More Businesses Purchasing Terror Cover

NU Online News Service, April 27, 3:48 p.m. EDT?The number of businesses purchasing terrorism insurance increased in the fourth quarter of last year, but a large majority of companies are not purchasing the coverage even though prices have fallen, a study has found. [@@]

Only one in three companies made the purchase, said New York-based Marsh Inc. after a study of 2,400 U.S. businesses.

Marsh found that rates for terrorism insurance dropped by 42 percent from the second quarter of 2003 to the fourth quarter. During the same two quarters, the percentage of businesses purchasing the coverage rose to more than 32.7 percent from 27.3 percent.

“As prices have come down, more companies are purchasing terrorism insurance, both under the Terrorism Risk Insurance Act of 2002 and the standalone terrorism insurance policies offered by various insurers,” said Jill Dalton, a managing director of Marsh and North American Property Practice Leader, in a statement.

According to the study, among the reasons companies said they are purchasing terrorism insurance for are:

? Lender requirements: to protect their investments, banks may require borrowers to buy insurance.

? Corporate governance: A business’ board of directors may determine that prudent corporate governance requires terrorism insurance.

? Directors and officers coverage requirements: A company’s directors and officers insurer may exclude D&O coverage if the company fails to insure certain exposures, including terrorism.

? More affordable pricing: While costs for many commercial insurance covers have gradually come down since the fall of 2003, these costs differ widely for different risks.

? Government alerts: A company’s decision-making process may be affected by the government’s heightening or lowering of terrorism risk alerts.

The study found that during the second and third quarters of 2003 the median cost of terrorism insurance available through TRIA was higher than that available on a standalone basis, but the situation reversed in the fourth quarter.

Copies of the Marsh report, titled “Marketwatch: Property Terrorism Insurance 2004,” are available through Marsh offices or by contacting Charees Bruce-Asher of Marsh at (404) 995-2950.