Moody's 'Snapshot': Terror Premiums Lower

The brief survey was part of a larger report by New York-based Moody's Investors Services on the performance of certain commercial mortgage-backed securities during the first quarter of 2003.

Dan Rubock of Moody's, one of the survey's authors, noted that the survey concentrated on the Manhattan real estate market because "that is where the higher-profile assets and most prominent and largest loans are."

"TRIA rates are about 10 to 30 percent of properties' overall property/casualty premiums according to the brokers who participated in the survey," said Mr. Rubock. "That's about half of what they were six to eight months ago."

However, Mr. Rubock added that the brokers did report higher premiums for certain types of risks. "There were a few in the 50 to 75 percent range and some 'outlyers' in the 200 to 300 percent range."

Insurer competition is probably behind the decreasing terrorism premiums, in Mr. Rubock's view. "TRIA has just begun to show its intended effects" as far as pricing is concerned, he pointed out. "As this is only an informal snapshot, no major conclusions should be drawn," he stressed.

In addition to lower pricing, the brokers indicated that insurers have become more inclined to provide "per occurrence" policy language, as opposed to the more restrictive aggregate limits written in response to 9/11.

Also, the brokers surveyed noted that coverage for domestic terrorism (which isn't mandated to be offered under TRIA) is becoming more readily available. In addition, they reported a shift away from stand-alone terrorism policies and a trend toward including this coverage under a building's existing p-c policies.