Summary |
This monograph does nor address some issues relevant to a full assessment of government intervention in the market for terrorism insurance. For instance, we do not assess (1) the impact of changes in insurance price and take-up rate caused by TRIA and enhancements to it on economic activity preattack or the speed of economic recovery and resiliency of the economy after an attack, (2) how price changes might affect incentives for businesses to adopt measures to mitigate terrorism risk, (3) how any change in the insurance industry’s existing willingness to bear terrorism risk might affect take-up rates over time, or (4) how government programs affect the flow of new capital into insurance markets or the development of instruments or strategies to spread insurance risk. Including such issues would increase the comprehensiveness of our analysis but would not affect the basic trade-offs identified here.
The models and methods used in this study apply to a wider range of questions than those considered here. For instance, our simulations could be adapted to examine a broader range of modifications to the TRIA program, such as different insurer copayments or different program caps. These tools could also examine a broader range of government interventions in terrorism-insurance markets, including requiring policy-holders to purchase terrorism coverage or pooling arrangements in which a surcharge on insurance policies funds a pool that is then used to pay claims following a terrorist attack.
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