Moody's 'Snapshot': Terror Premiums Lower
By Gary Mogel
An "informal survey" of large insurance brokers shows that premiums for terrorism insurance are averaging 10-to-30 percent of a property's overall property-casualty premiums, down perhaps 50 percent from six months ago.
This "snapshot" of terrorism premiums offered under the Terrorism Risk Insurance Act is based on an informal survey of large brokers that concentrated on the Manhattan market.
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 'outliers' 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 standalone terrorism policies and a trend toward including this coverage under a building's existing p-c policies.
Reproduced from National Underwriter Edition, May 5, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.
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