CIAB Says Few Buying Terrorism Cover

By Mark E. Ruquet

NU Online News Service, March 24, 4:07 p.m. EST?Few commercial customers are purchasing terrorism insurance either because they feel they are not at risk or, if they are at risk, they find the coverage too expensive, according to an industry group study.

The Council of Insurance Agents and Brokers released the results of a survey of 212 of the United States' largest insurance brokerage firms that says many of their commercial clients are not purchasing terrorism insurance.

According to the survey, 49 percent of the brokers surveyed said that less than 10 percent of their clients have purchased the insurance. On the other end of the spectrum, only 6 percent of brokers said all of their clients purchased the coverage.

Looking at the results by account size, 59 percent of the brokers said 10 percent or less of their small business clients purchased the coverage, while 38 percent of the brokers said only 10 percent of their largest account clients purchased the insurance. And 48 percent said 10 percent of their mid-size clients purchased the insurance.

Of those clients purchasing terrorism insurance, 61 percent of the client's purchase of terrorism was 10 percent or less of the their overall insurance cost. And 18 percent of the purchasers paid 11-to-20 percent of their insurance costs to terrorism insurance.

Of this total figure, for 74 percent of the small accounts, the premium paid for terrorism accounted for 10 percent or less of the clients overall insurance premium. Sixty-two percent of medium-size accounts and 46 percent of the largest accounts paid 10 percent or less of their total premium for terrorism insurance.

Ken Crerar, president of the Washington, D.C.-based association said that despite its stabilizing effect, there are problems with the coverage.

"On balance, the market is significantly more stable with the Terrorism Risk Insurance Act than without it," he said. "However, cost and availability of coverage remain key issues. Small, relatively low-profile accounts seem to be able to find terrorism coverage at a reasonable cost, but many are opting not to buy it because they don't think they are at risk.

"On the other hand, some of the riskier operations, with real exposures, choose to do without coverage because of the cost."

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