Brokers: Low Rates, Spur Terror Cover Buys

By Daniel Hays

NU Online News Service, July 15, 2:26 p.m. EDT?Decreases in property insurance premiums and warnings about attacks on political conventions and other venues are spurring sales of terrorism insurance, according to brokers.[@@]

"It's not just in Manhattan. We're getting calls [regarding terrorism coverage] from the outer boroughs and suburbs," said Damian Testa, president of New York-based Kaye Insurance Associates, part of the Hub Group.

Mr. Testa said his company is seeing a heightened awareness among customers about possible terrorist attacks and "clients are asking more questions."

He said some of this is prompted by a relentless drumbeat of news stories concerning possible terrorist threats in the city. "The news is always about security, security," he noted.

The other factor creating an impact, Mr. Testa said, is that "as property premiums have been coming down, people are saying, ?I can afford it'[terrorism coverage]."

A 5 to 20 percent terrorism surcharge on a policy becomes attractive for an insured whose renewal cost has dropped from $110,00 to $100,000, he suggested.

He noted that some insurers are not offering the coverage as part of the Terrorism Risk Insurance Act, which is limited to foreign terrorist acts, and are providing protection against domestic terror attacks as well.

Mike Chapman, chief sales officer for HUB International in Wilmington, Mass., said when it became clear this year that the Democratic Convention in Boston at the Fleet Center would present "a big issue in terms of security risk," the company had done an area analysis.

He said they had examined all the covered risks of $25 million, or those within a mile of the convention venue, and found only eight had terrorism coverage. He said 17 of those properties now have the coverage.

Steve Lundin, senior vice president at New York-based Marsh, said that the company had earlier noted that takeup of terrorism insurance among its clients had increased from 33 percent to 44 percent and he expected no dropoff when second quarter figures are released.

Mr. Lundin rejected the notion that increased warnings of terrorism and reports that conventions might be targets were a spur to sales of the coverage. "The real driver is our clients are using those saved premium dollars [from rate reductions] to buy terrorism," he said.

He said that Marsh does not have precise geographic data, "but by region the Northeast does have slightly more than the national average in takeup."

Mr. Lundin said rather than asking questions about terrorism, Marsh clients seem to be seeking assistance in business continuity plans.

According to Boston 2004, the host committee for the Democratic convention, they have obtained $2.6 million in coverage which includes $86,000 for terrorism.

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