Terror Insurance Booms Before Conventions
Insurance brokers in Boston and New York are in the midst of a small business boom due to fears of terrorism at this summer's Democratic and Republican national conventions.
Brokers report that more property owners are adding to their liability coverage to insure against losses from a terror attack - an increasingly popular form of insurance in other parts of the country as well, thanks to the federal government's financial backing of such policies
The upcoming Democratic convention in Boston and Republican convention in New York are an opportunity for brokers in those citites to make pitches to new customers and to urge existing clients to add terrorism coverage to their policies.
"We said to them, your policy is coming up for renewal, the convention is coming up, and now is the time to buy terrorism insurance," said Mike Chapman, chief sales officer for Hub New England, the regional office for insurer Hub International. "I only had one client come back to me who elected not to get the coverage."
Of the firm's 25 clients owning at least $25 million in property near the FleetCenter, the site of the Democratic National Convention, 17 have elected to buy terrorism insurance.
Nine of those 17 - banks, hotels and office buildings - are near the FleetCenter and added the coverage at the start of the year, Chapman said. The Democratic convention runs July 26-29.
Brokers say additional coverage can boost the premiums clients pay by as little as 2 percent in small towns and rural areas where the perceived terrorism risk is low, and by 20 percent and more in the heart of Manhattan.
The Democratic convention's host committee has added terrorism coverage to its own $100 million liability policy in case of an attack on the FleetCenter. Because the security measures taken for the event reduce the risk of a catastrophe, the host committee is getting terrorism coverage at a relative bargain - adding just $86,000 to the convention's $2.3 million overall insurance costs, said David Passafaro, the committee's president.
"It was a no-brainer," he said.
Damian Testa, a broker with Kaye Insurance Associates in New York, said terrorism insurance has become the norm since the Sept. 11 attacks for property owners in the heart of Manhattan. But with the Republican National Convention coming up Aug. 30-Sept. 2 at Madison Square Garden, clients across Manhattan and into New Jersey are increasingly buying terrorism coverage, Testa said.
"When you get away from the business section of town, now they are buying it," said Testa, who serves as a broker for Hub International policies. "A year ago, these people said, 'It's not going to happen here. Now they're saying, 'Why put myself at risk, when it's just about a 20 percent higher cost on my premium?'"
Terrorism coverage was practically unheard of before the Sept. 11 attacks, and brokers say it did not become commonplace or affordable until after the Terrorism Risk Insurance Act took effect in November 2002.
The federal law, a response to the attacks, requires insurers to offer coverage for terrorism losses. The government acts as a reinsurer by pledging billions of federal dollars to help pay claims if terrorists should attack the United States again.
Because of industry and client uncertainty about pricing and risk exposures when the law took effect, it wasn't until the middle of last year that the market for U.S. terrorism coverage began to take off.
A study of 600 U.S. clients of the insurer Marsh Inc. found just 23.5 percent had terrorism coverage in the second quarter of 2003. But less than a year later, in the first quarter of this year, 44 percent maintained such coverage. The biggest rise came among larger property owners, with coverage most common in the transportation industry, often a target in terrorist attacks.
However, despite the increasing popularity of such policies, terrorism insurance could begin to disappear unless Congress renews the Terrorism Risk Insurance Act, which is scheduled to expire in November 2005, warned Martin DePoy, a spokesman for the Coalition to Insure Against Terrorism, a Washington-based group representing a broad range of industries.
"We view this as a kind of economic security, to ensure we don't have a slowdown in the economy like we did after the Sept. 11 attacks," DePoy said.
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