Magazine article Mortgage Banking
GAO: Terrorism-Insurance Coverage Still a Challenge in High-Risk Areas
While commercial property terrorism-insurance coverage appears to be available nationwide at rates policyholders view as reasonable, certain policyholders may face challenges in obtaining desired amounts of coverage at reasonable prices, concluded a report by the Government Accountability Office (GAO) in July.
The report-Initial Results on Availability of Terrorism Insurance in Specific Geographic Markets-noted that policyholders experiencing these insurance-coverage challenges were typically those that own large, high-value properties in areas where many large buildings are clustered.
Urban areas, in particular-such as Manhattan-are viewed as at high risk of attack, and to a lesser extent certain areas of other major cities, such as Chicago and San Francisco, noted GAO.
The GAO study was expressly mandated by Congress as part of legislation passed at the end of last year to reauthorize the federal terrorism-insurance backstop for damage done as a result of acts of foreign terrorism.
The Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA) again extends the original Terrorism Risk Insurance Act of 2002 (TRIA) for an additional seven years, through the end of 2014.
To address challenges in obtaining terrorism-insurance coverage, the GAO report noted that policyholders reported taking a variety of approaches.
Some policyholders, for example, purchased coverage from a large number of insurers in complex insurance programs, adding to what can be a time-consuming and onerous process for policyholders and their insurance brokers.
Others purchased coverage in a separate policy rather than as part of an overall property-insurance package-which policyholders said may be more costly-or still others self-insured. …