Courting TRIA after Hurricane Katrina.

What is the common lesson of Hurricane Katrina and the debate over the Terrorism Risk Insurance Act of 2002 (TRIA)? It's hard to get credit for being prepared.

TRIA is one of a number of programs designed to stabilize the country and economy after the September 11 attacks. It is a government backed insurance program established to pay claims resulting from damage inflicted by international terrorism. Because it was implemented with more good intention than long term analysis, TRIA was originally scheduled to expire on December 31, 2005. By then, it was envisioned, another program would be in place. Well, there isn't even a realistic suggestion on how to replace TRIA let alone a full program less than three months before expiration.

The government wants the private sector to replace TRIA with commercial terrorism risk insurance products. Insurance companies are skeptical that such policies are feasible. Real estate interests are appalled at the possibility of being forced to go without protection.

The Treasury Department has predicted that an end of TRIA would create only a short term uptick in premiums and small shrinkage in coverage. Critics predict chaos in the real estate and insurance industries without some type of government supported reinsurance back-stop or reasonable cap on claims. Given political realities, the most likely scenario is a slower than scheduled death for TRIA with increasing premiums and deductibles, lower maximums and other incentives to ease the weaning process over several years.

Both 9-11 and the Gulf Coast storm are as close as we know to worst case scenarios, which shouldn't be the basis for every facet of disaster planning. Most terrorist attacks don't involve jet airplanes; "normal" hurricanes leave only single-digit billions worth of damage. The overwhelming aura of those events seems to have eliminated common sense discussion. Almost nowhere amid the gnashing and well-intentioned horror are there any proposals to mitigate risk in the future.

Look at lesser incidents:

After the Oklahoma City bombing, many building owners installed bomb abatement stanchions (ranging from oversized planters to steel bollards). Most of those systems were designed to keep car or truck bombs further from structures to lower the percussive impact and limit damage. Would those type of ground level structures saved the Twin Towers? Of course not. But every intelligence estimate I've seen predicts that the most likely delivery system of the next bomb is some kind of truck or other street level device.

A headline in a weekly Long Island, N.Y. newspaper announced last week that a proposed Army Corps of Engineers Plan to build dunes along a barrier beach wouldn't protect homes from a Katrina sized storm, implying, "Why bother if we are doomed anyway?" Are we to not prepare for the once-a-decade whopper because it is impossible to protect against the once a century one?

In a Senate hearing earlier this month, representatives from the real estate industry lamented the lack of incentive for installation of self protection measures. The presentations were surprisingly free of requests for federal aid and other government handouts, instead focusing on immediate reward for development and placement of protective measures and the introduction of negative consequences for failure to have worked proactively.

The simplest example involves concessions from insurers. If sidewalk bomb abatement installations will lower the damage from a truck bomb, why shouldn't the cost of the installation result in lower insurance premiums? Or, why shouldn't failure to install such protection result in higher premiums? What incentives do insurers give for comprehensive and rehearsed flood evacuation programs?

Why shouldn't a commercial landlord get a premium break for maintaining life boats at buildings in flood plains? A life boat isn't going to prevent damage, but it might save lives which would lower eventual claims.

There are a variety of examples in which insurers give incentives to encourage self protection: discounts for drivers' education, health insurance discounts for people who exercise regularly; premium penalties for folks who smoke. When I lived in California I was offered a reduction in my fire insurance premiums to replace my wood shake roof with something fire retardant. Now that I live in a New York flood plain, shouldn't I get a break for building a dike around my house?

The government has a role to play. Most structures in New York now have some kind of street bomb protection. Some of the precaution was merely well intentioned, but a lot was market driven. Upgraded safety is as much a selling point in the Manhattan real estate market as covered parking is in Tampa or onsite fitness centers are in LA.

That commercial pressure is less the further away from "high risk" areas a building is located. How much "hardening" has been installed in the average office tower in Miami, Dallas or Denver? If the market doesn't force such measures, perhaps the government could give it a nudge.

Why not support voluntary programs to increase safety measures to minimize damage in event of terrorist attack, floods, hurricanes and earthquakes? Even without offering grants or extended tax breaks, how about installing a pigovian program that punishes those who don't preplan? Next time a hurricane cuts a swath through a town, eligibility and size of government grants, loans etc. should be effected by the property owner's prior safety investment.

No one should suggest that any programs should be retroactive. But we have to start someplace. And, as the pictures of Katrina remind us, it's never too early to start planning.

JIM MULVANEY, MANAGING DIRECTOR, CORPORATE INTELLIGENCE, FORTRESS GLOBAL INVESTIGATIONS AND SECURITY