Commentary: Insurers Denying Terrorism Coverage
Cobb, Brenda, THE JOURNAL RECORD
Correspondence arrives from your insurance carrier. Chances are
it contains a "Notice to Policyholder." Read it carefully. It is
likely to read something like this, "An endorsement entitled,
Exclusion of War, Military Action and Terrorism will be added to
your next renewal policy."
At first glance, this doesn't sound so bad. Then the ramifications of this small statement begin to sink in. As Oklahomans, we know all too well that terrorism can happen anywhere. And as commercial real estate practitioners, we know all too well the financial risks associated with inadequate insurance coverage. Since the horrific attacks on America, insurance companies have been faced with unprecedented claims. According to insurance professional Tom Caraway of Agar-Ford-Jarmon & Muldrow, the claims cost of the 9-11 terrorism attacks on American will exceed $50 billion. Prior to 9-11 the largest claim event was Hurricane Andrew at $18 billion.
Insurance companies are scrambling to avoid another round of catastrophic claims like those generated by 9-11. It is affecting all levels of property insurance, including your homeowner policy rates. Most severely affected are commercial properties housing multiple tenants. Whether it is a high-rise office building or a low-rise, high-tech industrial park, both are being denied terrorism insurance or they are being quoted rates that severely impact profitability.
The average cost of property insurance in downtown Oklahoma City was 13 cents per square foot in 2000, according to the 2001 Building Owners and Managers Association International annual Experience and Exchange Report.
This year property coverage quotes could soar, in some cases doubling this line item in the building operating expenses - even though terrorism coverage is excluded. …