Studies: Terrorism coverage lacking - Up Front

It only stands to reason that a catastrophic, heavily insured event is going to create a demand that far outweighs the supply of insurance cover. So it came as no surprise to anyone that two independent surveys on the availability of terrorism insurance brought back nearly identical results.

The Risk and Insurance Management Society Inc. (RIMS) surveyed 450 member companies on their ability to obtain coverage for terrorism. Seventy-one percent said that finding adequate coverage was very difficult or impossible.

The Building Owners and Managers Association (BOMA) polled its members and the results mirrored those of RIMS. Seventy-three percent of BOMA members were able to obtain coverage, but 80 percent of those faced higher deductibles, 60-day or less cancellation clauses, and exclusions for chemical, biological, or radiological acts.

Yet is coverage adequate? RIMS respondents answered a resounding no. Eighty-four percent feel that their coverages would not be sufficient in the event of another attack. The lack of available and affordable coverage has 45 percent of respondents saying that their companies will be adversely impacted. Of those who renewed property coverage in 2002, 52 percent said that terrorism coverage was not included in the policy.

Complicating matters further is price. The BOMA report shows that insureds are facing premium increases of 20 percent to 200 percent. As a result, many companies are choosing to risk going without coverage; 27 percent of BOMA respondents were either self-insuring or going without, while 25 percent of RIMS study participants were going without terrorism coverage.

Another survey, this one by The Real Estate Roundtable, showed that 42 percent of all insurance premiums paid by survey participants go toward terrorism coverage, whereas prior to September 11, the coverage was free. The report says that more than $10.5 billion in real estate transactions have been delayed or cancelled because of a lack of terrorism coverage.

COPYRIGHT 2002 Axon Group
COPYRIGHT 2002 Gale Group