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U.S. terrorism insurance backstop would save taxpayers money: Study


The federal government’s terrorism insurance backstop program would save taxpayers money in the event of a terrorist attack causing less than $50 billion in losses, according to a study released Thursday by RAND Corp., a not-for-profit research organization.

The program, created by the Terrorism Risk Insurance Act of 2002, is slated to expire at the end of the year unless reauthorized by Congress.

The study, “The Impact on Federal Spending of Allowing the Terrorism Risk Insurance Act to Expire,” said eliminating the backstop could increase federal spending by $1.5 billion to $7 billion for attacks with losses ranging between $14 billion and $26 billion.

Santa Monica, Calif.-based RAND said the increased federal spending without the program would be caused by less insurance coverage, which would result in greater uninsured losses and thus more demand for federal disaster insurance.

“For attacks with greater losses, the federal government pays a portion of the losses,” said the study. “When considering both disaster assistance and spending through the program, the federal government would pay less without the program if losses exceed about $50 billion.”

RAND called the program a “reasonable policy” from the perspective of federal spending.

“In the absence of a terrorist attack, it costs taxpayers relatively little, and in the event of a terrorist attack comparable to any experienced before, it is expected to save taxpayers money,” said RAND.

The report is available here.