The Terror Insurance Debate

April 23, 2013 in Daily Bulletin

One of the many debates that the Boston Bombings will lead to in the United States, is the debate about the role that the government has to play in providing terror insurance:

  • Insurers are able to develop risk forecast models for natural disasters such as floods and hurricanes to help identify the right amount they should charge for insurance.
  • However their models are unable to truly account for terror attacks since those are relatively rare.
  • The fear is that since private insurers won’t provide terror insurance, important infrastructure and development projects will be held up as developers are unwilling to take on an uninsured risk of a terror attack.
  • After 9/11 the government set up a program that would provide government support if a terror attack led to over $100 million in losses.
  • However that program is expiring in 2014 and lawmakers are hoping that even though the Boston Bombings wouldn’t have triggered a payout under the policy; it will still serve as impetus to extend the program.

Read more about why it is being opposed and how it could be modified over here.

Source: Politico

Via: Marginal Revolution