More companies are buying terrorism insurance as rates fall, revealed a report from Marsh.
Marsh said rates for terrorism insurance in the US dropped by 42% from the second quarter of 2003 to the fourth quarter.
During the same two quarters the percentage of businesses purchasing cover rose from 27.3% to 32.7%, said the company.
“As prices have come down, more companies purchasing terrorism insurance, both under TRIA and the stand-alone terrorism insurance policies offered by various insurers,” said Marsh director and North American property practice leader Jill Dalton.
Marsh identified the following factors in company's motivations for purchasing terrorism cover:
· Lender requirements - to protect their investments, banks may require borrowers to buy insurance
· Corporate governance - a firm's board of directors may determine that prudent corporate governance requires terrorism insurance
· Directors and officers coverage requirements. A company's directors' and officers' (D&O) insurer may exclude D&O cover if the company fails to insure certain exposures, including terrorism
· More affordable pricing. While costs for many commercial insurance covers have gradually come down since the fall of 2003, these costs differ widely for different risks
· Government alerts. A company's decision-making process may be affected by the government's heightening or lowering of terrorism risk alerts.
Businesses with total insured property valued between $500m and $1bn were most likely to purchase terrorism cover, said the Marsh report.
Copies of the report, Marketwatch: Property Terrorism Insurance 2004, are available through Marsh.
