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来源类型Working Paper
规范类型报告
DOI10.3386/w13359
来源IDWorking Paper 13359
Evaluating The Effectiveness of Terrorism Risk Financing Solutions
Howard C. Kunreuther; Erwann O. Michel-Kerjan
发表日期2007-10-05
出版年2007
语种英语
摘要The 9/11 attacks in the United States, as well as other attacks in different parts of the world, raise important questions related to the economic impact of terrorism. What are the most effective ways for a country to recover from these economic losses? Who should pay for the costs of future large-scale attacks? To address these two questions, we propose five principles to evaluate alternative programs. We first discuss how a federal insurance program with mandatory coverage and a laissez faire free-market approach for providing private insurance will fare relative to these principles. We conclude that neither solution is likely to be feasible here in the United States given the millions of firms at risk and the current structure of insurance regulation. We then evaluate how well the U.S. Terrorism Risk Insurance Act (TRIA), a public-private program to cover commercial enterprises against foreign terrorism on U.S. soil, meets the five principles. In particular, we show that TRIA has had a positive effect on availability of terrorism coverage and also has significantly contributed to reducing insurance premiums. TRIA is scheduled to terminate at the end of the year, but pending legislation would extend the program for fifteen years after December 31 (HR. 2761). In this paper, we show that such a long-term extension might have important impacts on the market. This could increase the take-up rate, as prices might be even lower than they are today. We show also, however, that if TRIA were extended for a long period of time in its current form, some insurers could "game" the program by collecting ex ante a large amount of premiums for terrorism insurance, while being financially responsible for only a small portion of the claims ex post. The general taxpayer and the general commercial policyholder (whether or not covered against terrorism) would absorb the residual insured losses. This raises major equity issues inherent in the design of the program.
主题Financial Economics ; Financial Institutions ; Public Economics ; National Fiscal Issues
URLhttps://www.nber.org/papers/w13359
来源智库National Bureau of Economic Research (United States)
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条目标识符http://119.78.100.153/handle/2XGU8XDN/571150
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Howard C. Kunreuther,Erwann O. Michel-Kerjan. Evaluating The Effectiveness of Terrorism Risk Financing Solutions. 2007.
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