Thank you for sharing!

Your article was successfully shared with the contacts you provided.

ORLANDO-Despite a warning that they will stop writing terrorism insurance coverage by Dec. 31 on most new developments, the nation’s major carriers will continue offering policies but the premiums could be stiff, Realvest Partners Inc. founder/chairman George D. Livingston tells GlobeSt.com .

Rate increases of “50% to 100% is the number I have heard,” the developer says. An unverified industry report has some premiums increasing by 1000%.

Refusing to write terrorism coverage could delay some real estate deals but “I doubt it,” Livingston says. “Insurance will be written and deals will be done.”

The developer sees the insurance industry’s ultimatum to the real estate industry as a pure marketing play.

“The insurance companies see this as an opportunity to push margins and profits up,” Livingston says. “They are now positioning for advantage and not sure how to price it.”

But the developer doesn’t think insurance companies will stop writing terrorism coverage. “I believe that in the end, they will write it,” says Livingston, a longtime committee member of FIABCI, the international corporate real estate organization based in Paris.

“The corporate real estate guys are very concerned” over the terrorism coverage issue, Livingston says. “They are all looking at ways to minimize the (premium) cost.”

However, if the carriers follow through on their threat to stop writing terrorism coverage altogether, “it will affect deals,” either pending or in the near future, Livingston tells GlobeSt.com.

How the insurance firms will structure their terrorism coverage premiums is “too early to say,” the developer says. “My guess is that everyone will adjust and it will be business as usual.”

Livingston says the terrorism coverage topic is “mostly a lender issue.” But “the perceived risk (to developers and owners) will matter” because they will wonder if they are “a likely target or not.”

He tells GlobeSt.com the federal government “may have to become the reinsurance company of last resort” for the real estate industry. “Some European countries are already doing that.”

Reinsurance backup would be good for the development industry, Livingston says. But reinsurance may not be an option, at least in the short run, he says. “They (reinsurance companies) really got hurt” in the 1980s and 1990s.

Regardless of how the terrorism coverage issue is resolved, property owners and tenants “have to look at who they are dealing with” in the building itself, Livingston tells GlobeSt.com.

“High-risk tenants will have to pay more,” the developer says. “Who else is (renting) in the building” will become an equally important caution flag for the owner in the near future.

So will the adjustment of pass-through costs to tenants. “There are many new issues to be worked through” because of the terrorism coverage cloud, Livingston says.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


GlobeSt. NET LEASE Fall 2021Event

This conference brings together the industry's most influential & knowledgeable real estate executives from the net lease sector.

Get More Information


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.