Report Finds Terrorism Insurance For Businesses Difficult to ObtainBy Jackie Spinner
THE WASHINGTON POST -- Washington
A General Accounting Office report that will be released Wednesday found widespread evidence that large business and property owners are having difficulty getting terrorism insurance coverage, creating potential problems that are likely to reverberate throughout the economy.
Although the report does not cite specific cases, it found that the problem has increased significantly since the first of the year, when the majority of reinsurance contracts expired, leaving primary insurers without their backup coverage. As primary insurance policies have rolled over, coverage for terrorism has decreased for commercial policyholders, even as premiums have have gone up.
“The potential for more severe economic impacts is increasing as the level of uninsured risk climbs,” according to excerpts from the report, which were released Monday by the House Financial Services Committee. The committee plans to hold a hearing Wednesday on the issue.
Although not mentioned in the report, the Mall of America, the nation’s largest shopping center, provides one of the most telling examples of the particular trouble facing real estate owners and their lenders after Sept. 11.
A judge in Hennepin County District Court in Minneapolis granted the mall’s owner, Simon Property Group, a temporary restraining order last week to prevent GMAC Commercial Mortgage Corp. from forcing the mall to buy a separate terrorism insurance policy as a condition of its lending agreement.
Simon is disputing whether it should have to buy the policy because what terrorism insurance is available is limited and expensive, a cost that would be passed on to tenants.
Although the Mall of America case is one of the first to involve a high-profile property in a legal dispute over terrorism insurance, lenders and property owners across the country are facing similar problems caused by a lack of available coverage -- an issue that rose from the Sept. 11 terrorist attacks.
Because commercial real estate drives so much of business in any community -- primarily through tax revenue and job creation -- financial experts predict the fallout from the insurance issue could spread much farther than the real estate and lending communities.