorism insurance program could lower federal costs, study finds." ScienceDaily. ScienceDaily, 10 April 2014. <www.sciencedaily.com/releases/2014/04/140410111218.htm>.
RAND Corporation. (2014, April 10). Extending terrorism insurance program could lower federal costs, study finds. ScienceDaily. Retrieved July 22, 2014 from www.sciencedaily.com/releases/2014/04/140410111218.htm
RAND Corporation. "Extending terrorism insurance program could lower federal costs, study finds." ScienceDaily. www.sciencedaily.com/releases/2014/04/140410111218.htm (accessed July 22, 2014).

Share This




More Science & Society News

Tuesday, July 22, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Courts Conflicted Over Healthcare Law

Courts Conflicted Over Healthcare Law

AP (July 22, 2014) Two federal appeals courts issued conflicting rulings Tuesday on the legality of the federally-run healthcare exchange that operates in 36 states. (July 22) Video provided by AP
Powered by NewsLook.com
What Self-Made Women Need to Know Financially Before Getting Hitched

What Self-Made Women Need to Know Financially Before Getting Hitched

TheStreet (July 21, 2014) Halle Berry was recently ordered to pay her ex-boyfriend Gabriel Aubry $16,000 a month in child support by a California judge for their daughter Nahla. As women make strides in the workforce, they are increasingly left holding the bag when relationships end regardless of marital status. 'What Monied Women Need to Know Before Getting Married or Cohabitating' discusses information such as debt incurred during the marriage is both spouse's responsibility at divorce, whether after ten years of marriage spouses are entitled to half of everything and why property acquired within the marriage is fair game without a pre-nup. Video provided by TheStreet
Powered by NewsLook.com
$23.6 Billion Awarded To Widow In Smoking Lawsuit

$23.6 Billion Awarded To Widow In Smoking Lawsuit

Newsy (July 20, 2014) Cynthia Robinson claims R.J. Reynolds Tobacco Company hid the health and addiction risks of its products, leading to the death of her husband in 1996. Video provided by Newsy
Powered by NewsLook.com
Clock Ticks Down on Internet Speed Debate

Clock Ticks Down on Internet Speed Debate

Reuters - US Online Video (July 18, 2014) The FCC received more than 800,000 comments on whether and how internet speeds should be regulated, even crashing its system. Lily Jamali reports. Video provided by Reuters
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:
from the past week

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins