Global Business and the Terrorist Threat
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Global Business and the Terrorist Threat

Edited by Harry W. Richardson, Peter Gordon and James E. Moore II

Global business is affected by global terrorism and the two are intricately linked on many levels. This book is an eclectic and enlightening compendium of research that explores the interrelationships between the two. A companion to and expansion on the authors’ previous books on the area, Global Business and the Terrorist Threat takes a closer look at practical business management, as influenced by terrorist infrastructure, networks and actions.
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Chapter 5: NBCR Terrorism: Who Should Bear the Risk?

Dwight Jaffee and Thomas Russell

Extract

5. NBCR terrorism: who should bear the risk? Dwight Jaffee and Thomas Russell INTRODUCTION The costs to the US economy of the terrorist attacks of 11 September 2001 went considerably beyond the horrendous loss of life and property destruction of that day. The event also triggered disruptions in financial markets which threatened adverse effects on the normal operations of a broad set of newly vulnerable industries. Immediately following the attacks, the insurance industry, recognizing the new magnitude of this risk, began to place terrorism exclusions in standard commercial property loss contracts. At the same time, mortgage providers and other lenders, aware that collateral was now exposed to terrorist action, refused to make loans unless the borrower obtained terrorism insurance coverage. In the face of this ‘catch-22’, the pace of mortgage and other lending slowed, leading to a loss of jobs in construction and other industries dependent on loan markets. Reacting to this, and aware of the obligation to maintain full employment, the US Congress passed the Terrorism Risk Insurance Act of 2002 (TRIA), a temporary measure which made Treasury funds available for three years as a backstop to the private insurance market. The purpose of the Act was to buy time to allow the private market to regain its capacity to handle terrorism events. This did not happen, and the Act was extended by a further temporary (two years) measure, the Terrorism Risk Insurance Extension Act (TRIEA), passed in December 2005.1 This act expired in December 2007 and was in...

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