Terrorism insurance take-up rates hold steady: Marsh

In its “Marketwatch” review of property terrorism insurance amongst commercial buyers, broker Marsh finds rates holding steady in the third quarter of 2004.The survey of 754 companies finds take-up rates holding in the mid-40% range the rate was 44% in the third quarter, down from 46% in the second quarter of 2004, but up significantly from the 26% take-up rate seen last year at this time. And 95% of the companies which bought terrorism coverage in the third quarter of 2003 renewed that coverage in this most recent third quarter.The take-up rate has averaged 45% over the past 12 months.The survey also breaks results down by geographical location and account size. Take-up rates are highest in the Northeast and Midwest U.S., while rates were greater for larger companies.Pricing for terrorism coverage was down from the first half of 2004, but remained steady with pricing seen in the third quarter of 2003.The biggest issue for buyers moving forward is uncertainty over the future of the Terrorism Risk Insurance Act (TRIA). While insurers have urged the U.S. federal government to renew its terrorism insurance backstop through 2007, no such action has taken place yet.If TRIA is allowed to expire on December 31, 2005, insureds could find themselves facing lack of availability of the coverage in the marketplace, as well as dealing with the exclusions and limitations approved for use in 44 states already. Some insurers may choose to offer the coverage on a case-by-case basis, with sub-limits and aggregations factored in. “Given that insurers are extremely concerned about accumulations of risk, we believe that they will assess each client’s needs against their exposures in any one area or city when determining whether to offer terrorism coverage and at what price,” the Marsh report notes.