The terrorist attacks of 2001 fundamentally changed the way that the world looks at risk and demonstrated that terrorism losses are too unpredictable and potentially catastrophic to be handled solely by the private sector, believe many representatives of the insurance industry.

In The Economic Effects of Federal Participation in Terrorism Risk, a recent report commissioned by industry trade groups, R. Glenn Hubbard, former chairman of the U.S. Council of Economic Advisors and dean of the Columbia University Graduate School of Business, and Bruce Deal, managing principal of Analysis Group, examined the impact that a failure to extend the Terrorism Risk Insurance Act of 2002 could have on the United States' economy.

Currently, TRIA is scheduled to expire Dec. 31, 2005. In mid-September, House Financial Services Committee Chairman Michael Oxley (R-Ohio) announced that he would sponsor legislation to extend the terms of the act. “Just three months ago, hopes for movement on this legislation were dim,” said Carl Parks, senior vice president, federal government relations, for the Property Casualty Insurers Association of America. “But, through a concerted effort on behalf of the insurers and commercial insurance consumers, an extension of TRIA is now one step closer to completion.”