Benefits of the U.S. Program for Terrorism Insurance from a Comparative Perspective

16 Pages Posted: 14 May 2016

See all articles by Jeffrey E. Thomas

Jeffrey E. Thomas

University of Missouri at Kansas City - School of Law

Multiple version iconThere are 2 versions of this paper

Date Written: August 3, 2016

Abstract

This article summarizes the U.S. program for terrorism insurance and outlines its advantages as compared to similar programs in other developed countries. The program, while similar to reinsurance, does not require participants to pay premiums but instead uses an ex post recoupment mechanism. Consequently, it is generally referred to as a “Federal backstop.” This approach requires less capital investment and makes “pricing” more accurate than a reinsurance approach. The program also requires insurers to maintain significant amounts of exposure through insurer deductibles and copayments, which creates market demand for the development of terrorism reinsurance in the private market. The current program extends until 2020, though perhaps it will be extended further in the future.

Suggested Citation

Thomas, Jeffrey E., Benefits of the U.S. Program for Terrorism Insurance from a Comparative Perspective (August 3, 2016). Available at SSRN: https://ssrn.com/abstract=2779695 or http://dx.doi.org/10.2139/ssrn.2779695

Jeffrey E. Thomas (Contact Author)

University of Missouri at Kansas City - School of Law ( email )

5100 Rockhill Road
Kansas City, MO 64110-2499
United States

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