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As the 10-year anniversary of 9/11 approaches, insurance industry experts not that at the time, 9/11 was at the time the largest cumulative claims payout for property/casualty insurers and reinsurers in global insurance history—producing insured losses of about $32.5 billion, or $40 billion in 2010 dollars—exceeded only by Hurricane Katrina, at more than $45 billion in 2010 dollars. 9/11-related losses were paid out across many different lines of insurance, including property, business interruption, aviation, workers compensation, life and liability.
“The 9/11 attack was the largest payout in the history of insurance until Hurricane Katrina in 2005,” according to I.I.I. president and economist Dr. Hartwig. “Insurers became the nation’s economic ‘first responders’ and as construction progresses on the site of the former World Trade Center, insurance claims dollars continue to play an essential and highly visible role in rebuilding lower Manhattan while also mitigating the overall economic impact of the 9/11 attack.”
Terrorism risk insurance, a product that was almost nonexistent in the U.S. prior to 9/11, is now an essential coverage for millions of American businesses.
"The fact that acts of terrorism are intentional and that the frequency and severity of attacks cannot be reliably assessed makes terrorism risk extremely problematic from the standpoint of insurers,” Dr. Hartwig said.
Released in April 2011, the 23-page report, Terrorism Risk: A Reemergent Threat: Impacts for Property/Casualty Insurers, co-authored by Dr. Hartwig and Claire Wilkinson, who writes the I.I.I. Terms + Conditions blog, explains how before the attacks of September 11, 2001, terrorism exclusions were virtually nonexistent in commercial insurance contracts sold in the United States. Soon thereafter, insurers moved to exclude terrorism coverage from their commercial U.S. policies. Only when Congress enacted the Terrorism Risk Insurance Act (TRIA) in November 2002 did coverage resume on a consistent basis for terrorist attacks against commercial properties, utilities and transportation networks.
TRIA established a public/private risk-sharing partnership that allows the federal government and the insurance industry to share losses in the event of a major terrorist attack. TRIA was modified and extended in recent years, with the current law extending through December 2014. The legislation was designed to ensure that adequate financial resources are available for businesses to recover and rebuild should they be the victims of a terrorist attack. Insurers are solely responsible for terrorism losses that impact non-TRIA lines of insurance, such as private passenger auto and homeowners insurance as well as group life.
Click here to visit the I.I.I. website for more information.