NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

An Empirical Analysis of the Economic Impact of Federal Terrorism Reinsurance

Jeffrey R. Brown, J. David Cummins, Christopher M. Lewis, Ran Wei

NBER Working Paper No. 10388
Issued in March 2004
NBER Program(s):   PE

This paper examines the role of the federal government in the market for terrorism reinsurance. We investigate the stock price response of affected industries to a sequence of thirteen events culminating in the enactment of the Terrorism Risk Insurance Act (TRIA) of 2002. In the industries most likely to be affected by TRIA banking, construction, insurance, real estate investment trusts, transportation, and public utilities the stock price effect was primarily negative. The Act was at best value-neutral for property-casualty insurers because it eliminated the option not to offer terrorism insurance. The negative response of the other industries may be attributable to the Act's impeding more efficient private market solutions, failing to address nuclear, chemical, and biological hazards, and reducing market expectations of federal assistance following future terrorist attacks.

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Document Object Identifier (DOI): 10.3386/w10388

Published: Brown, Jeffrey R. & Cummins, J. David & Lewis, Christopher M. & Wei, Ran, 2004. "An empirical analysis of the economic impact of federal terrorism reinsurance," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 861-898, July.

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