X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

WASHINGTON, DC-Terrorism insurance legislation finally made it to the desk of the president, who signed the Terrorism Risk Insurance Act of 2002 today, thus putting in place a federal backstop for property insurers in the event of another terror attack. Under the new legislation, the government will pick up 90% of the tab beyond the $10-billion mark in terrorism-related claims. The law covers a three-year period–with the kick-in point increasing from $10 billion to $12.5 billion in 2004 and to $15 billion in 2005–and carries an annual cap of $90 billion. Also stipulated in the legislation is the setting of insurance company deductibles at 7% of premiums the first year, then 10% and 15% in the second and third years.

In recent months, President George W. Bush had joined the cry–initiated by representatives from the real estate, insurance, construction and development industries–for Congress to pass a law that would reverse the drastic monetary losses caused by the pervasive unavailability of property insurance in the wake of last year’s attacks. “The risk of terrorism has had a profound effect on potential development and construction,” Eric T. Schake of risk and insurance services firm Marsh Inc. tells GlobeSt.com. “This has not only affected real estate owners developers, and construction companies but also construction laborers, unions and the entire US Economy.” Insurance companies have been left with an estimated $70 billion bill for Sept. 11-related claims. The situation led to outrageously high-priced coverage–or no coverage at all–which resulted in billions of dollars in canceled and stalled development projects.

Representatives of the terrorism insurance legislation crusade spoke to GlobeSt.com about the process of bringing the legislation to the forefront and just what Bush’s signing of the bill means to their respective industries. “Passage of the federal reinsurance program will have an immediate impact on financing large, single-asset properties that could not get financed due to the lack of insurance for terrorism and in enabling primary commercial insurers to quantify their outside risk for terrorism insurance,” notes Gail Davis Cardwell, Mortgage Bankers Association of America senior vice president of commercial/multifamily. “MBA will be working aggressively with the insurance industry, our commercial real estate finance members, Treasury officials and our industry coalition partners in implementing a sound federal reinsurance program.”

Bankers are not alone in their enthusiasm. Builders, who were perhaps the most directly affected in the often-fruitless search for terrorism coverage in the post-Sept. 11 climate, applaud the legislation, as well. “BOMA International and Congressional leaders are confident that these provisions will ease many of the problems building owners have faced in finding available terrorism insurance coverage at reasonable rates and terms,” says Building Owners and Managers Association International assistant vice VP for advocacy Karen W. Penafiel. “Once the three-year period is over, the insurance market for terrorism coverage should be sufficiently developed to continue offering coverage absent government involvement.”

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
  • 3 free articles* across the ALM subscription network every 30 days
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

GlobeSt

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 © 2020 ALM Media Properties, LLC. All Rights Reserved.