Insurance: terrorism coverage cost dip brings more buyers.

• Author: Marshall, Jeffrey

While rates dropped 42 percent in the fourth quarter of 2003 from the second quarter, a new study shows that only one in three companies purchased insurance against terrorism risk--although that percentage of purchasers is higher than in any prior period. The study of 2,400 U.S. businesses by global risk and insurance-services firm Marsh Inc. finds that the percentage of businesses purchasing the coverage rose to more than 32.7 percent from 27.3 percent.

"As prices have come down, more companies are purchasing terrorism insurance--both under the Terrorism Risk Insurance Act of 2002 (TRIA) and the stand-alone terrorism insurance policies offered by various insurers," said Jill Dalton, a managing director of Marsh and North American Property Practice Leader.

In the aftermath of 9/11, insurance companies excluded terrorism risks from their commercial policies. TRIA, signed into law by President Bush in November 2002, requires insurance companies to offer insurance for certain acts of terrorism in the U.S. that are certified by the Secretary of the U.S. Treasury Department, the Secretary of State and the Attorney General. Terrorism coverage offered under TRIA must be in amounts and have terms and conditions that do not differ materially from buyers' other policies. As an alternative, businesses can purchase separate, "stand-alone" terrorism insurance policies that do not require U.S. government certification.

The report notes that several factors are currently motivating...