NY Sens: time to pass terrorism insurance bill

Real Estate Weekly, Oct 9, 2002

Standing with leaders from New York's real estate and business community at the Real Estate Board of New York, U.S. Senators Charles E. Schumer and Hillary Rodham Clinton called for the passage of the Terrorism Risk Insurance Act of 2002, legislation that will help make sure that American businesses, workers and families are protected in the event of another terrorist attack.

"Of all the actions that the federal government could take right now to turn the economy around, passing a terrorism insurance plan would probably have the greatest impact in terms of creating jobs and spurring investment. As a result, the real estate market is slowing to a crawl and every time a new project isn't refinanced or a new proposal to build something large and grand doesn't get insurance coverage, it slows down a little more," Schumer, an author of the terrorism insurance legislation and one of the Senators helping to reconcile the House and the Senate versions of the bill, said.

"Not long ago no one talked about terrorism insurance, but now in our post 9/11 world it has become a basic necessity for businesses, hospitals, and apartment buildings," said Clinton. "The federal government must help pay the price of terrorism insurance or we will all pay an even greater price of higher unemployment and less economic growth."

Businesses in New York and across the country either haven't been able to renew the policies they had prior to Sept. 11 or the coverage has been so expensive that purchasing it has dramatically affected their bottom line. Some have simply self insured or done without insurance at all. Most troubling is that when companies have been able to obtain insurance at exorbitant prices, the coverage they receive is far less than what they received under their previous policies.

Before Sept 11, no one talked about terrorism insurance except insurance agents, developers, and business managers. The costs were minimal and had no effect on employees or any other workers. But then the devastating terrorist attacks of Sept. 11 happened.

However, as of September 2002, more than $15.5 billion worth of real estate projects in 17 states (including New York) have been stalled or cancelled according to the Real Estate Roundtable's Member Survey. Furthermore, according to a survey by the Building Owners and Managers Association (BOMA), 80% of building owners plan to pass their increased insurance costs on to tenants.

The Terrorism Risk Insurance Act of 2002 would provide a temporary government-industry program for sharing property and casualty insurance losses - in short, a government backstop. If losses from a terrorist attack are less than $10 billion, the federal government will cover 80% of insured losses. And if losses are more than $10 billion, the federal government will cover 90%. The bill covers not just insurance companies, but also those who are self-insured.