Magazine article Journal of Property Management

Disasters Spike Insurance Costs, Spark Legislation

Magazine article Journal of Property Management

Disasters Spike Insurance Costs, Spark Legislation

Article excerpt

Costs of property and casualty insurance have been on the rise in the United States for nearly five years. From 2001 to 2005, office building insurance costs increased by an average of 71 percent; costs for conventionally financed multifamily apartments went up 66 percent; and shopping center insurance costs rose 43 percent.

Affordable and accessible insurance is essential to the real estate market. But in recent years, large natural disasters like hurricanes Katrina and Rita have made the acquisition of adequate property insurance difficult in some areas. Insurers are declining to write policies, canceling existing policies or increasing premiums on existing policies.

In the absence of a federal natural disaster policy, all taxpayers will pay significantly more for future disasters through government assistance to affected areas unless property owners in disaster-prone areas are able to obtain insurance. Congress has held several hearings and introduced several bills relating to flood and disaster coverage this year.

The Terrorism Risk Insurance Extension Act, passed in 2005, increases the trigger point at which the federal government provides assistance from $5 million in 2005 to $100 million in 2007, and increases the insurer deductible from 15 percent to 20 percent. …

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