At TRIA 90-Day Mark, Cover Appetite Unchanged

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Mark E. Ruquet

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NU Online News Service, Feb. 21, 5:10 p.m.EST--When the U.S. Department of Homeland Securityincreased the threat level to Orange, or High Risk of a TerroristAttack, the public's defense was a run on duct tape, sheets ofplastic and bottled water.

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For the commercial insurance client, the alert did nothing.

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"We really haven't seen any significant increase [in requestsabout terrorism insurance] from our customers since the high alertstatus was posted," said Scott R. Isaacson, vice president andchief marketing officer for Chicago-based insurance broker Acordia,a subsidiary of Wells Fargo.

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"I think the reason for that is that terrorism has been on theminds of all Americans since the attack of 9/11 and so this is nota new issue.

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"Our customers are purchasing terrorism to protect their assetswhenever it is economically feasible and so nothing has reallychanged," he noted.

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"Because of all the notices and procedural things that have beengoing on because of TRIA [Terrorism Risk Insurance Act of 2002] thethought of terrorism has been moved up in the consciousness ofclients for awhile," noted Gail Norstrom, managing director withthe Chicago?based insurance broker Aon.

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"Despite all the discussion about the Orange Alert, for many, itis not a question of if, but when, and how exposed they think theyare," she said.

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One thing that is confounding customers is the process beingemployed by carriers when it comes to the insurance placement,observed Elizabeth Demaret, managing director of internationalretail niche for insurance broker Arthur J. Gallagher headquarteredin Itasca, Ill.

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"We are now at the 90-day mark," noted Ms. Demaret, speakingabout TRIA provisions that require insurers to offer coverage tothose commercial accounts that want it within 90 days of the Nov.26 effective date of the Act.

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"When you look at our clients they are as confused as ever," shesaid.

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"The Act is a simple solution for those who do not need it. Ithas not helped the large urban company that needs it," shesaid.

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She said that clients whose coverage has been built usingmultiple carriers have been unable to plan for their insuranceneeds, because the TRIA proposals have come in at different timesfrom the carriers. The proposals did not provide time for thecustomers to wait for all the other proposals to come in. They havehad to make purchases not knowing what the other carriers wouldpropose.

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Those who do feel they need the coverage, and have not gottenthe full picture of the TRIA proposals, have opted for standaloneterrorism coverage instead, she added.

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"TRIA has not been the solution," Ms. Demaret noted.

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In Houma, La., one agent says he has advised his commercialclients that they should purchase terrorism coverage, but many havedecided not to.

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Robert P. Page, president and owner of Charles A. Page &Sons Insurance Agency, Inc., a mid-size property-casualty agency,says his clients could be prime targets for a terror event. Hepoints out that most of them are in the middle of the petroleum andchemical industry, just 40 miles from the Gulf of Mexico. Despitehis advice, most have turned down the coverage.

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A major reason, he said, is that his clients do not want to addmore to their insurance costs after receiving 60-to-90 percentincreases on their premiums in the hard market.

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Mr. Page, who is also the national director of the ProfessionalInsurance Agents in Louisiana and chairman of the National PIAFederal Affairs Committee, also raises the issue of compensationfor the work agents have done for carriers.

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If companies count the TRIA increases as surcharges, agents donot receive compensation for the time and effort their offices havespent making sure the notices have been sent and either accepted orrejected.

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"There is some issue about compensation back to the agentbecause of the added cost to the agency for following through onthe federal mandate," Mr. Page said.

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Mr. Norstrom predicted that "it will take until late springbefore we get a good idea on how the terror market is developingand the complementary risk strategy."

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