Newspaper article The Record (Bergen County, NJ)

Senate Passes Terrorism Insurance Bill

Newspaper article The Record (Bergen County, NJ)

Senate Passes Terrorism Insurance Bill

Article excerpt

The U.S. Senate moved swiftly Thursday to renew a federal backstop for terrorism insurance, which had lapsed at the end of last year.

Insurance providers and business groups applauded the move, which followed House passage of the measure on Wednesday.

"This is needed so commerce can go on," Joseph Parisi, owner of Otterstedt Insurance Agency in Englewood Cliffs, said of the backstop renewal, which must be signed by President Obama before it takes effect.

The 2002 Terrorism Risk Insurance Act (TRIA), passed after the 9/ 11 attacks, provides a government-funded safety net for insurance companies that covers damage from major acts of terrorism. Before the government terrorism coverage lapsed on Jan. 1, it would have covered claims that exceeded $100 million. The backstop has never been used.

"TRIA was set up as a backstop to protect the industry and the buying public," Parisi said. "Terrorism is difficult to insure against, and this protects the carriers so they will be able to provide the insurance."

When the Senate failed to renew the backstop last month, some businesses in New York City and New Jersey, as well as other parts of the country, had to scramble to buy separate terrorism coverage from private insurance companies at rates sometimes more than twice as high as they had been paying, according to brokers and property owners.

Some insurers extended terrorism coverage for 30 days despite the loss of the backstop on Jan. 1, even though they could have excluded the coverage altogether. But others did drop coverage, said Duncan Ellis, U.S. property practice leader at insurance broker Marsh's New York City office.

"If you had a large commercial loan on a property in midtown Manhattan and you agreed to provide risk insurance, including terrorism insurance, and if you had a policy [that lapsed], you were technically in default of your loan covenants," he said.

Normally, with the backstop in place, terrorism coverage in a high-risk area such as Manhattan accounts for 4 percent to 10 percent of the cost of a business's general liability premium, Ellis said. Standalone terrorism insurance generally can cost about twice that amount, he said. …

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