Heritage Expert: Terrorism Risk Insurance Act No Longer Needed
Last week, we noted Congress would soon begin to debate the Terrorism Risk Insurance Act (TRIA), and Heritage Action legislative strategist Cari Kelly explained, “It’s time to let this federal program see an outcome that is extremely uncommon in Washington, but intended for TRIA: expiration.”
Prior to September 11, there was no way for insurance companies to properly account for the risk of terrorism and the costs that come with the aftermath. Initially enacted as a two-year stopgap measure, TRIA gave the federal government the ability to reinsure insurance companies following terrorist attacks. The private sector has now had an additional decade to assess risks and develop affordable terrorism insurance. TRIA succeeded in fostering the development of private terrorism risk coverage. The number of companies purchasing insurance has sharply increased from 27% in 2003 to 61% in 2009.
The policy case is fairly clear cut: the need for “temporary” federal influence is no longer necessary. The federal government should hand over the reins to those that can properly administer insurance policies instead of hindering the growth of a private insurance market. Even the non-partisan Congressional Budget Office (CBO) stated that, “the development of global financial instruments for spreading risk, including catastrophe bonds, would probably be more rapid without TRIA.”
In new analysis by David Inserra, the Heritage Foundation reaffirms the same, and explains TRIA is a form of corporate welfare for insurance companies:
While it had a legitimate purpose following the attacks of 9/11, TRIA is no longer needed and serves only as a form of corporate welfare to insurance companies. Rather than continue this program, Congress should allow the insurance companies to stand on their own: The market has matured considerably since the days after 9/11, and insurers have had plenty of time to develop the tools needed to insure against terrorism.