Terror-Insurance Costs Cut Into Demand --- Large Policy Buyers Choose Limited or No Coverage, Cite Surge in Premiums
Deep into the all-important year-end renewal season for insurance contracts, big insurance buyers in many cases are choosing to either carry no terrorism coverage or opting for low-level coverage, leaving themselves vulnerable in the event of future attacks.</br></br>The big reason buyers are turning down the specialized coverage, whose value was illustrated by the Sept. 11 terrorist attacks, is it has become simply too expensive, in many cases costing more than a company's basic commercial coverage.</br></br>"There is terrorism coverage available, but it's at outrageous prices," said Bob Spadaccia, senior vice president for the Northeast at USI Insurance Services Corp., a San Francisco insurance broker. Real-estate companies and any other entities that are required, either by law or, in some cases, by lenders, to buy the terrorism coverage "are choking on the numbers," he said.</br></br>Prior to the Sept. 11 attacks, which are estimated to be costing the insurance industry at least $40 billion, such terrorism coverage was included as part of a standard policy. Now, terrorism coverage is being stripped out of the policies offered to most large businesses and owners of properties viewed by insurance companies as the likeliest targets, including tall office buildings, sports stadiums and shopping malls. These businesses are being offered the chance to "buy back" the coverage, but only at the steep prices. USI estimates only about one in 10 such clients is opting to buy back the coverage.</br></br>Smaller, lower-profile businesses are less affected by the insurance industry's retrenchment. They are generally still able to get terrorism coverage as part of a basic package, albeit at higher prices than they paid last year, brokers said.