- The Washington Times - Tuesday, October 3, 2006

Having marked the fifth anniversary last month of the September 11, 2001, attacks, we know the threat of a terrorist attack on American soil remains high. With that knowledge, our country must take steps to do whatever we can reasonably do to prevent another attack. Also, our country must take steps to do whatever we can reasonably do to lessen the impact of another attack.

It is this second category — lessening the impact of another terrorist attack — which I address. While there have been no studies on this subject, I would hazard a guess most Americans assume the United States has taken the reasonable and sensible precaution of insuring itself against future terrorist attacks. Unfortunately, this assumption would be wrong.

The fact is that — unless Congress acts — current terrorism risk insurance will cease at midnight Dec. 31, 2007. In other words, in little more than a year, the American economy will be exposed to possibly ruinous harm — without adequate insurance to allow recovery. Although Congress took the correct first steps recently in holding a hearing on the subject, “Protecting Americans from Catastrophic Terrorism Risk,” action is needed.

After September 11, private insurers took on an estimated $32 billion in losses caused by the attacks. Private insurers also began to recalculate their previous assumptions. Their deliberations led to the conclusion terrorism is essentially uninsurable by traditional methods because no one can predict the size, location or frequency of attacks. Also, terrorist attacks are unique in that their target is not a particular place or group but our entire nation and way of life. Consequently, insurers cancelled the availability of terrorism insurance or increased its price to levels only a few businesses could afford.

The U.S. Congress recognized it had to act. In 2002, it enacted the Terrorism Risk Insurance Act (TRIA) which provided a national solution to future terrorist attacks by establishing a federal safety net for private insurers. This public-private partnership gave private insurers primary responsibility for paying claims. The federal government would step in when private insurers exhausted their resources.

TRIA’s wise solution to terrorism provided confidence in a chaotic time. TRIA provided the measure of certainty that business markets and companies need to continue in the face of unprecedented adversity.

Today, many companies can afford terrorism risk insurance. And that is exactly the result Congress intended — to let the market work by providing a federal safety net for unprecedented loss.

But the effectiveness of the TRIA public-private partnership will dissolve with the legislation unless Congress acts before the end of 2007. If Congress allows TRIA to expire, premiums for terrorism risk insurance again would escalate to levels only a few companies could afford. Again, the U.S. economy — indeed, our way of life itself — would be exposed to ruinous attack without any federal safety net.

Exposing the U.S. economy to the unknowable risk of terrorist attack without federally backed insurance is unwise and irresponsible. Terrorism risk insurance remains essential to the U.S. economy as long as the threat of terrorist attack hangs over the economy’s well-being.

Clearly, the United States cannot afford to allow the essential protections of TRIA to expire — now or ever. So, Congress must develop a permanent public-private partnership solution before TRIA expires at 2007’s end. We need a comprehensive plan that does not pick winners or losers in terms of who is the subject of a terrorist attack (victims) or the form of attack, to protect U.S. citizens in every capacity.

The point is clear. Terrorism risk insurance protection was essential to the U.S. economy after September 11, 2001, and terrorism risk insurance protection is still essential. Congress must address this fact — before TRIA protections expire.

George C. Landrith is president of Frontiers of Freedom Institute, a nonprofit public policy foundation dedicated to promoting free market principles.

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