New terrorist warnings prompt industry outcry for insurance coverage: Congress mulls bill to guarantee coverage.

Vice President Dick Cheney's comments about the likelihood of another terrorism attack are sparking renewed efforts in the battle to pass terrorism insurance legislation.

The National Association of Industrial and Office Properties released a letter urging Senate Majority Leader Tom Daschle and Senate Minority Leader Trent Loft to push for the Senate's passage of a bill that would insure commercial building owners can obtain adequate insurance.

"The recent FBI warning that focused on trophy buildings clearly, shows the need for this legislation, since most of these buildings are privately owned," the letter states. "Our members are experiencing difficulty in obtaining adequate terrorism insurance and when it is available, the cost is exorbitant and the coverage is limited."

Reba Raffaella, vice president of government affairs for the National Association of Industrial and Office Properties, said building owners across the country are experiencing problems with terrorism insurance. She added that it not just trophy property owners that are experiencing difficulty. She cited as an example a 4-tenant building in Jacksonville, Florida that was having trouble.

"Our membership is getting insurance, but the price is outrageous," she said.

The Congressional Joint Economic Committee in Washington recently released a report saying that problems with terrorism insurance pose a threat to economic growth. The insured losses stemming from Sept. 11 will likely total $40 to $50 billion, making it the single largest economic loss in U.S. history. The next largest disaster was Hurricane Andrew in 1992, with insured losses of $19.6 billion.

As a result, insurance companies are routinely excluding or limiting coverage for terrorist acts from the policies they issue.

"As a result, a significant barrier to economic activity has been created, as businesses are forced to bear higher costs of insurance or are unable to conduct business due to financing requirements to carry terrorism insurance," the report states.

The report goes on to say that the problem is stopping major business transactions, including commercial real estate and construction projects across the United States.

"The lack of adequate terrorism insurance poses an unacceptable level of risk to individual firms and to the economy as a whole," said chairman Jim Saxton. "Major facilities such as hospitals, office buildings, factories and sports stadiums are either uninsured or insured at a fraction of their replacement value. The current exposure of our economy to excessive losses in the event of another terrorist attack makes a temporary federal role necessary."

The issue first came to light after Sept. 11, when reinsurance agencies said they would discontinue providing coverage for terrorism insurance. About 70% of the policies impacted by the decision were set to expire Jan. 1. The rest of the policies have expiration dates of April 1 and July 1.

Since the issue surfaced, many high-profile examples of buildings that face difficulties in obtaining adequate insurance has surfaced. In recent weeks 4 Times Square, the 1.6 million SF, 48-story building also known as the Conde Nast building, has reportedly experienced difficulties caused by changes with terrorism insurance.

Industry officials are also keeping tabs on the Empire State Building, whose policy is set to expire at the end of June, according to the Real Estate Board of New York.

Last fall the House of Representatives passed a terrorism insurance bill but Congress convened before the Senate considered a similar measure. President George W. Bush, along with other prominent leaders, has spoken publicly about the need for terrorism insurance.

In an appearance May 22 at the National Press Club in Washington, Daschle said "the sooner we can address terrorism insurance, the more secure our country will be financially should, God forbid, another incident of some magnitude occur."

He said he was determined to bring legislation to the Senate floor either as an amendment to another bill or "make a motion to proceed to the legislation sometime in-the not-too-distant future."

Mark Hofmann, Business Insurance Magazine senior editor who is based in Washington, has been following the legislative wrangling. He said, while the real estate industry has lobbied extensively for the passage of the bill, there have also been many groups that have lobbied against it. He cited two consumer groups that urged Daschle to refrain from taking up the measure.

He also said that Congress is facing a "rapidly shrinking calendar." It's an election year which means that Congress will likely quit early to allow time for campaigning. Congress also breaks for the July 4th holiday and for an August recess.

"Right now there's a stall mate. With every passing day, there becomes less and less of a chance of a bill passing," Hofmann.