Insurance groups already are mapping their strategies for 2007,the year in which the Terrorism Risk Insurance Act again is set toexpire. The act, which provides protection for insurance companiesagainst extreme losses but has been deemed a temporary solution,was first approved in 2002 and received a last-minute extension atthe end of 2005 from Congress before it expired.

In the meantime, though, how will the revised TRIA affect theinsurance industry in the next two years? Risk Management Solutionsdetermined that the newly passed act would shift the relative shareof the risk from the government to the insurance industry.

Based on the new TRIA terms, over 90 percent of the RMS modeledaverage annual loss would be retained by the industry. If aterrorist attack occurred, there also is less than a 10 percentchance that it would cause the industry deductible to be reached,since only the most extreme, low-probability attacks will causelosses in excess of $30 billion. For example, the 2001 World TradeCenter attacks resulted in approximately $32.5 billion of insuredlosses. If an event of this magnitude occurred today, it wouldproduce only a minimal TRIA recovery for the insuranceindustry.

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