The Insurability of Terrorism Risk and the Response of Insurance Law and Regulation—The U.S. Experience and Critiques on Present Taiwanese Regime

The terrorist attacks on September 11, 2001 inflicted devastating damage resulting in death, injury, business interruption losses, and property damage. The characteristics of terrorism risk prove that in the absence of meaningful actuarial data, insurance coverage is not possible. Such finding may lead to a conclusion that terrorism risks are uninsurable. Owing to such characteristic, Terrorism Risk Insurance Act (TRIA)was signed into law by President Bush on November 2002, to protect consumers by addressing market disruptions and ensure the continued widespread availability and affordability of property and casualty insurance for terrorism risk. The TRIA program, originally destined to be tentative and expire on December 31st 2005, has been extended until Dec. 31, 2027. These extensions again incurred the debate over the appropriateness of the government intervention in terrorism insurance program as well as the length and form of the intervention.In Taiwan, terrorism risks are generally excluded from most all-risk insurance policies unless specifically stated and endorsed. In reality, Taiwan has a much higher population density than the United States, and its business districts are far more concentrated. Iconic structures like Taipei 101 could easily become targets for terrorist acts. Should an attack occur, the resulting damage and losses would likely be severe.This paper will define and examine the characteristics and impact of terrorism risk, analyze the insurability of terrorism risk from a theoretical perspective, explore the legal frameworks governing terrorism insurance in the U.S., focusing on the role of government in providing terrorism coverage and the duration of its involvement, assess the current situation in Taiwan, offering critiques of the existing system,after identifying the shortcomings of Taiwan’s approach, and eventually explore potential solutions to the legal and practical challenges facing terrorism insurance in Taiwan.