Terrorism Insurance


TRIA after 2014

TRIA in the United States covers insured firms up to $100 billion under a public-private partnership. With its expiration at the end of 2014, the Risk Center is actively involved with key decision makers here and abroad at developing a long-term sustainable solution to terrorism risk financing.

Terrorism risk poses fundamental challenges to our national security which must be seen in a dynamic perspective as the threat is continuously evolving. One of these challenges is associated with terrorism insurance coverage.

The 9/11 attacks inflicted $35 billion in insured losses ($44 billion in 2014 dollars), making 2001 the most costly year in the history of insurance and reinsurance up to that point. These attacks also revealed the new nature of the terrorism threat, where businesses and citizens have become the prime target of terrorist groups seeking to inflict major economic disruption and mass casualties.

Careful research and policy development are needed in the current debate on the future of terrorism insurance to assure economic and social continuity in the case of new terrorist attacks in the United States.

The goal of the Wharton Risk Center research on terrorism risk financing is to provide policymakers, key industry decision makers and other interested parties with a continuous analysis of the question of what roles the public and private sectors can and should play with respect to terrorism risk coverage in the United States and abroad in the post-9/11 world.

Research Project Title:

Financing the Economic Consequences of Terrorist Attacks

PI/Project Contacts:

Howard Kunreuther and Erwann Michel-Kerjan

Project description:

The Wharton Risk Center has been advancing knowledge on terrorism insurance markets since 2001.

The terrorist attacks of Sept. 11, 2001 inflicted $32.5 billion of insured losses ($44 billion in 2014 dollars). After paying these claims, insurers and reinsurers stopped providing coverage for terrorism in the United States unless required to do so. As a result, most businesses operating in the United States found it increasingly difficult to purchase commercial property insurance that included the risk of terrorism. At the end of 2002, Congress passed the Terrorism Risk Insurance Act (TRIA) as a temporary measure to increase the availability of risk coverage for terrorist acts. TRIA is based on risk sharing between the insurance industry and the federal government (taxpayers) covering up to $100 billion of insured commercial losses. TRIA affects all corporations in America, large and small.

The Terrorism Risk Insurance Act (TRIA) is set to expire at the end of 2014 and is currently under debate in Congress. The full Senate passed S. 2244 in July 2014; the House Financial Services Committee passed H.R. 4871 in June 2014. These bills would modify the current program in different ways.

Our report, TRIA after 2014 analyzes the impact of loss-sharing for the different stakeholders under the current program and proposed designs. Our analysis builds on data drawn from over 750 insurers across the United States by analyzing terrorist attack simulations in partnership with the risk modeling firm, Risk Management Solutions, in four states of the U.S.: California, Illinois, New York, and Texas.


In August 2005, the Risk Center issued its report, TRIA and Beyond, one of the most extensive studies ever published on terrorism risk financing in the United States. The Wharton team has had fruitful meetings and discussions with key players on the issues associated with terrorism insurance and its relationship to other strategies for reducing and managing this risk.

The study concluded that there was a role and responsibility for government in collaboration with the private sector to provide protection against terrorism losses, and cautiously favored a temporary extension of TRIA, subject to specific modifications in its design. We also urged that Congress or the White House establish a national commission on terrorism risk coverage before permanent legislation is enacted. In December 2005, a two-year extension of TRIA was voted by Congress and signed by the President.

As part of ongoing collaboration with the Organization for Economic Cooperation and Development (OECD; comprised of the 34 highest-income countries), Kunreuther and Michel-Kerjan served as experts for the OECD Task Force on Terrorism Insurance between 2003 and 2005, which also provides us with an international perspective on this complex subject.

From 2006 to 2012, we produced a series of new empirical studies thanks to a unique access to data on commercial insurance purchases.  Taken together, these studies encompass a structured research program which now provides a lot of empirical evidence that can be used in current and future debates about the role and responsibilities of the public and private sectors in providing and purchasing adequate financial coverage against the economic consequences of future attacks, here and abroad.

We have discussed the results of these studies with top decision makers in corporations, insurers and reinsurers, trade associations, intelligence services, risk modeling firms, presidents of the national terrorism insurance programs and with governments of OECD member countries, including the U.S. Congress and the White House.

Although the U.S. has been successful since 9/11 in preventing terrorist attacks on its own soil, the impact to the economy of another mega-attack or series of coordinated attacks seriously concerns the government, the private sector and citizenry. It is not clear, however, that the question of who should pay for the economic consequences of a terrorist attack on the U.S. has yet received the attention it deserves. We continue to work on this important issue.

Related publications: