U.S. terrorism insurance purchase rates continued to climb in 2009 as companies of all sizes and across all industries continued to buy terrorism coverage, according to a report by global broker Marsh.
Of the firms surveyed by Marsh, 61% purchased property terrorism insurance in 2009, an increase from 57 % in 2008 and representing a steady climb from 27 % in 2003, according to the report, Terrorism Risk Insurance 2010.
However, the report found that median premium rates declined from $37 per million of total insured value (TIV) in 2008 to $25 per million in 2009. Not surprisingly, capacity in the standalone terrorism insurance market, which has served as an important alternative or supplement to coverage made available through the Terrorism Risk Insurance Act (TRIA), has grown considerably in recent years, to a theoretical maximum of $3.76 billion, according to Marsh. Primary purchasers in 2009 included hospitality companies, large real estate firms, and financial institutions.
The report indicates several differences by industry, region, and company
• Utility, real estate, health care, transportation, financial institutions, and media companies purchased property terrorism insurance at the highest rates of the 15 industry segments reviewed, with take-up rates in each sector exceeding 70 %.
• Construction, hospitality, utility, and real estate companies experienced the highest median premium rates, exceeding $50 per million of TIV.
• Take-up rates rose most significantly in the Northeast, increased slightly in the South and the West, and remained flat in the Midwest.
• As a percentage of total property premiums, financial institutions (24%) and transportation companies (17%) paid the largest share; hospitality firms saw the greatest decrease in this area (from 13% to 4%).
• Smaller companies (with TIV below $100 million) spent 22% of total property premiums on terrorism coverage in 2009. By contrast, relative spending was significantly lower for companies between $100 million and $500 million in TIV (5%), $500 million to $1 billion (7%), and $1 billion or more (11%).
"Terrorism risk remains a critical concern for global companies," said Ben Tucker, SVP in Marsh's Property Practice and a lead author of the report. "Recent attempted attacks in New York's Times Square and on a Detroit-bound flight on Christmas day 2009 remind companies of the importance of securing adequate financial protection against the possible catastrophic impact of terrorist events."
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