Senate approves temporary terrorism insurance coverage

Real Estate Weekly, Nov 27, 2002

The Senate recently voted to enact a temporary federal backstop for terrorism insurance coverage, a step that will help to protect U.S. economic security from any future terrorist attacks, remove a significant hurdle to job-producing real estate market activity, and protect the value of real estate investments held by millions of Americans, according to The Real Estate Roundtable.

The legislation, which has been a top priority for the Bush Administration this past year, will help to rebuild terrorism insurance market capacity and ease the shortage of adequate coverage that developed after 9/11. This shortage has restricted financing for acquisitions, construction projects, and other transactions--putting at risk thousands of construction related jobs and billions of dollars worth of commercial property values and real estate investments held by pensioners and others.

"By voting for a federal terrorism insurance backstop, Senate lawmakers have recognized the urgent need to protect the country's economic security, which remains at risk from potential new terrorist attacks," said Real Estate Roundtable chairman Nelson C. Rising, who is chairman and CEO of San Francisco-based Catellus Development Corp. "Today's action will also help to protect businesses across the country that need comprehensive terrorism insurance to operate. With many commercial properties now uninsured or underinsured against catastrophic losses, and many policies rolling over in coming months, the need for this legislation is more acute than ever."

Under the Senate-passed conference report, which cleared the House last week, the government would pay terrorism-related insurance claims after a significant threshold of losses are covered by private insurance firms. The plan would help to ensure that office buildings, shopping malls, hospitals, sports stadiums, amusement parks, and other vital private and public spaces where Americans converge have access to insurance coverage against damages sustained in any potential new terrorist attacks.

"By helping to stimulate expanded capacity in the terrorism insurance marketplace, this bill will remove a significant obstacle to real estate market activity and job creation. It will also help to improve our industry's ability to weather ongoing economic and geopolitical uncertainty, "said Roundtable president and COO Jeffrey DeBoer.

"Lawmakers have produced a prudent plan that will be good for the U.S. economy, good for workers, and good for investors and businesses that depend on a normally functioning insurance system. While many have worked hard to advance this legislation, President Bush deserves special thanks for his unwavering efforts to keep Congress focused on this matter throughout the past year," he added.

A Roundtable survey of real estate CEOs this fall revealed that more than $15.5 billion in real estate transactions in 17 states have been stalled or cancelled because of the ongoing scarcity of adequate and affordable terrorism insurance. Problems were reported in markets across the country, from large states such as New York to smaller ones such as Alabama and Nevada.