(Archived Content)
Examples of Terrorism Insurance Difficulties
Prior to January 1 st 2002, Gwinnett County, GA, in Atlanta’s metropolitan area paid approximately $349,000 for $1.8 billion of property-casualty insurance, including $300 million of terrorism coverage. At renewal, Gwinnett secured only $500 million in property-casualty insurance for the county’s jail, police headquarters, sewage treatment plants, government center, and other municipal buildings from its primary carrier, and only $1 million of terrorism insurance coverage. Additionally, the county’s premiums climbed to $502,000 per year. Gwinnett County then went out and purchased a $50 million terrorism insurance policy from Lloyds of London for $390,000.
After discussions with over 40 different insurance companies for general liability coverage, the U.S. Olympic Committee (USOC) received quotes from only two companies just days before the Salt Lake City Games were to begin. Both quotes excluded terrorism coverage. The day before the Olympic Winter Games began, the USOC secured a minimal amount of terrorism risk coverage – 5 percent of its expiring general liability limit, for the full price of the broader coverage – a 20-fold increase in cost per dollar of coverage. The USOC is currently negotiating a policy for 3 U.S. Olympic training sites, for an April 16 renewal. So far, it has received 5 quotes for insurance coverage, but none of them includes terrorism coverage.
The Metropolitan Transportation Authority for New York City was able to obtain only $150 million in terrorism coverage for its tunnels, bridges, and subways worth over $1.5 billion.
Terrorism insurance coverage for the Mall of America was finally re-obtained in late March. For the real estate company, which owns the Mall and many other trophy properties, certain coverage limits are now 1/100 th of what they were prior to January 1 st. At times terrorism coverage costs more than 10 times what all risk coverage had cost prior to January 1 st. The company is prohibited from revealing the exact price terms.
The LeFrak Organization, owner of a new large office building in Jersey City, New Jersey, experienced difficulty obtaining mortgage financing because of the high cost of terror coverage. Self-insurance was not an option since all of LeFrak’s lenders, including the securitization market, required terrorism insurance. After an extensive search, LeFrak was able to obtain terrorism coverage. But this came at a substantially higher cost – $400,000 for standard property-casualty coverage and another $400,000 for terrorism insurance. Prior to 9/11, the entire cost of the coverage for this building, including terrorism coverage, was $60,000.
The Golden Gate Bridge in San Francisco has lost its terrorism risk coverage. For its non-terrorism coverage, premiums recently rose from $500,000 to $1.1 million and coverage was reduced from $125 million to $25 million. The Golden Gate Bridge District's CFO is contemplating toll increases to pay for the premium hikes.
The United Jewish Appeal-Federation of Jewish Philanthropies of New York sponsors hospitals, major medical teaching centers, nursing homes,and many other facilities throughout New York State. None of these institutions has been able to obtain terrorism risk insurance.
The Newark Museum’s fine arts insurance premium recently doubled, increasing from $21,000 to $42,500. According to the Museum's insurance agent, this increase was primarily due to concerns about potential terrorism, exacerbated by the institution’s proximity to New York City.
The Hyatt Corporation has purchased a site for a new office building in downtown Chicago at a cost of roughly $400 million. The company is now trying to obtain financing for this project but is being told that nobody will make loans without insurance for terrorism, yet adequate terrorism insurance is unavailable. As a result, construction on the project has not been able to begin. The project will lead to the creation of 2500 jobs -- if the Hyatt Corporation can get insurance and proceed with the project.
Amtrak was unable to obtain terrorism coverage when its $500 million property insurance policy came up for renewal on December 1 st. Terrorism coverage of that magnitude was not available, and the amount of terrorism coverage that was available was priced so high that it was beyond consideration. Amtrak believes that only limited amounts of terrorism coverage are available today, and that limited coverage is at extremely high rates.
was unable to obtain terrorism coverage when its $500 million property insurance policy came up for renewal on December 1. Terrorism coverage of that magnitude was not available, and the amount of terrorism coverage that was available was priced so high that it was beyond consideration. Amtrak believes that only limited amounts of terrorism coverage are available today, and that limited coverage is at extremely high rates.
Major hotel companies, including such well-known brands as Embassy Suites, Hilton, Holiday Inn, Hyatt, Marriott, Sheraton, Westin and others, have lost or will soon lose within the next 60 days terrorism coverage under their property insurance programs. These companies are finding that whatever replacement terrorism insurance coverage is available is inadequate to meet their insurance needs. These companies employ millions of Americans, including people working in the hotels, building the hotels and all the other indirect jobs that are required to support hotel properties.
, including such well-known brands as Embassy Suites, Hilton, Holiday Inn, Hyatt, Marriott, Sheraton, Westin and others, have lost or will soon lose within the next 60 days terrorism coverage under their property insurance programs. These companies are finding that whatever replacement terrorism insurance coverage is available is inadequate to meet their insurance needs. These companies employ millions of Americans, including people working in the hotels, building the hotels and all the other indirect jobs that are required to support hotel properties.The Cleveland Municipal School District has been notified that there will be an exclusion for terrorist risk when its policy comes up for renewal in July. The School District is concerned that not only will it be losing coverage for terrorism risk, but that the language of the exclusion is written very broadly.
The Wisconsin Energy Corporation has been informed by its insurer that coverage will no longer be available for acts of terrorism when its policy comes up for renewal in July. In seeking to fill this void, the company has found only very limited, and extremely expensive, coverage available from other insurance companies. With this limited coverage, the company's non-nuclear power plants would be grossly underinsured for the potential risk.
In a recent insurance renewal, Baylor University was able to get only half the coverage for twice the price, and its terrorism risk coverage was even more limited. Last year, Baylor’s coverage was $1 billion, including terrorism coverage, for a $500,000 premium. This year, they have several separate policies totaling $600 million in coverage, and the premium has risen to $1 million. The terrorism coverage is only $60 million.
The State of Florida is requiring all insurance policies for homeowners and small businesses to include terror coverage. But the availability of such insurance is in jeopardy because the insurance companies cannot obtain reinsurance on coastal commercial properties in Florida.
A prominent Las Vegas developer has been unable to obtain financing for a $2 billion project due to lack of insurance; once financing is obtained, the project will provide 16,000 jobs.
The National Football League and individual teams and stadiums have experienced difficulty acquiring terrorism coverage. The Miami Dolphins and New York Giants have joined the ranks of other teams around the country that have lost terrorism coverage in the wake of the 9/11 attacks. Many teams and stadiums are faced with the choice of going "bare" or paying the exorbitant prices being charged by insurers for minimal coverage.