Terrorism Coverage Purchases Increasing

This is an increase from Marsh's 2003 fourth-quarter survey that said only 33 percent of businesses were making the purchase.

In a statement, Stephen Lundin, senior vice president of Marsh and head of the firm's National Property Practice, said the cost of property insurance programs "has become more manageable," freeing up cash to purchase the coverage. Underwriters, he added, are also pricing the insurance "at affordable rates."

Buyers are filling in gaps in their terrorism coverage by purchasing higher limits, translating into higher premiums for the coverage than last year, said Mr. Lundin.

Insurers, he noted, are helping by adding non-certified coverage and stand-alone terrorism coverage to policies.

Under TRIA, the Secretary of the U.S. Treasury Department must certify acts of terrorism before claims can be paid. The act does not cover domestic acts of terrorism, which non-certified and stand-alone coverage would address.

Examining the buyers of the coverage, 63 percent of entities with insured property value of more than $1 billion bought the coverage in the first quarter. More than half, 51 percent, of insured values ranging from $100-to-$500 million made the purchase, and 46 percent of entities with insured value of between $500 million and $1 billion purchased terrorism coverage. More than 32 percent of entities with property values of less than $100 million made the purchase.

All groups showed significant increases in purchase above the median rate in 2003.

Marsh added that a number of industries showed significant increases in their purchase of the coverage, above 40 percent. Notably, 57 percent of transportation firms made the purchase, followed by government entities at less than 57 percent. Financial institutions were third at 53 percent, real estate 52 percent, and retail firms at 51 percent.

The TRIA program is set to expire in 2005. Insurers and association representatives are calling for extension of the act. Critics contend that it is not doing the job it was originally intended to do, which was to allow insurers time to form their own pool, and they are relying upon the federal government to bail them out. .