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Saturday, Jun 3, 2023

Terrorism Insurance More Popular Five Years After 9/11

Five years after the terrorist attacks on Washington, D.C., and New York, a growing number of mid- and large-sized Los Angeles companies have purchased a special form of insurance to cover losses if a similar act were to occur, a report has found. “Marketwatch: Terrorism Insurance 2006,” a 30-page study by the insurance services firm Marsh Inc., determined that 58 percent of Los Angeles companies have purchased terrorism insurance. Among Western states, the number buying the coverage has jumped 19 percent from 2004, the study found. The large portion of companies with terrorism insurance are those with significant holdings, usually in excess of $1 billion, the study found. “The most prevalent utilization is by very large companies from a size standpoint,” Dennis Donahue, senior vice president, property practice leader, for Marsh. Donahue said real estate companies are big purchasers because many are required by lenders to have it. Around 75 percent of media, finance and healthcare companies are also likely to have it, the study said. Geography does not appear to be a major factor in whether companies have the coverage. Northeastern states were the most likely to have the insurance, around 67 percent of companies; businesses in the south were the least likely, around 50 percent. Fifty-three percent of companies in western states picked up the insurance, an increase from 34 percent in 2004, the study found. That relatively modest spread is largely because mid- and large-sized businesses tend to address the same universal issues regardless of location, Donahue said. “They may not feel it’s centralized solely in New York or other large cities,” he said. Locally, it is well known that major global brands such as Walt Disney Co. have some type of insurance coverage in case of an attack, although few will talk publicly about it. Officials from local companies as varying as The Cheesecake Factory Inc. and biomedical giant Amgen, for example, would neither confirm nor deny that they have it. Still, some companies are not buying into terrorism insurance. IHOP Inc., for example, has some coverage on its property insurance, but not designated terrorism insurance for its headquarters in Glendale, said spokesman company Patrick Lenow. “There’s every type of insurance imaginable,” he said. “You purchase the ones that make the most sense from an economic standpoint.” Contentious coverage The issue of terrorism insurance almost immediately became a contentious issue after Sept. 11, 2001. The terrorist attacks caused financial hemorrhaging for the insurance industry. As a result, many companies tried to exclude terrorism coverage from commercial coverage. In response, Congress in late 2001 introduced the Terrorism Risk Insurance Act, a public-private partnership that looked to ensure the availability and affordability of terrorism risk insurance. It required companies to offer terrorism coverage and created a risk-sharing arrangement among insurance companies, with the federal government covering losses in excess of the deductible. The plan was set to expire late last year, but Congress narrowly voted to extend it until Dec. 31, 2007. Even though steps have been put into place, a 9-11-style attack would still cause staggering financial damages to the U.S. insurance industry; around $778 billion in insured losses for an attack in New York, according to a study by the American Academy of Actuaries. The threat perceived or otherwise has resulted in more companies investing. “I would suspect a continual increase,” said Donahue, who stopped short of saying another attack would drive up the numbers higher. “It would depend on where the event happened and the circumstances surrounding the event,” he said.

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