Most companies take out some form of professional indemnity, liability and business insurance, but the latest addition to companies’ insurance portfolios is property terrorism insurance. Such products are becoming increasingly prevalent among larger to mid-size US companies in the fields of finance, healthcare and real estate, according to Marsh, a risk and insurance services firm.
In its third annual report on terrorism insurance, Marsh reported a dramatic increase in the number of US companies purchasing property terrorism insurance. Almost 60% of its risk management and middle-market clients purchased terrorism insurance in 2005, compared with an average of 27% in 2003 and 50% in 2004.
According to Marsh’s findings, take-up of property terrorism insurance varied by industry sector, with financial institutions, real estate firms and healthcare facilities boasting the highest take-up rate, exceeding 75% in each sector. Take-up rates also varied between regions, increasing dramatically in the West from 34% to 53%, and in the Northeast from 53% to 67%.
Marsh also highlighted concerns about the future of the “standalone” terrorism insurance market, noting that the Terrorism Risk Insurance Extension Act (TRIA) of 2005 was due to expire on December 31, 2007. The 2005 act extended the provisions of the original Terrorism Risk Insurance Act, which was instituted after the World Trade Center attacks and was designed to provide federal funding to support insurance companies’ ability to cover a catastrophic terrorist attack. “If TRIA is not renewed or if there is no permanent solution in place, the standalone insurance market is unlikely to have sufficient capacity to meet demand,” Marsh writes.
Marsh says a “ cooperative effort” between federal and state governments, the insurance industry and policyholders was needed in order to develop a long-term solution for the availability of “commercially viable terrorism coverage.”