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More than five years since the terrorist attacks of Sept. 11, 2001, governments at all levels have invested billions of dollars to secure vulnerable targets, improve the flow of information and develop new technologies to combat weapons of mass destruction. But when terrorists actually strike, the government’s efforts turn from prevention to remediation: caring for the injured, assessing the damage and determining what could have been done better. The actions taken after a terrorist event can be as important-or even more important-than the steps taken to prevent it. Insurance-the process of shifting the risk of loss to a third party-is a key part of post-event remediation. Following an act of terrorism, those affected turn to insurance carriers to compensate them for their economic losses. In the absence of the financial safety net that insurance provides, rebuilding and long-term recovery stalls, creating financial pressures that ripple through the economy. Typical insured risks-owning a home or driving a car-permit the accurate pricing of coverage. But the “difficult risk” presented by terrorism does not: When, where and how terrorists may strike is unpredictable. The consequence of the loss-in essence, how much damage a particular attack may cause-will always be more about speculation than science. For a discipline that literally values precision and reliability, terrorism is simply not a risk that traditional insurance models manage well. Following Sept. 11, the magnitude of terrorism’s financial costs and the complexities associated with insuring against terrorist acts became clear. In high-profile locations such as New York and Washington, insurance providers either refused to extend coverage for acts of terrorism or offered coverage at such high prices that it was available only to a select few. Further, the regulation of the insurance industry among the 50 states caused inconsistencies from jurisdiction to jurisdiction, complicating matters for providers and consumers alike. The lack of affordable coverage had implications throughout the national economy. In May 2002, the Joint Economic Committee of the U.S. Congress stated that “the inability of some businesses to obtain suitable terrorism insurance can result in the cessation of business activity.” Indeed, among other examples, new construction projects were halted due to a lack of terrorism insurance. Federal government backstop Congress responded to the growing market uncertainty by passing the Terrorism Risk Insurance Act of 2002 (TRIA). The law required the federal government to backstop the financial losses caused by a terrorist attack when the costs exceed predetermined financial thresholds. As the insurer of last resort, Congress predicated TRIA’s very existence on the notion of temporary federal aid: Approximately three years after enactment, on Dec. 31, 2005, TRIA would terminate, a time by which Congress believed that the market would self-correct, thereby making the need for a federal safety net unnecessary. As 2005 drew to a close, it was clear that a robust terrorism insurance market that could survive in the absence of federal aid had not developed. Days before TRIA was to expire, Congress reauthorized the law, this time until Dec. 31, 2007. Under the Terrorism Risk Insurance Extension Act of 2005, the President’s Working Group on Financial Markets was tasked to “perform an analysis regarding the long-term availability and affordability of insurance for terrorism risk” by Sept. 30, 2006. While the working group found that “the availability and affordability of terrorism risk insurance has improved since . . . September 11, 2001,” it also found that “any prediction of the potential degree of long-term development of the terrorism risk insurance market [is] somewhat difficult.” This comes as no surprise: By definition, “difficult risks” such as terrorism are unpredictable and market-resistant. Perhaps the only thing that is clear is that terrorists retain the potential to cause billions of dollars of loss with a single act. When the 110th Congress is called to order next year, it must not wait until the 11th hour to reauthorize TRIA. While the contours of the program must avoid the pitfalls of previous initiatives, such as federal flood insurance, Congress is well advised to make federal involvement to backstop the financial consequences of terror a permanent fixture-or risk the prospect of a return to the days of canceled construction, downgraded credit ratings and market uncertainty. In doing so, we can ensure that America’s overall strategy to remediate and respond to terror is as robust as our efforts to thwart it in the first place. Steven Roberts, an NLJ columnist, is an associate in the Washington office, and in the global security and enforcement practice, of Atlanta-based Alston & Bird.

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