What is the purpose of the Terrorism Insurance Program enacted after 9/11?

What is the purpose of the Terrorism Insurance Program enacted after 9/11?

• A. To provide private insurers unlimited coverage
• B. To serve as a backstop and provide federal financial support for terrorism claims
• C. To exclude terrorism losses from property policies
• D. To require insurers to self-insure all terrorism losses

Answer: (B)

The program provides a federal backstop for terrorism losses, ensuring private insurers continue to offer coverage after a major terrorist event. It keeps terrorism insurance available and affordable by sharing the cost of large claims between private insurers and the government. Insurers still issue and price the policies, but once losses exceed insured retentions, the federal government helps cover a portion of those losses up to set limits. This arrangement helps prevent market instability or withdrawal of coverage in the wake of terrorism, without implying unlimited coverage, exclusion of losses, or a requirement for self-insurance.

The program provides a federal backstop for terrorism losses, ensuring private insurers continue to offer coverage after a major terrorist event. It keeps terrorism insurance available and affordable by sharing the cost of large claims between private insurers and the government. Insurers still issue and price the policies, but once losses exceed insured retentions, the federal government helps cover a portion of those losses up to set limits. This arrangement helps prevent market instability or withdrawal of coverage in the wake of terrorism, without implying unlimited coverage, exclusion of losses, or a requirement for self-insurance.