The world changed after the devastating terror attacks on September 11, 2001.
The event also generated the insurance industry’s largest-ever man-made loss, of tens of billions of dollars, and triggered changes to the industry that are still noticeable today. As a result, today’s insurance companies are far more resilient and disciplined.
Let’s take a closer look at 9/11’s impact on the insurance industry.
The Terrorism Risk Insurance Act
In response to the terror attacks of 9/11, the Terrorism Risk Insurance Act came into law in the United States in 2002.
The act basically created a federal backstop for insurance claims that are related to acts of terrorism. It provides a transparent system of shared private and public compensation for insured losses that occur from terrorism acts.
So, it’s a short-term measure to help the insurance industry recover from the effects of 9/11 and develop better solutions for insuring against acts of terrorism.
While the act was originally set to expire in 2005, it has since gone through numerous extensions and changes. In 2019, the Further Consolidated Appropriations Act was approved, which includes the Terrorism Risk Insurance Program Reauthorization Act, and it’s currently due to end in 2027.
Compensation Is Now Available for People Suffering from 9/11-related Health Conditions
Another act introduced by the U.S. government is the James Zadroga 9/11 Health and Compensation Act, which provides people with 9/11-related health conditions with medical care. It was passed on the tenth anniversary of the attacks.
Also, the September 11th Victim Compensation Fund was introduced earlier for first responders, cleanup workers, and New York residents suffering from 9/11-related illnesses like deadly cancers, respiratory diseases, and conditions like asbestosis.
So, people who were around the area during the aftermath of the 9/11 catastrophe who have developed health issues caused by the toxins in the dust can now claim monetary compensation.
The Insurance Industry Helped to Provide Economic Stability During the Aftermath of 9/11
Another effect of 9/11 on the insurance industry was a new class of insurers and reinsurers was quickly formed after the terror attacks in order to help replenish the capital that was removed from the market as a result of the attacks. The amount of the capital is estimated to be between $35 billion and $40 billion.
In fact, insurers across the board did a lot to help in the aftermath of the financial calamity caused by 9/11. The insurance industry sent money to New York before the government, so insurers deserve a huge amount of credit for providing economic stability in the days after 9/11. Also, the insurance companies didn’t shy away from continuing to provide coverage.
9/11 Changed Insurance Policies Covering Acts of Terrorism Forever
Insurance policies related to acts of terrorism have gone through some significant changes since 9/11, but the insurance industry could still do more to address the risk of terrorism better.
The main issue is that the market doesn’t determine the difference between large terror attacks that are solely dealt with by the government and other more conventional terror attacks.
Terrorist activity takes many forms today, so the insurance market could do more to differentiate the forms and provide appropriate coverage for various types of terrorism acts. Also, terrorism insurance programs tend to be quite small in comparison to insurance programs for natural catastrophes, even though the threat of terrorism is still, unfortunately, still significant.
The insurance industry changed forever after 9/11, but the industry is still pretty far away from a normalized market when it comes to insurance related to acts of terrorism.